Although Japan?s Indophile premier Shinzo Abe has quit prematurely, the country?s prospects for a closer economic engagement with India have never been brighter. Japanese businesses have so far failed to tap India as a market and source of skilled labour, according to the Japan Forum on International Relations. In a recent report, the forum urged the Japanese government to strengthen business ties between the two nations.
Japan is now eager to invest in India in a big way, thanks to its ill-fated romance with China. Over the years, many of its trade missions have visited India but they were largely fact-finding in nature. ?It is true that investment in India has been stymied by many problems, especially poor infrastructure and labour problems, but the reaction of many members of trade missions from Japan is to ask the Indian government to improve the investment climate. This creates the counterproductive impression that Japanese people only go there to complain,? noted the report, asking for change.
An estimated 5% of India?s FDI comes from Japan, compared with about 12% from the US and 8% from the UK. Japan?s contribution is concentrated ?almost exclusively? in transport-related industries. For diversification, Japanese firms must appreciate the buying power of the rapidly emerging Indian middle class. Promising areas include general and industrial machinery, processed foods, sanitary goods and cosmetics, chemical products, pharma, retail markets, infrastructure and so on.
As India engages the East, the Japan Forum urged that Japan must participate in these networks as well. It cites the Delhi Metro as an example of how Japanese capital and technology can succeed, and how Japanese-South Korean joint ventures are doing such a good job. To enhance such possibilities, the Japanese government has been urged to accelerate free-trade talks and conclude the Economic Partnership Agreement.
Above all, Japan wants to tap India?s soft power. According to Japan?s foreign ministry, around 74,000 Chinese were studying in Japan in 2006 compared with just 525 Indians. A consequence for business is that US and European companies have enjoyed more gains from outsourcing clerical and infotech functions to low-cost Indian firms. Japan, noted the forum, also needs India?s skills.
