Bilateral ties between India and Japan have seen consistent improvement in the past decade. Prime Minister Narendra Modi and his Japanese counterpart Shinzo Abe built on this momentum through a "Special Strategic and Global Partnership" in 2014. Japan has committed an investment of $35 billion over five years in India as part of this collaboration. As Modi gets ready for yet another visit to Japan during the year, Japanese Ambassador Kenji Hiramatsu talks to Joe C. Mathew about the progress in ties between the two countries. Excerpts.
Almost every key minister in the Modi government has visited Japan in the past two years. Finance Minister Arun Jaitley is the latest. Is this an indication of the growing relationship between the two countries?
Yes. Under the current government, Japan and India are getting closer and closer. It is not just economic engagement, it is people to people exchange that is happening. Prime Minister Abe has a special interest in strengthening our bilateral relationship. That is where the visit of Finance Minister Arun Jaitley becomes important.
Jaitley seems to have tried to attract Japanese investors to the National Investment Infrastructure Fund (NIIF). Was that the highlight of his visit?
That's one thing that he has done. He had also met Japanese industry leaders to encourage them to make investment in the manufacturing sector to strengthen the 'Make in India' campaign. Japan is one of the largest investors in Indian manufacturing. As Maruti Suzuki illustrates, we have a long tradition of investing in India. The number of Japanese companies operating in India has grown almost five times in the past 10 years. As per embassy's statistics, we have 1,229 companies operating in India. They are basically into manufacturing. They are employing people and transferring technology which is much needed for the success of the 'Make in India' campaign.
Both the governments had put in place a strategic plan...
I think it is the Japan desk created by the Department of Industrial Policy and Promotion (DIPP) which is providing one-stop clearances to Japanese investors. There is also another committee in the government to look into the investment proposals that are coming after Prime Minister Abe committed 3.5 trillion yen of public and private investment and financing in five years. It is headed by the cabinet secretary and they meet regularly. I was also invited to this meeting to see that all proposals are implemented in a timely manner.
How much of these committed investments have come?
I cannot tell you how much, but in 2014 we did a survey that sought response from all major companies of Japan about their plans for investments in India. They said they were planning around $15 billion. So, we know the possible investment that is coming from Japan. Since we have committed a 3.5 trillion yen of public and private investment and financing, it is important for us to invest more.
Can you highlight some of the major areas of investment interest?
The high-speed railway project from Mumbai to Ahmedabad will be an important milestone in India-Japan collaboration in infrastructure after the success of the Delhi Metro project. After the decision was taken to involve Japan in the project, we have already had two high-level meetings and we hope to report the progress when Mr Modi visits Japan during the year. We want to make sure that this project is going on time. So this is one. We reached the agreement on civil nuclear cooperation when Prime Minister (Abe) visited India last December. This agreement will be signed after technical details are finalised.
Were there some sticking points that were delaying this?
No, we have agreed and we are doing technical fine-tuning of the documents. It should be ready soon to be signed by the two sides. In our bilateral cooperation, talking is important, but the key is implementation. I think that the Indian government is serious about this and the Prime Minister himself has instructed that it should be done.
Delhi-Mumbai Industrial Corridor was also a key ongoing project...
Yes, we are talking about other projects, too. Chennai-Bangalore industrial corridor is one. It is a region where a lot of Japanese firms, their manufacturing plants, are located. This corridor project is important to facilitate infrastructure development because we want to invite more Japanese investment here. We are trying to encourage States to give us better infrastructure and better incentives. That is one area where the two Prime Ministers agreed upon. And from our side, we hope that state authorities explore possibilities of more incentives to Japanese companies. I think they are working hard, because they understand the value Japanese companies create. They create jobs, train young talented people and transfer technology.
Not every Japanese company had a pleasant experience in India. Pharma major Daiichi Sankyo had to exit. Maruti Suzuki faced labour problems. How do Japanese companies rate India in terms of business friendliness?
According to the survey conducted by Japanese Bank of International Cooperation, India was seen as the most favourable place across the world to do business. This survey covered not only big companies, but also SMEs. Japanese companies understand the capacity and potential of the India market. Of course, there are many things that need improvement. The taxation system should be more investor friendly. More incentives should come not just from the Central government, but also from the state governments. Our industry chamber, representing Japanese companies, has given its set of recommendations to the government of India on the issues where they feel the need for improvement. Tax system is one, and also infrastructure. Some clarity on land ownership is another requirement. Uninterrupted power supply and water provisions are important for stable operations for a plant. We are requesting Central and state governments to establish industrial parks for Japanese companies with certain incentives.
Neemrana in Rajasthan already has a Japanese zone?
Yes, we have a couple of hubs which are successfully operational. We are now trying to have more. Some of them are in Tamil Nadu, Andhra Pradesh, Madhya Pradesh and Uttar Pradesh. Many chief ministers have visited Japan to appeal to the Japanese industry to invest in their states.
Overall, we are planning to set up 12 new Japanese industrial townships in India.
As Japanese companies increase their manufacturing presence in India, they may also have a position on free trade agreements and multilateral trade treaties?
Japan, in general, believes in free trade. Our investors are not only looking at India but wider markets, including Middle East and Africa, that can be served from here.
Japan has low interest-based growth strategy. Is it sustainable in the long term?
Prime Minister Abe's Three Arrows strategy is an attempt to push economic growth. We are trying to avoid any deflationary cycle and for that we need more consumption and also more production and increase in wages. And for that, we have to make sure that Japanese companies become profitable and employ more people. Hence encouraging investment is our priority.
The challenge is our shrinking population and ageing society. Japanese society is matured and we are changing the ways we do business through innovation and high technology. To sustain growth, we need a big market. Companies have sufficient funds but they are wondering if they should invest more. That is why we are giving them enough encouragement to help them look for more markets, not only in Japan, but also in other countries like India.
India has a growing population and a young society. Japan has technology, but need qualified labour. India is very talented, but needs technology. This is what provides us the opportunity.
Prime Minister Modi is scheduled to visit Japan later this year. What would be high on the agenda?
Implementation of the commitments already made is very important. So, the next meeting will talk about implementation. It will also discuss more about strategy, about India-Japan relationship in a changing global situation. There is a need for more tie-ups with countries which share same value, such as the US and Australia. I also feel that the leaders should talk more about enhancing cultural and people-to-people exchange between the two countries.
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