japanese investment in india

JAPAN TRADE RELATIONS WITH INDIA, INVESTMENTS AND FUTURE PROSPECTS

QUAD BUSINESS SOLUTIONS PVT LTD | GURGAON, INDIA | +91 124 4930776 WWW.QUADGROUP.IN

TABLE OF CONTENT Investments in India

Top Countries Investing in India

India Advantage

Indo-Japan Ties

Japanese Investments

Areas Attracting Investment

Top companies Investing in India

JETRO Survey

Small and Medium Industries

Problems Faced During Expansion

Concerns and Opportunities

Crosscoop Business Centre

Japanese Business Centre

Conclusion


Investments in India

India has a conducive foreign investment environment that provides freedom of entry and favorable location

Government has done away with the complex pre-entry approvals. FDI through automatic route possible

Most investments are made to services sector due to availability of skilled manpower

19

12

7

6

5

5

4

4

4

3

0 5 10 15 20

Services Sector

Construction Development

Telecommunication

Computer Software and Hardware

Drugs and Pharamaceuticals

Chemicals

Power

Automobile Industry

Metallurgical

Hotel and Tourism

SECTOR WISE % SHARE OF INVESTMENT


Top 10 countries investing in India Country (Rank wise)

FDI inflows(in US $ million.) August ’91 – Mar ’12

% share of total inflows

Mauritius 67,777 37.1

Singapore 17,496 9.6

UK 16,567 9.1

USA 13,014 7.1

Japan 9,146 5.0

Netherlands 7,737 4.2

Cyprus 6,425 3.5

Germany 5,293 2.9

France 3,207 1.8

UAE 2,254 1.2


India Advantage DEMOGRAPHIC

FACTORS POLICY RELATED

FACTORS ₪6th most attractive investment destinations |KEARNEY Business Confidence Index, 2003

₪India has the Best licensing regime |KEARNEY

₪India was rated among the most favourite investment destinations|UNCTAD, JETRO, JBIC, Deutsch Bank, EIU etc.

₪Major destination for foreign venture capital funds |Far Eastern Economic Review


Indo-Japan Ties

Japan: 4th Largest Investor

More than 1422

Japanese companies

Delhi Mumbai Industrial

Corridor in partnership with Japan

Delhi Mumbai Freight

Corridor in partnership with Japan The major

sector of investment:

Drugs & Pharmaceut

icals

Major Japanese clusters in

Delhi & NCR

Exports automobile

s to India

₪Initiatives like ‘Namaste India’ and ‘India Centre’ intend to strengthen the ties between the two countries

₪Major pacts like CEPA and Japan-India Economic Partnership Agreement have been signed for trade and investment promotion

₪Top sectors for future investment ‡ Indian Power Sector

‡ Pharmaceuticals

‡ Civil Aviation

‡ Logistics

‡Biotechnology ‡Nano-technology ‡Agro Processing ‡Clean technology


Japanese Investments

5,670.40

7,062.98

14,089.09

11559.08

0.00

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

14,000.00

16,000.00

Rs.

in c

rore

FDI Equity Inflows

FDI Equity Inflows

₪Out of a negligible number of FIIs, 8-11 of them have entered the Indian market in the past year and a half

₪Japan looking to shift their investment destination from China to India

₪CEPA-Comprehensive Economic Partnership Agreement, aimed at reducing the trade tariffs by 94% between India and Japan


Areas Attracting Investment From Japan

29

%

16

%

14

%

9%

5%

Sectors Attracting FDI₪ Pharmaceuticals is the major sector attracting investments from Japan (Rs. 20,239.75 Crores- Jan’00-Dec’11)

₪RBI branch office at New Delhi received an investment of Rs. 1220.81 Crores

₪Companies like Nissan, Suzuki and Yamaha investing heavily

₪After a policy intervention, services sector is now open for investment


Top Companies Investing In India TOP JAPANESE COMPANIES INVESTING IN INDIA AMOUNT OF FDI INFLOWS (in Rs. Crore)

DAIICHI SANYO CO. LTD 19804.03

JFE STEEL CORPORATION 4,800.72

NIPPON LIFE INSURANCE COMPANY 4238.61

NISSAN MOTORS 1927

MATSUSHITA ELECTRIC WORKS LTD. 1866.55

SUMITO MITSUI BANKING CORPORATION 1366.12

HONDA MOTORS CO. LTD 1200

HITACHI 1159.50

SUZUKI MOTOR CO. LTD. 1000

(through Indian companies, from April 2000 to February 2013)


JETRO SURVEY

About JETRO(Japan External Trade Organization)

JETRO-a government related organization promotes mutual trade and investment between Japan and the rest of the world.

About JETRO-Survey

Survey of Japanese-Affiliated Companies in Asia and Oceania (FY 2012 Survey)


Most of the Japanese companies in India were established after 1996

Improved operating profits in emerging economies forecasted for 2013

A large number of firms planning to downsize their China operations and look to invest in India

87.5% looking to expand in the automobile industry and 83% in wholesale and retail in India

Japanese firms put priority on local market development in India rather than developing exports

83.6% firms intend to expand operations in couple of years

62.4% firms expecting an increase in operating profits in 2013

87% of respondents correspond this increase to increase in local market sales

Key Findings


Business Development

67.2% firms would like to

employ locally

35.3% firms would like to

employ Japanese

expatriates

Most Japanese

firms would like expand their sales capabilities

89.7% cited ‘increase in sales’ as the main reason

for expanding India

operations

72% see high growth

potential in India


Proportion of Profitable Japanese Firms


Downsizing in China Increase of

costs

Difficulty in procuring labour

Relationship with clients

Tightening of regulations

Sales Decrease

₪ China has been a major destination for Japanese investment

₪ According to recent surveys, firms are shifting their base from China to India

₪ Low labour costs, large market and skilled workforce attract investments into the country


Small and Medium Industries ‡ FIEO and JETRO have joined hands to promote Japanese SMEs in India

‡FIEO in association with JETRO is organizing a three prong strategy to help SMEs of the two nations.

† One: Aggressive seminars in metros, plus two tier cities.

† Second: Exchange of delegation. Take the SME delegation to Japan and exchange their delegation and then have B2B meeting with them.

† Third: Participate in their leading exhibitions

Break-up of SMEs in India


Problems Faced During Expansion Wage

Increase

Growing market share

of competitors

Power shortage or

blackout

Difficulty in procurement of material & rising costs

Complicated customs

clearance procedures

Difficulty in recruiting executive

staff

Drop in FIIs due to the depreciating rupee


Bureaucracy is a major deterrent.

Concerns and Opportunities

India’s growing middle class an opportunity for foreign firms to invest Concerns that plague entry of

Japanese firms

83% of Japanese

SMEs targeting

the middle class

70% middle

price range to tap the

market

75.2% overall in

manufacturing

sectors.

74% in finance

and Insurance

85% are concerned about the

price competitive

ness

66% firms take the

local companies

as competition

70% firms have prioritize on local market development

rather than developing exports to India

Product differentiati

on

Secure and train human

resources


Conclusion

Japanese investments in India have been on the rise, specially after the souring of ties between Japan and China

With the current economic slowdown, the FIIs into the country have come down, but Japanese companies are positive about investing in the growing economy once it stabilizes

A Japanese Business centre at a location like Gurgaon is favourable due to it’s proximity with industrial locations like Manesar and Neemrana. Since most of the Japanese automobile companies set up manufacturing units in India, it makes sense for them have their corporate offices in the vicinity

Although initially they have their Japanese staff, data shows that most of these companies would like to employee locally. Generally the ratio is 35%:65%

Staff, fluent in Japanese, to cater to the needs of these companies in the centre is crucial for business dealings. The staff should also be acquainted with the Japanese work culture to help the companies in the transition process.


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