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India and the world

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India and Japan

June, 2010

According to a survey conducted by the Japan Bank for International Cooperation (JBIC) released in December 2009, covering 620 Japanese manufacturing companies, India remains the second favourite investment destination for Japanese companies after China. 278, or 58 per cent of the companies surveyed wanted to do business with India in the medium term. The survey reflects Japanese companies' mounting interests in Indian businesses, especially in sectors such as automobiles, IT, infrastructure, steel, power and pharmaceuticals.

Japan ranked seventh in terms of cumulative foreign direct investment (FDI) in India, accounting for US$ 3,714 million in the period from April 2000 to March 2010, of which US$ 1,183 million came in the period April 2009-March 2010, according to the latest data released by the Department of Policy and Promotion (DIPP).

According to the Japanese External Trade Organisation, (JETRO), Japanese firms are increasingly preferring India as an investment destination over China. The number of Japanese companies in India has grown three fold over the last three years from approximately 100 companies in 2006-07 to 300 in 2009-10. "More Japanese companies would enter the Indian market in the coming years," said Naoyoshi Noguchi, retired director-general of JETRO.

According to investment bankers, India may witness US$ 20 billion worth of Japanese investment by 2012.

India's exports to Japan in the period 2008-09 stood at US$ 3025.70 million while imports totalled US$ 7886.27 million for the period. During April to December 2009, India exported goods worth US$ 2,479.38 million to Japan. India imported merchandise worth US$ 4823.66 million from Japan during April-December 2009-10.

Major Japanese funds have been coming into India by way of offshore funds, with many Indian houses such as SBI Capital, UTI and DSP Blackrock raising money from the Japanese markets to invest in India.

India and Japan have decided to jointly develop one city in India as a 'solar city'. The project aims to reduce its projected demand of conventional energy at the end of five years, through energy efficiency measures and generation from renewable energy installations.

The two sides also agreed to strengthen cooperation in research and development for promoting renewable energy. As part of the exchange programme, a ten-member delegation from India participated in the Japan-India New and Renewable Energy Seminar in Tokyo in January 2010.

Further, in May 2010, India and Japan agreed to set up a working group on civilian nuclear energy. The working group is being seen as a first step towards potential civilian nuclear cooperation between the two countries.

Government Initiatives

During Japanese Prime Minister Yukio Hatoyama's visit to India in the last week of December 2009, the prime ministers of India and Japan discussed cooperation in infrastructure projects, climate change and security and renewable energy. The two countries also agreed to work out funding and logistical issues relating to the Dedicated Rail Freight Corridor.

In the course of the visit, the governments of India and Japan also agreed to relax visa rules in a year's time in order to facilitate improved trade and widen cooperation between the two nations.

In the last week of December 2009, India and Japan signed two important agreements for implementing the ambitious US$ 77.16 billion Delhi-Mumbai Industrial Corridor (DMIC) project which seeks to create integrated investment regions and industrial areas across six states.

The agreements included collaborating in the development of eco cities that are environmentally and ecologically sustainable along the corridor and setting up of a project development fund to undertake activities like master planning & feasibility studies, preparing project reports and obtaining approvals and bid process management for projects.