Against the backdrop of the global slowdown, Japanese firms are increasingly preferring India as an investment destination over China.

According to the Japanese External Trade Organisation (Jetro), there has been a three-fold rise in companies from Japan having operations in India. In 2006-07 there were approximately 100 companies from Japan having offices in India. The number increased to an impressive 300 in 2009-10.

?There is a lot of excitement among Japanese companies about India. The country has weathered the downturn better than most countries, giving an opportunity to Japanese companies,? Naoyoshi Noguchi, outgoing director-general, Jetro told FE. His term ends in May 2010.

He said the overarching feeling among Japanese companies was that China was getting saturated as a market, hence there was a need to diversify into other countries like India. ?More Japanese companies would enter the Indian market in the coming years,? he added.

Currently, Jetro is in talks with the state governments of West Bengal, Gujarat, Andhra Pradesh and Maharashtra for setting up industrial units. Jetro has already set up an industrial unit in Neemrana, Rajasthan. The total area of the land is in excess of 1,000 acre.

Noguchi said the second industrial unit would be around the same size. ?There was a brief delay among Japanese companies entering the Indian market at the height of the slowdown. However, we are seeing many companies wanting to set up plants in Neemrana?we are getting many enquiries now,? he said.

Noguchi said though the Chinese market for Japanese companies was much larger than the Indian one — roughly 30-times over — he felt that the gap would reduce in the coming few years.

He identified two sectors in India that were keenly being observed by the Japanese firms: ?Food processing and natural minerals are two areas in India that hold a lot of potential.?

Many Japanese companies were lining up to explore opportunities in food processing. Noguchi explained, ?Since more than 70% of India?s population is involved in agriculture, it throws open great opportunities for both India and Japan to work in cooperation to help the farmers,? he said.

India and Japan are also negotiating a Free Trade Agreement (FTA) of goods and services. Last December Japanese Prime Minister Yukio Hatoyama visited India to give a political push to the stalled negotiations on FTA. Informally the two countries have set December 2010 as the deadline for the conclusion of the talks when Prime Minister Manmohan Singh is slated to visit Tokyo. Currently, India?s exports to Japan is $3 billion while imports are valued at $7.8 billion.