Updated February 22nd, 2024 at 14:20 IST

Japan’s Rising Interest in India, All You Need To Know

Abe’s words at the Parliament of India in 2007 highlighted the relevance of the Japan-India partnership

Reported by: Business Desk
Flag of Japan | Image:Pixabay
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Japan-India love affair: In 2007, Shinzo Abe, then Prime Minister of Japan was on a tour to India. While addressing the parliament of India, he said, "The different streams, having their sources in different places, all mingle their water in the sea." Abe did not stop there and dubbed the India-Japan relationship as “Confluence of the Two Seas.”

Abe’s words at the Parliament of India in 2007 highlighted the relevance of the Japan-India partnership. The importance of India, as highlighted by Abe in 2007, is being witnessed now in the rising investment interest from Japan.

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The Finance Ministry on Tuesday said that the Japanese government is injecting a substantial loan of 232.209 billion yen (approximately Rs 12,800 crore) into nine diverse projects across India. These projects span various sectors, including North East Road Network Connectivity, Start-up and Innovation Promotion in Telangana, Chennai Peripheral Ring Road Construction, Sustainable Horticulture Promotion in Haryana, and Climate Change Response and Ecosystem Services Enhancement in Rajasthan. The move signifies rising interest of Japan in Indian ventures and companies.

Japan-India love affair

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The Japan Bank of International Cooperation's (JBIC) survey report for FY 2020 positioned India as a close second to China for Japanese outward Foreign Direct Investment (FDI) over the mid-term. While Japanese FDI in India has seen an uptick in recent years, it still constitutes a fraction of Japan's total outward FDI.

Notably, Japanese FDI to India for the fiscal years 2021-22 and 2022-23 amounted to $1.49 billion and $1.79 billion, respectively. Cumulatively, from 2000 to June 2023, Japan has invested around $39.94 billion in India, ranking fifth among the source countries for FDI.

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As of October 2022, there were 1,400 registered Japanese companies in India, with manufacturing firms constituting half of the number. These companies boast a total of 4,901 business establishments in India, spanning liaison and branch offices as well as local subsidiaries. On the other hand, more than 100 Indian companies are operating in Japan.

Prominent Japanese companies like Maruti Suzuki, Toyota Kirloskar Motors, UNIQLO, Mitsubishi Group, Mizuho Corporate Bank, Panasonic, Hitachi, and Honda have established a significant presence in India.

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Tale of Trade

Bilateral trade between India and Japan reached $21.96 billion in FY 2022-23, with Japan exporting $16.49 billion worth of goods to India, and importing $5.46 billion. Key exports from India to Japan include petroleum products, organic chemicals, fish and aquatic invertebrates, machinery, and vehicles.

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On the other hand, India primarily imports machinery, electrical equipment, iron and steel products, plastic materials, and non-ferrous metals from Japan.

Cumulatively, since 2000, Japan has invested approximately $32.058 billion in India. The focus has primarily been on sectors such as automobile, electrical equipment, telecommunications, chemicals, financial (insurance), and pharmaceuticals.

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Railway Cooperation

Under railway cooperation, the implementation of the first High-Speed Rail (HSR) corridor from Mumbai to Ahmedabad is underway, with technical and financial assistance from the Japanese government. This corridor, spanning Maharashtra, Gujarat, and the Union Territory of Dadra and Nagar Haveli, covers a length of 508.17 km with twelve stations.

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Furthermore, Japan has been a significant bilateral donor to India since 1958, extending loan and grant assistance. Japan's Official Development Assistance (ODA) supports India's endeavors in key areas such as power, transportation, environmental projects, and projects related to basic human needs. Notably, Japan's ODA commitment in FY 2018-19 reached a historic high of 522.405 billion yen.

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Published February 21st, 2024 at 17:11 IST