Japanese Investments in India – Prospects & Challenges

October 31, 2017

GLOBAL BUSINES DIVISION

1

Contents

India – Basic Facts and Prospects

Japanese FDI Inflow to India – Prospects and Challenges

Key Challenges ahead

BTMU network in India

2

India – General facts and prospects

3

India – An Overview

General Formal Name Republic of India (Bhārat Gaṇarājya)

Capital New Delhi Area 3,287,263 sq. km approx. 8.8 times of Japan)

Natural Resources

Coal, iron ore, manganese, mica, bauxite, titanium, chromite, natural gas, diamond, petroleum, etc.

Population 1.31 Billion UNFPA White Paper on World Population 2015 Literacy Rate 74.04% (Male: 82.14%, Female 65.46%) 2011 National Census Currency 1 Rupee (INR 100Paisa; or approximately JPY 1.75,

1 USD Approx. INR 64 .88 (Source: Reuters : 26 Oct. 2017)

Fiscal Year of National Budget

April 1 March 31

Time Difference with Japan

-3.5 hours

GDP Nominal GDP: USD 2.250 trillion Real GDP growth 7.6% IMF Data Base 2016

GDP composition Agriculture: 16.5%, Industrial Mining: 29.8%, Service: 53.7% CIA 2016) Inflation rate Wholesale price index: 3.39 (year-on-year growth rate, Department of

Commerce of India) Unemployment 8.4% CIA 2016 Sector-wise Employment

Agriculture: 49%, Manufacturing: 20%, Service: 31% CIA 2012; no updates since 2012

GDP

4

GDP Growth rate

GDP Ranking

Gross GDP 2016 Billion Dollar)

Source IMF World Economic Outlook Database 2016

Source:IMF World Economic Outlook Database 2016

The total GDP of India was USD 2.25 trillion and ranked 7th in the world in 2016 (FY2016, IMF).

GDP Per capita USD 1,718 China USD 8,260 Thailand USD 5,662 Japan USD 37,304

GDP Growth (%) FY2003-04 7.5% FY2004-05 9.5% FY2005-06 9.6% FY2006-07 9.3% FY2007-08 6.7% FY2008-09 8.6% FY2009-10 9.3% FY2010-11 6.2% FY2011-12 5.0% FY2012-13 6.9% FY2013-14 7.3% FY2014-15 7.3% FY2015-16 7.6%

7

02,0004,0006,0008,000

10,00012,00014,00016,00018,00020,000

7th in the world

-10

-5

0

5

10

15

20

2009 2010 2011 2012 2013 2014 2015 2016

India China

Indonesia

Japan

Malaysia

Philippines

Singapore

USA Vietnam

5

Policy Interest Rate and Inflation Rate

Trend – Policy rate / Inflation rate

RBI’s Policy Interest rate

Reseve Bank of India (RBI) has cautionary interest rate policy with a focus on controlling inflation. After almost an year, RBI reduced the policy rate to 6.00% in August 2017.

Inflation

As Indian is a net importer of crude oil, the movement in its prices have strong impact on inflation.

0.00

20.00

40.00

60.00

80.00

100.00

120.00

-6.00

-4.00

-2.00

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

2013 1 7 2014 1 7 2015 1 7 2016 1 7 2017 1 7

CPI WPI ( Policy Rate Crude Oil Price (right side)

6

India – Population pyramid (2017, Unit: Million)

Population trends (1950 ~ 2025)

Population

02468

1012141618

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Source U.S. Census Bureau, International Data Base

With a population of 13.1 billion (2016) India was ranked no.2, after China with 13.8 billion

India is projected to become the most populous country by 2025 surpassing China

India offers significant demographic dividend with nearly 50% of population under 27 years and about 200 million expected to enter workforce over the next decade.

Demographic dividend/burden in major Asian countries

Year Country 50 55 60 65 70 75 80 85 90 95 0 5 10 15 20 25 30 35 40 45 50 55 60

Singapore 1970 2019 2020

Malaysia 1970 2049 2050

Philippine 1970 2054 2055

Thailand 1975 2019 2020

Indonesia 1975 2029 2030

Vietnam 1975 2039 2040

China 1975 2019 2020

India 1970 2044 2045

Japan 1955 1994 1995

Demographic dividend period Demographic burden period

Source Based on data from UN

India Developed Nations

China USA Japan

(Unit: ‘00 Millions)

7

Consumption level in India is lower than those in ASEAN and China. Imported goods would be limited to consumers in the high-income bracket Anticipating a gradual increase in consumption level, it will be necessary to meet the demand of the high volume zone

Indian business up to now Supplying import goods

and Japan quality products

Business targeting wealthy and upper-middle segments Emphasizing high brand image and high quality Not pursuing scale in business

Product development/production

system targeting the high volume zone

Business expanded to include the high volume zone as its target Launch products with a quality level that suits the local needs Pursuing both revenue and scale in business, by local production

The Middle East/Africa markets

Export/expand the

business model in India

Consumer segments

Wealthy

Upper-middle

Middle

Lower-middle

Low income

Indian business hereafter

Expand business in the Middle East and Africa markets whose economic standards and product needs are similar to India

Enjoy the economy of scale and the government’s export benefits by making India a base for export

Point India The Middle East/Africa

Market

diversity

Standards of

GDP per capita

Population of about 1.3 billion Consists of 29 states, 7 union territories, and 1 national capital territory

Population of about 1.3 billion Consists of 15 Middle Eastern countries and 54 African countries

GDP per capita is about USD 1,600 Equivalent to that of Japan in the 1960s

GDP per capita in some markets in the Middle East exceed USD 10,000 USD 1,000 - 3,000 in most markets in Africa

Expand to the Middle East/Africa markets by utilizing the Indian business model + the network of Indians companies

Reinforce business by alliance

Local needs oriented R&D Cost-cutting production system

Establish Indian quality

Determine the price and quality that can be accepted in India, the Middle East and Africa India has a culture of allowing trial and error

Fully utilize the low-cost procurement environment and work force Eliminate excessive quality/functions and reduce cost

Utilize the network of Indian expatriates that connects to the Middle East/Africa markets Investments and alliances in the Middle East/Africa markets

India - New Strategy (Focus on ‘Volume Zone’ & Localization as well Exports from India)

• Considering the strong economic growth and rising per capita income, the global MNCs are developing business targeting the high volume zone • Product development and manufacturing for the local market, this will enable access to new markets in Middle-East and Africa • Further supported by the strong network of overseas Indians

Establish product development /production system in India – Comparison of Indian business up to now and hereafter

Utilize the product development/production system in India to enter the Middle East and Africa markets

8

New Strategy in India (2) Redefining India as a base for export by cost-cutting strategy

• Expansion to India as a base for export to Japan or affiliated companies in other countries • Profit rate improves with the incentives for exporting companies and reduction in financing cost Many of the Japanese companies which expanded to India to sell locally are having a hard time, more export-driven companies are profitable than local-demand-driven companies

FY 2016 NOP forecast of JPN companies India by founding year

Export ratio of less than 50% Export ratio of 50 or more -# of companies Profitable # of companies Profitable

Cambodia 49 24.5% 33 39.4% 14.9%Malaysia 117 56.4% 128 68.8% 12.4%India 325 52.3% 46 63.0% 10.7%ASEAN 1,344 59.8% 995 63.3% 3.5%Asia/Oceania total 2,602 62.4% 1,533 65.1% 2.7%

Top 3 countries where more export-driven JPN affiliates are profitable than local-demand-driven JPN affiliates in Asia/Oceania

Expansion as part of a global cost-cutting strategy In the past, many of Japanese-affiliated companies have expanded to India to sell locally. As a result, India’s export ratio is the lowest in Asia/Oceania region (See the graph below)

Production base have been shifted from Japan and other countries for cost-cutting

Exporting countries are decided in view of logistic cost, economic treaty, etc.

Export to HQ in Japan or affiliated companies in other countries India has few financial incentives for foreign-affiliated companies, but has a variety of them for both foreign and Indian companies. Revenue structure can be improved by utilizing these incentives.

It is possible to temporarily save proceeds from export as a foreign currency deposit, and use it for import settlement.

Export finance can be used. (Foreign currency and rupee: In case it is rupee-denominated, there is a 3% interest subsidy system (Valid until March 2020, and under given conditions))

Top 3 and bottom 3 Asia & Oceania countries for export ratio of local Japanese companies

(Source) Prepared by BTMU based on JETRO FY2016 Survey of Japanese-Affiliated Firms in Asia and Oceania 2016

(Source) JETRO FY2016 Survey of Japanese-Affiliated Firms in Asia and Oceania

69% 60% 57%

21% 17% 15% 0%

20%

40%

60%

80%

Top 3 (export-driven) Bottom 3 (local sales-driven)

India Laos Philippines

Myanmar

(Source) Prepared by BTMU based on JETRO FY2016 Survey of Japanese-Affiliated Firms in Asia and Oceania

Take advantage of export incentives and improve profit rate by reducing financing cost

Major incentives for exporting companies

Advance Authorization Scheme (AAS) A duty exemption scheme for manufacturers, applied to import of intermediate supplies/parts for manufacturing specific export products. Subject to duty exemption: basic customs duty, additional customs duty, education cess, anti-dumping duty, safeguard duty

Duty Free Import Authorization Scheme (DFIA)

Benefits are the same as AAS, but tax-exempt import permit of this scheme is also issued for traders who conduct import and export operations for manufacturers

Export Promotion Capital Goods Scheme (EPCG)

This scheme allows zero-duty import of capital goods by exporters, on the condition that the beneficiary will pay back in the form of an export obligation equivalent to 6 times the duty saved on the capital goods import

Duty Drawback Scheme (DDS) If an exporter manufactures export products in India, any customs duty or countervailing (additional) duty on imports of raw materials or components, or machinery used for production, is eligible for duty drawback

Merchandise Exports from India Scheme (MEIS)

An exporter receives a transferable credit scrip after exporting specific products to specific countries. By using the credit scrip for payment of custom duty, excise tax, and service tax, the exporter achieves a substantial tax exemption

Service Exports from India Scheme (SEIS)

A service provider gets a transferable credit scrip after providing a specific service. By using the credit scrip for payment of custom duty, excise tax, and service tax, the service provider achieves a substantial tax exemption

Status Holders If the exports in the last 3 years is worth USD 3 Mn or more, it is possible to get priority treatment in trade transactions and issue a certificate of origin needed for a trade agreement, etc. (The status is divided into 5 levels according to export values)

(Source) Website of government of India, etc.

79% 64% 58% 39%

7% 15% 19%

14%

14% 21% 23% 47%

0%20%40%60%80%

100%

2000 (58 )

2001 05 (33 )

2006 10 (145 )

2011 (169 )

Bangladesh

Pakistan

9

Japanese FDI flow into India – Prospects and Challenges

10

Economic Strength

Thailand Vietnam Indonesia Malaysia The Philippines Singapore Myanmar China India

Area (1,000km²) 513 About 1.4 times

the size of Japan

332 Almost

equivalent to the size of Japan

excluding Kyushu

1,905 About 5 times the

size of Japan

330 About 0.9 times

the size of Japan

300 About 0.8 times

the size of Japan

7.1 Almost

equivalent to the size of Tokyo 23

wards

676 About 1.8 times

the size of Japan

9,597 About 26 times

the size of Japan

3,287 About 9 times the

size of Japan

Population (million) 2015

65.7 91.7 255.5 31.0 101.6 5.5 51.5 (2014)

1,373.5 1,283.0

GDP per capita (USD) 2016

5,908 2,186 3,604 9,390 2,924 52,961 1,269 8,113 1,723

Total nominal GDP (billions of USD) 2016

407 203 932 297 305 297 66 11,218 2,256

Real GDP growth rate 2016

3.2% 6.2% 5.0% 4.2% 6.9% 2.0% 6.3% 6.7% 7.1%

Inflation in consumer prices 2016

0.2% 2.7% 3.0% 2.1% 1.8% -0.5% 6.96% 2.0% 4.5%

Current account balance (100 millions of USD) 2016

477 82 -169 69 6 565 -20 1,964 -221

Foreign currency reserves (100 millions of USD) 2016

1,719* 369* 1,163* 931* 807* 2,464 46 30,978 3,802*

Number of Japanese companies that have begun to operate in 2016

2,412 972 1,218 965 579 1,386 105 6,774 808

Number of Japanese residents as of October 2016

70,337 16,145 19,312 23,693 16,977 37,504 2,315 128,111 9,147

Comparison with Major Countries in Asia

(Source) data by Ministry of Foreign Affairs, BOJ, JETRO, Toyo Keizai, IMF World Economic Outlook (including estimated figures) and other published data *: including gold

11

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1 China China China China China China Indonesia India India India

2 India India India India India India India Indonesia Indonesia China

3 Vietnam Vietnam Vietnam Vietnam Thailand Indonesia Thailand China China Indonesia

4 Russia Russia Thailand Thailand Vietnam Thailand/ Vietnam China Thailand Thailand Vietnam

5 Thailand Thailand Russia Brazil Brazil Vietnam Vietnam Vietnam Thailand

6 Brazil Brazil Brazil Indonesia Indonesia Brazil Brazil Mexico Mexico Mexico

7 USA USA USA Russia Russia Mexico Mexico Brazil USA USA

8 Indonesia Indonesia Indonesia USA USA Russia Myanmar USA Philippines Philippines

9 S.Korea S.Korea S.Korea S.Korea Malaysia Myanmar Russia Russia Brazil Myanmar

10 Taiwan Taiwan Malaysia Malaysia Taiwan USA USA Myanmar Myanmar Brazil

Preferred Investment Destinations

For consecutive 7 years, India continues to be the most preferred destination in the long term.

Majority of the respondents (approx. 85%) mentioned India’s large domestic markets Reasons for this preference were highlighted as the prospective economic growth of India and its domestic markets. The other reasons were the current market size, followed by lower labor costs.

Since 2012, Myanmar is increasing attracting attention as a prospective investment destination.

As per JBIC survey, for the past 3 years, India continues to be the most preferred investment prospect in the medium term

Responding to the medium term investment prospect, every 2nd respondent chose India as the most preferred destination.

Long-term (next 10 years) preferred investment destinations

Medium-term (over the next 3 years) preferred investment destination

(Source) “Survey Report On Overseas Business Operations by Japanese Manufacturing Companies (28th)” by Japan Bank for International Cooperation (JBIC)

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1 India India China India India India India India India India

2 China China India China China China China Indonesia Indonesia China

3 Russia Russia Russia Brazil Brazil Indonesia Indonesia China China Indonesia

4 Vietnam Brazail Brazil Vietnam Indonesia Brazil Brazil Vietnam Vietnam Vietnam

5 Brazil Vietnam Vietnam Russia Vietnam Vietnam Thailand Thailand Thailand Thailand

6 Thailand Thailand Thailand Indonesia Thailand Thailand Vietnam Brazil Brazil Mexico

7 USA USA Indonesia Thailand Russia Russia Myanmar Myanmar Myanmar Myanmar

8 Indonesia Indonesia USA USA USA Myanmar Russia Russia Mexico USA

9 Mexico S. Africa S. Africa Malaysia Mexico Mexico Mexico/ USA Mexico USA Brazil

(Source) “Survey Report On Overseas Business Operations by Japanese Manufacturing Companies (28th)” by Japan Bank for International Cooperation (JBIC)

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Number of overseas subsidiaries of Japanese corporations (2016)

Global Ratio China

ASEAN

India Ratio Thailand Vietnam Indonesia Malaysia Philippines Singapore Myanmar

Total 29,904 100.0% 6,774 2,412 972 1,218 965 579 1,386 105 808 100.0% Construction 517 1.7% 69 75 36 42 44 33 32 12 21 2.6% Manufacturing 11,869 39.7% 3,744 1,204 517 643 456 273 214 21 383 47.4%

Food 591 2.0% 165 65 35 35 21 7 19 3 9 1.1% Textile / apparel 449 1.5% 222 43 26 39 6 1 1 6 5 0.6% Pulp / paper 100 0.3% 33 17 12 5 6 1 3 - 2 0.2% Chemicals 1,878 6.3% 583 189 62 108 81 40 58 2 54 6.7% Pharmaceuticals 261 0.9% 58 5 9 10 2 3 8 - 4 0.5% Petroleum / coal 24 0.1% 2 4 - 1 - - 3 - - 0.0% Rubber products 332 1.1% 87 54 17 30 16 6 7 - 16 2.0% Glass / cray and

stone 285 1.0% 97 17 13 14 13 3 2 2 8 1.0% Iron and steel 347 1.2% 106 41 21 29 18 5 7 - 21 2.6% Nonferrous

metals 311 1.0% 104 37 19 13 31 8 5 - 8 1.0% Metal products 617 2.1% 199 109 40 38 23 22 10 1 16 2.0% Machinery 1,514 5.1% 516 143 42 54 28 19 25 59 7.3% Electric

equipment 2,067 6.9% 721 166 95 76 131 79 42 2 43 5.3% Transportation

equipment 2,033 6.8% 528 237 61 144 41 54 5 2 120 14.9% Precision

equipment 418 1.4% 120 28 22 5 9 8 9 1 6 0.7% Other 642 2.1% 203 49 43 42 30 17 10 1 12 1.5%

Machinery wholesale 1,894 6.3% 268 159 36 74 65 26 106 2 68 8.4% Electric equipment wholesale 2,401 8.0% 368 140 32 46 49 29 179 - 62 7.7% Transportation equipment wholesale 648 2.2% 84 45 7 21 15 4 17 6 13 1.6% Precision equipment wholesale 613 2.0% 64 23 8 8 16 6 28 - 21 2.6%

Number of Japanese Corporations Operating Overseas (Sector-wise)

(Source) “2017 Overseas Japanese Companies ”( ) by Toyo Keizai

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As of 2016, there were 1,305 Japanese companies present in India, i.e., an increase of 76 companies over the previous year.

Earlier the investments were largely related to auto sector but lately we have seen a more diversified mix of sectorial investment.

While the numbers are still low but we have seen an increase in investment from Small-medium sized Japanese companies.

The total number of Japanese residents in India were 9,147 as of Oct. 2017

Japanese companies in India – Current Status

Note 1. The Bank of Tokyo-Mitsubishi UFJ, Ltd. based on the list of Japanese companies published in 2017 by Embassy of Japan in India Northern region National Capital Region of Delhi, Haryana, Rajasthan, Uttar Pradesh, Punjab, Uttara Khand, Chattisgargh, etc.

Western region: Maharastra, Gujarat, Madhya Pradesh, Goa, Daman & Diu, etc.

1

Japanese companies

Yangon

247331 478

844 971 1,009

0

500

1,000

1,500

11 12 13 14 15 16

385 454 497667 798

845

0

500

1,000

1,500

11 12 13 14 15 16

812926

1,0381,156 1,229

1,305

0

500

1,000

1,500

11 12 13 14 15 16

67 75 96 168 189 193

0

500

1,000

1,500

11 12 13 14 15 16

182 228 297387 451 476

0

500

1,000

1,500

11 12 13 14 15 16

286344

498 541 577 582

0

500

1,000

1,500

11 12 13 14 15 16

Ahemdabad

Surat

Mumbai Pune

Bengaluru Chennai

Hyderabad

Jaipur New Delhi

Kolkata

11,0001

Mumbai Region Delhi-Haryana Region All-India

Bengaluru Region Chennai Region

Bangkok

Kolkata

14

Northern Region National Capital Region and its vicinity

New Delhi

Greater Noida

Haryana

Rajasthan

Uttar Pradesh

Rohtak Maruti Suzuki R&D

Training Centre Suzuki 2-Wheeler

Kotputli Otsuka Chem.

Jhajjar Panasonic Denso

Bawal Japanese Auto-component

suppliers YKK

Manesar Maruti Suzuki

Honda 2-Wheeler

Ghelot JETRO sponsored (oper for allotment)

Noida Region Honda Motor

Yamaha Toyo Inx

Neemrana JETRO Sponsored

Japanese Auto-component Suppliers Unicharm, Daikin and others

NH8

NH10

Tapukara (Kushikhera) Honda 2-Wheeler/ Car)

Honda supplier park

Faridabad Japanese Auto comp. suppliers

Gurgaon (Gurugram) Maruti-Suzuki

Large no. offices of Japanese companies

NH2

Bahadurgarh Yokahama Rubber

New Delhi Br,

Neemrana Office

In North, the Rajasthan Govt. has been successful in attracting several Japanese companies to Neemrana Industrial Park (sponsored by JETRO) . Moreover, the land allotment has also begun in the nearby Ghelot Industrial Park.

With the presence of the Auto majors (Suzuki, Honda and Yamaha Gen.) their suppliers have also set-up their operations in the region.

Apart from Auto industry, the regional also has a large presence of companies from other sectors, such as YKK, Unicharm, Daikin, Sakata Inx, Toyo Ink, Otsuka Chemical, etc.

Delhi has a limited presence of Japanese companies (largely limited to Banks and trading companies), Gurgaon has become increasingly popular location for majority of Japanese companies in the region.

15

Western Region Mumbai, Pune, Gujarat area

MUMBAI

Vadodara

Baluch

Surat

Indore

Bhuj

Nasik

Detroj

MAHARASHTRA

MADHYA PRADESH

GUJARAT

RAJASTHAN

Mundra Port Adani (Kowa)

Maruti Suzuki – Export Centre

Suzuki India

Dahej DMIC Desalination Project

Smart City Dai Nihon Ink Co.

Panoli Sakata Inx

Nava Shiva Port

Ranjangaon Fiat, LG

Haier

Mehsana

Mandal JETRO

sponsored

NH8

NH8

NH3

NH17

NH59

Siemens Hindustan Uniliver

AHEMDABAD

Talegaon Chakkan Bridgestone

Bajaj Mahindra GM VW Benz, Hyundai Heavy

TATA PUNE

Mumbai Br.

Hajira L&T MHI

Sanand Hitachi Highrail

TATA NANO Ford

Aurangabad Bajaj, Skoda

Siemens

NH4

Supa Varna (JETRO sponsored)

Mumbai is a financial capital of India with the central bank, main stock exchanges and all major financial institutions present here. Mumbai’s Nava Shiva Port is the largest container port in India.

Pune is a major industrial and education hub, with large number of local and US-European companies (Auto, Engineering, Electrical appliances, Engineering, IT sectors) are based here. While the Japanese companies presence is low, its expected that the situation would improve after completion of the JETRO sponsored industrial park for Japanese companies.

The investor friendly state government and the relative quality of infrastructure and power supply has made Gujarat an attractive investment destination within India. Their ability to attract large scale investments from Suzuki and Honda has attracted the attention of other Japanese companies.

sponsored Mandal Industrial Park has start sales to Japanese investors. In addition, Toyota Tsusho is operating rental factories is also located near Ahmedabad

As Gujarat and Maharashtra are core to the DMIC project, we expect increased investment from Japanese companies in this region.

16

Souther Region Chennai, Begaluru Area

CHENNAI

ANDHRA PRADESH

KARNATAKA TAMIL NADU

Kanchipuram

Tumkur

NH32

NH4

NH75

NH209

SH17

NH16

Bengaluru

Chennai Br.

Bengaluru Br,

NH48

In the recent years, Southern India has attracted a large number of investments in Auto and Auto related sectors.

While auto majors like Nissan, Isuzu, Yamaha are located in Chennai region., other sector companies like Toshiba are also based here.

With access two major ports (Chennai and Kamaraja), this is a preferred location for linkage to the existing supply chain (export-import) in South-east Asia.

Toyota Motor and Honda’s 2-wheeler plants are located in the Bengaluru region.

Several auto sector companies located in North India have set-up their additional plants in South. We expect this to be an increasing trend.

New Industrial Parks being set-up for Japanese companies

Sojitsu-Motherson Industrial Park is currently available.

Mahindra Industrial Park Chennai (Sumitomo Corp.) is also expected to start selling soon.

17

Hurdles for Entry (Hurdles remain high, though in recent years the situation is improving)

Doing Business 2016, the World Bank report, says India is in 130th place among the 189 countries in the Ease of Doing Business ranking.

Image of Indian Rupee

reflects rich multilingual culture

Market Characteristics

Complex Regulatory Environment

Poor Infrastructure

Labour relations and skills

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Location – Key considerations

(Source) Prepared by BTMU based on State Assessment Report on Business Reforms Action Plan 2016 by Department of Industrial Policy and Promotion (DIPP) in the Ministry of Commerce & Industry, Government of India, which ranks the ease of doing business in each state

Business environment ranking of states of India (2016)

Rank Name of state Name of major city Rank in 2015

1 Andhra Pradesh Visakhapatnam 2

1 Telangana Hyderabad 13

3 Gujarat Ahmadabad 1

4 Chhattisgarh Raipur 4

5 Madhya Pradesh Bhopal 5

6 Haryana Gurgaon 14

7 Jharkhand Ranchi 3

8 Rajasthan Jaipur 6

9 Uttarakhand Dehra Dun 23

10 Maharashtra Mumbai 8

13 Karnataka Bengaluru 9

18 Tamil Nadu Chennai 12

19 Delhi, National Capital Territory ---- 15

In India, incentives and government business support differ by state. Therefore, one of the options is to decide the destination from this perspective.

The following eight items are studied, and a ranking of states by ease of doing business is released .

(1) Starting a business

(2) Land acquisition and construction permit

(3) Compliance with labor laws

(4) Infrastructure such as electricity, gas and water

(5) Taxes

(6) Inspections

(7) Legal force of contracts

19

Features of the area where Japanese-affiliated companies are operating (by city)

New Delhi Mumbai Bangalore Chennai Ahmadabad

Features Capital (national capitol territory)

Many Japanese-affiliated companies in the area and neighboring towns

Commercial / financial city with Central Bank of India

One of the major IT hubs in the world

Various sectors such as IT, electronics and automaker are

operating

Petrochemical, automaker, metal-processing, etc.

Industry Japanese-affiliated automakers

gather in the area, including neighboring towns (Haryana, Noida)

Many trading companies and sales companies / manufacturers in Pune

As for Japanese-affiliated company, Toyota is operating in the area / IT

industry is booming

Automaker: Hyundai Other: Nokia, etc. Agriculture / textile

Number of offices of Japanese-affiliated companies1 (Number of Japanese companies: 1,3050)

845 Delhi union territory +

Haryana state

709 Maharashtra state

476 Karnataka state

582 Tamil Nadu state

300 Gujarat state

Statutory minimum wage of unskilled labor 2 (USD / per month)

138 112 89 94 4.15

Industrial park 2 (USD / ) 45 121 65 26 51 33 139 32 54

Office rent 2 (USD / / per month) 19 25 39 12 11 8.27 10

Housing for Japanese representatives2 (USD /floor/ per month)

1,879 3,006 9,768 1,277 1,653 1,353 2,405 1,202 1,954

Seaport

Inland city, with no accessible

seaport 3 to 4 days by land transport from

Mumbai

The largest in India

Mumbai, JNPT

Close to Chennai

Chennai Port

Mundra Port

Airport

Daily direct flights between Japan (JAL, ANA)

Daily direct flights between Japan

(ANA) No direct flight between Japan No direct flight between Japan No direct flight between Japan

Electricity (frequency of blackout)

Gujarat is the only one state

which sells electricity

Climate From November to February: below

20 From April to June: over 40

The average temperature is around 30 throughout year, with high

humidity / heavy rainfall from June to September

In April and May, the temperature is over 30 , but conformable in the

rest (altitude: 900m)

From April to June, the temperature is over 40 with high humidity

The average temperature is over 30 throughout the year

(rainy season: June to September)

Location – Key considerations

(Source) documents by JETRO, Embassy of Japan in India

(Note) 1. As of Oct. 2016 (“Japanese Business Establishments in India” released in January 2017, by Embassy of Japan in India)

2. Statutory minimum wage of unskilled labor, industrial park, office rent and housing for Japanese representatives are based on the documents by JETRO released in June 2016.

20

Japanese Expats – Challenges

Japanese Expats - Key Considerations

Expat community

Residential Environment

Food and Shopping

Healthcare & Medicine

Safety & Disaster-management

Social Life – Entertainment & Leisure

21

Key Challenges ahead

22

Key Challenges

• Single window, SEZs, Industrial Parks •FDI related

• Land acquisition, registration and digitalization; Land banks

•Land related

• Skill levels, industrial relations, laws, etc. •Labour Laws and Practice

• Port and custom Infrastructure, transport and incentives

•Foreign Trade

• GST introduced but still complex •Taxes

• Discussed on next slide •Financial Sector

• Perception/Brand India • Business Cost ••••••••••••Others

23

Indian Financial Sector – some suggestions

•Consolidation and Specialization (to improve the delivery system)•NPAs •Cost of capital • Interest rates • Roadmap for financial market development

••••••••

Structural Reforms

• Tenor • Hedging requirement • Offshore rupee market

•••••••ECB Loans

•Development of offshore financial center on similar lines to Labuan (Malaysia) or Dubai

•D(

Off-shore Financial Centre

•Historical and current development •Proposals: Need for alternative mechanism to improve delivery system and the health of banking sector

•To enhance foreign investments into India, startups of foreign companies should be classified as PSL (eg., upto 10 yrs.)

••

•

Priority Sector Lending

24

OTHER CHALLENGES

Japanese FDI – Other challenges and Possible Suggestions

Perceptions – Developing Brand India

Cost of Business – Low or High?

Balance between Competitive strength and national priorities

Consolidated Approach – Centre vs States

Make in India – Domestic Market vs Exports

25

. BTMU network in India

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MUFG network in India

MUFG India - Network

A century long presence in India Predecessor of former The Bank of Tokyo, Ltd, Yokohama Specie Bank had opened an office in Kolkata (former Calcutta) around 1888. Established Mumbai branch (former Bombay) in 1953 On April 2, 2014 established the Bengaluru branch. With 5 offices in India, we are able to support are corporate clients across the region.

Network of Japanese Banks in India

MUFG MIZUHO SMBC

New Delhi (Established in 2013)

Neemrana

Mumbai (Established in 1953) (Established in 1996)

Chennai

Begaluru

Ahemdabad

Note 1. Full banking branch Sub-office No presence ( ) Year of entry into India

Established in 1963 Busienss Coverage Area: Northern and Eastern region

New Delhi Branch

CHENNAI

MUMBAI

NEW DELHIi

HYDERABAD

BENGALURU

KOLKATA (Calcutta)

AHEMDABAD

PUNE

NEEMRANA

Established in 2012 Coverage Area Rajasthan & Haryana (Bawal area)

Neemrana Office

Established in 1996 Business coverage area South India (Eastern region) [Andhra Pradesh and Tamil Nadu]

Chennai Branch

Established in 1953 Office of the Regional Executive Business Coverage Central and Western region

Mumbai Branch

Established in 2014 Business coverage area: South India (western region) [Karnataka and Kerela)

Bengaluru Branch

Bank Branch1953 MUFG Mumbai1963 MUFG New Delhi

1996 MUFG ChennaiMizuho Mumbai

2006 Mizuho New Delhi2012 MUFG Neemrana

2013SMBC New DelhiMizuho BengaluruMizuho Chennai

2014 MUFG Bengaluru2015 Mizuho Ahemdabad2017 Mumbai

Timeline of Japanese Banks in India

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