Economic relations between India and Japan have vast potential for growth, given the obvious complementarities that exist between the two Asian economies. Japan's interest in India is increasing due to a variety of reasons including India's big and growing market and its resources, especially the human resources. The signing of the historic India-Japan Comprehensive Economic PartnershipAgreement (CEPA) and its implementation from August 2011 has accelerated economic and commercial relations between the two countries. For Inquiry Visit Us: https://www.market-xcel.com/contact.html

1. INDIA – JAPAN
TRADE RELATION
An Overview of
Today & Tomorrow

2. INTRODUCTION
INDIAN ECONOMY
INDIA-JAPAN RELATIONSHIP
INDIA’S GROWTH PROJECTIONS REVISED DOWN
Economic relations between India and Japan have vast potential for growth, given
the obvious complementarities that exist between the two Asian economies.
Japan's interest in India is increasing due to a variety of reasons including India's
big and growing market and its resources, especially the human resources. The
signing of the historic India-Japan Comprehensive Economic Partnership
Agreement (CEPA) and its implementation from August 2011 has accelerated
economic and commercial relations between the two countries. During the visit of
our Hon’ble Prime Minister Shri Narendra Modi to Japan in September 2014, PM
Shinzo Abe pledged USD 35 billion in investment in India's public and private
sectors over the next five years as well as to double the number of Japanese
companies operating in India.
As the world’s third largest
economy in purchasing parity
terms, India aspires to better
the lives of all its citizens and
become a high-middle
income country by 2030.
Between 2011-15, more than
90 million people escaped
extreme poverty and improved
their living standards thanks to
robust economic growth. However,
India’s growth rate has decelerated in
the past two years.
India’s ability to achieve rapid, sustainable development will have profound implications for
the world. India’s success will be central to the world’s collective ambition of ending
extreme poverty and promoting shared prosperity, as well as for achieving the 2030
Sustainable Development Goals (SDGs). Indeed, the world will be able to eliminate poverty
only if India succeeds in lifting its citizens above the poverty line.
Previously, the growth was projected to be 6.0 percent this fiscal year and expected to rise
to 6.9 percent in 2020/21 and to 7.2 percent in the following year.
Given the challenges that businesses and people are facing currently, the Indian
economy is most likely to experience a lower growth during the last
quarter of the current fiscal. In case the spread of corona virus continues, growth
may remain subdued in the first quarter of FY 20-21 as well.

3. International and credit rating agencies have therefore revised their 2020 and
2021 growth projections for India keeping in view the negative impact of
coronavirus-induced travel restrictions, supply chain disruptions, subdued
consumption and investment levels on the growth of both global and the Indian
economy. However India is not alone, rather there is a silver lining to the cloud as
many Rating agencies feel India will benefit in the short to long term period.
The Economist Intelligence Unit (EIU)
in its Post-Covid-19-Outbreak revised the growth forecast for G20 countries in
2020. It downgraded the projected FY21 GDP growth of India to 2.1 per cent from
6 per cent before the outbreak. While this looked like a free fall but when
compared with the other G20 countries, India’s growth projection stood on the
top while others are set to dive deep into recession except for two other
countries – China and Indonesia, where both of these countries will grow at 1 per
cent in 2020.
The biggest contraction in the GDP growth this year among the rest 17 of the G20
countries would be suffered by Italy (-7 per cent), Germany (-6.8 per cent) and
Argentina (-6.7 per cent) followed by Brazil (-5.5 per cent), Mexico (-5.4 per cent),
France (-5 per cent), Saudi Arabia (-5 per cent), and UK (-5 per cent). The US
economy would contract by -2.2 per cent in 2020.
Moody's Investors
slashed India’s growth forecast for the calendar year 2020 to 0.2%, from 2.5%
projected in March. For 2021, the rating agency expects India's growth to rebound
to 6.2%. China is projected to grow 1 per cent in 2020 and 7.1 per cent in 2021.
The International Monetary Fund (IMF)
further slashed India’s growth estimate for FY21 to 1.9% from 5.8%
estimated in January, warning that the “worst recession since the Great
Depression” will dwarf the economic damage caused by the global financial crisis a
decade back. It also said that India and China would be the only two major
economies likely to register growth, with all others contracting.
As per -IMF’s latest estimate, the Covid-19 pandemic will shrink world output by
3% in 2020.

4. India’s share in global trade
(merchandise and services) was
2.1% ( USD 481.74 billion out of total
USD 23,044 billion) for exports and
2.6% ( USD 600.62 billion out of total
USD 23,112 billion) for imports in
2017.
Total exports from India
(Merchandise and Services)
registered a growth of 2.13 per
cent year-on-year during April 2019
February 2020 to USD 491.64 billion, while total imports are estimated at
USD 559.45 billion, according to the data from the Ministry of Commerce and
Industry.
While India’s share in Japan is only 0.83% for import and 1.3 % for export.
(INR trillion)
MACRO ECONOMIC INDICATORS 2016 2017 2018 2019 2020
GDP at market prices 153.6 7.2 6.8 5.8 6.2
Total domestic demand 156.3 9.9 7.7 5 6.1
Exports of goods and services 29.5 4.7 12.5 5 4.4
Imports of goods and services 32.2 17.6 15.4 2.2 4.4
Net exports 1 -2.7 -2.8 -1.1 0.5 -0.2
An Overview of the Indian Economy and
Latest Development
India’s share in global trade
Current
prices
Percentage changes, volume
(2011/2012 prices)

5. The postponement of the 2020 Tokyo Olympics on account of COVID-19
pandemic will have a tremendous impact on Japan's economy with the
possibility of USD 6 billion losses. The overall domestic financial loss could reach
600 billion yen to 700 billion yen (USD 5.42 billion to USD 6.32 billion). The impact
would apply both to the nation -- which has invested heavily in making the
Olympics a national showcase -- and to companies such as Bridgestone that have
poured an estimated USD 3 billion into sponsorships.
Japan slips to the fourth spot when GDP is measured in terms of PPP; GDP (PPP)
is USD 5.75 trillion in 2019, while its GDP per capita is USD 40,850 (24th spot).
JAPANESE ECONOMY
Japan Nominal GDP: USD
5.15 trillion- Japan GDP
(PPP): USD 5.75 trillion.
Japan is the third-largest
economy in the world, with
its GDP crossing the USD 5
trillion mark in 2019.
The financial crisis of 2008
rocked the Japanese
economy and it's been a
challenging time for it
economy since then. The
global crisis triggered a
recession, followed by weak
domestic demand and huge
public debt.
When the economy was
beginning to recover, it
suffered a massive
earthquake that hit the
country socially and
economically. While the
economy has broken the
deflationary spiral, economic
growth remains muted.

6. An Overview of The Japanese Economy
JAPAN IMPORT-EXPORT
Japan is the 4th largest export economy in the world and the most complex
economy according to the Economic Complexity Index (ECI). In 2017, Japan
exported USD 694 billion and imported USD 632 billion, resulting in a positive
trade balance of USD 62.4 billion. In 2017 the GDP of Japan was USD 4.87 trillion
and its GDP per capital was USD 43.3 thousand.
*Based on the Interim Economic Outlook released on 6 March 2019, taking account of the
second estimate of 2018 Q4 on 8 March 2019.
(USD Billion)
MACRO ECONOMIC INDICATORS 2016 2017 2018 2019 2020
Gross domestic product
Total domestic demand
Exports of goods and services
Imports of goods and services
Net exports
0.6
0
1.7
-1.6
0.6
1.9
1.4
6.8
3.4
0.6
0.8
0.8
3.1
3.3
0
0.8
1
1.6
3.5
-0.3
0.7
0.3
3.8
2
0.3

7. The top export destinations are listed below (%):
Export Destination Singapore Indonesia Malaysia Vietnam IndiaPhilippinesThailandChina
South
Korea
Hong
Kong
Products % 20 7.8 4.6 3.8 2.5 1.9 1.9 1.9 1.7 1.3
Machinery (Auto
ancillary parts)
45 34 54 38 39 37 43 39 51 39
Instrument 11 15 5.8 6.2 7.9 3 4.4 5.7 3.8 6.6
Transportation 10 4.1 3.5 12 8.7 17 11 5.6 17 6.5
Metal 9.2 14 3 23 5.1 21 15 18 9.1 19
Plastic and Rubber 7.1 6.7 4.7 6.4 3.2 8.6 7.5 9.4 6.2 11
Chemical product 9.1 16 5.1 7.1 8.2 7.1 6.9 6.8 4.8 11
Paper Goods 1.9 0.96 0.61 1.3 0.34 0.89 1.4 2.1 0.99 0.73
Textiles 1.8 0.71 1.5 1.3 0.59 2.6 1.1 7.1 1.1 1.3
Stone and glasses 1.3 1.6 0.71 1.1 0.29 0.79 - - - 1.2
Mineral Products 1 3.8 2.8 0.45 9.3 0.43 2.1 - 2.9 2.3
Precious Metal - 0.95 12 1.4 15 0.57 4 - - -
Foodstuffs - - 2.7 0.32 0.89 - - 1.1 - -

8. The top import destinations are listed below (%):
Destination China Qatar India
25 4.2 4 3.5 3 3 2.9 2.8 1.9 1.8 1.6 0.83
Machinery
(Auto
ancillary
parts)
47 30 - 37 11 - 30 30 52 49 - 7.2
Textiles 13 2 - 4 7.9 - 22 1.5 0.45 1.6 - 7.9
Metal 5.4 17 1.9 6.5 6.4 3.7 3.5 3.8 2.5 7.5 0.84 7.5
Chemical
product
5.2 10 1.4 5.7 2.7 - 3 3.3 16 3.3 0.38 16
Plastic and
Rubber
3.6 6.5 0.46 10 7.7 - 4.5 5.2 2.7 2.9 0.15 1.4
Instrument 3.5 2.5 - 5 - - 2.1 4.7 12 3.6 - 1.7
Foodstuffs 3.2 4.9 - 14 - - 3.5 1.8 5.5 1.2 - 2.8
Transportati
on
2.8 4.5 - 5.2 2.9 - 3 - - 4.7 - 3.5
Footwear
and
Headwear
2.2 - - - - - 5.6 - - - - 1.1
Mineral
Products
1.5 12 96 - 36 96 2.5 35 4 4.1 99 26
Vegetable
Product
1.5 - - - - - 1.7 - - 6.9 - 4.1
Precious
Metal
- 4 - 1.4 5.4 - - 1.1 - 0.73 - 7.5
Animal
Products
- 2 - 3.2 2.7 - 3.4 - 0.86 0.93 - 8.6
Wood
Products
- - - - 4.4 - 3.3 4.7 - 7.6 - -
Animal
Hides
- - - - - - 3.2 - 1.6 1.1 - 1.6
Animal And
Vegetables
- - - - - - - 3.2 - - - 1.4
Products %
South
Korea
Saudi
Arabia Thailand Indonesia
United
Arab
Emirates
Vietnam Malaysia Singapore Philippines

9. INDIA-JAPAN ECONOMIC RELATIONS
The India-Japan Association is one of the oldest surviving international friendship
bodies, having been set up in 1903. The similarities and shared values between
India and Japan, including democracy, respect for the rule of law combined with
convergence of political, economic and strategic interests, an affinity for pluralism
and open society, have served to further strengthen the bilateral relationship
between the two countries over the years.
Japan was PM Modi’s first choice for a bilateral visit outside India’s immediate
neighborhood in 2014. Since then, multiple meetings and bilateral talks later, both
leaders have laid out a vision document for the future with the largest potential
for growth, into a deep, broad-based and action-oriented partnership, which
reflects a broad convergence of their long-term political, economic and strategic
goals titled ‘India Japan Vision 2025’.
More recently, the two democracies have come together with a mandate of driving
ties through economic performance also, as mutually agreed by the dynamic Prime
Ministers of both the countries-Prime Minister Shri Narendra Modi and his
Japanese counterpart Mr. Shinzo Abe. Both the PMs have welcomed the launch of
Japan India Fund of Funds at their bilateral summit meeting on the side of G20
Osaka summit, last June. Japan and India can develop globally competitive
technologies by complementing Japan’s strength in hardware, and India’s strength
in software. This is why Japan and GOI’s Ministry of Electronics and IT signed an
MOU on the “Japan-India Digital Partnership” in October 2018.
In October 2018, PM Modi and
Japanese PM Abe participated in an
India-Japan Annual Summit Meeting,
where the dynamic leaders reviewed the
significant milestones achieved by their
countries over the last four years and
laid down a shared vision for the
future.The two ministers discussed how
to utilize India and Japan’s shared
values not only to constitute the basis
for the India-Japan bilateral relationship but also to underscore the principles for the
two countries to work together for the benefit of the Indo-Pacific region and the world
at large. The ministers discussed the progress on different partnership fronts which
have been transforming the landscape of both nations in various ways.
ANNUAL SUMMIT MEETINGS

10. Annual Summit meetings are part of the transformative relationship that began since
the beginning of the 21st century when annual Prime Ministerial summits were
conceived. The idea for a ‘Special Strategic and Global Partnership’ was arrived at in
the year 2014 during the 9th Annual Prime Ministerial summit meeting with Japanese
PM Shinzo Abe. Both sides had then agreed to establish the ‘India-Japan Investment
Promotion Partnership’. PM Abe had pledged to realize public and private investments
worth JPY 3.5 trillion and to ensure that the number of Japanese companies in India
doubled over the next five years.
Japan’s announcement of joining the International Solar Alliance (ISA), Exchange of
Notes concerning the provision of seven Yen loan projects including the Project for
the Construction of MAHSR, Currency Swap Agreement, India-Japan Digital
Partnership and Implementing Arrangement for deeper cooperation between Japan
Maritime Self-Defense Force and the Indian Navy were among the thirty two MoUs/
Agreements signed during this Annual Summit.
India, being the second-most-populous country in the world, and one of the
fastest-growing economies in Asia, offers attractive opportunities for investment and
partnership, (especially in the infrastructure sector), to Japan which has an abundance
of capital and the presence of strong construction, transport and machinery
companies.
In the past, companies such as
Suzuki and Honda, have partnered
with Indian companies and have
become household names in India.
The lasting success of these
companies is evidence that there is
untapped potential in the
India-Japan bilateral trade and
investment relationship.
Analyzing what India exported to
Japan from 1999-2000 till 2017-18, the
major heads are mineral fuels, fish and crustaceans and other aquatic
invertebrates, organic chemicals, nuclear reactors, pearls, imitation jewelry, iron
and steel etc. Exports from India to Japan were USD 4,734.22 million in 2017-18.
MOUs SIGNED DURING THE SUMMIT

11. India has been ranked at first or second place being one of the most attractive
investment destinations in recent surveys of Japanese manufacturing companies,
conducted by the Japan Bank for International Cooperation (JBIC).
In FY 2017 survey, it ranked at the second place. Japanese FDI in India has increased
in recent years but it still remains small compared to Japan's total outward FDI. During
FY 2015-16 and FY 2016-17, Japanese FDI into India increased from USD 1.8 billion
to USD 4.28 billion respectively. Japanese FDI for FY 2017-18 dropped to USD 1.6
billion and for FY 2018-19 reached USD 2.96 billion. Cumulatively, from 2000 to June
2019, the investments to India have been around USD 30.746 billion (Japan ranks
third now among the major investors). Japanese FDI into India has mainly been in
automobile, electrical equipment, telecommunications, chemical, financial (insurance)
and pharmaceutical sectors.
At the bilateral summit at Tokyo on October 2018, 57 Japanese companies had
declared their interests in broadening business in India with a commitment of
USD 3 billion. Last October, Indian government’s top officials had met around 40
Japanese companies for the next round of investments from Japan Roadshow. There
exists broadening variety of investment areas by Japan from auto-sectors to steel,
pharmaceuticals, food processing etc.
YEAR FDI from Japan (USD billion)
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
1.8
1.8
1.6
2.96
4.28
2
JAPAN'S INVESTMENT IN INDIA:

12. TOP JAPANESE COMPANIES SECTORAL INVESTMENT
ACROSS VARIOUS SECTORS IN INDIA
Top Companies in the Sector
47 23 16 16 13 12 11 11 11 8 8 8 8 7 6 4 4 3 2 2 2 2 1
Auto Components
Mitsuba Sical India Ltd.
Asahi India Glass Ltd.
Mitsubishi Electric Automotive India Pvt. Ltd
IndustrialMachineTools
AutoComponents
industrialGoods
Trading
Electronics/ElectricalGoods
ConsumerGoods
Automobile
IT/ITEnabledServices
logistics/Transportation
Chemicals
Engineering
FinancialServices
PrecisionEquipment
Construction
Media/Advertising
Food/FoodProcessing
Telecommunications
Aviation/Hospitality/Tourism
Education
Metals/Mining
Pharmaceuticals/Healthcare
Apparels
Consulting
Electronics/Electrical Goods
Alpine Electronics Asia Pvt. Ltd.
Sony India Pvt. Ltd.
Toshiba India Pvt. Ltd.
Automobile
Toyota Motor Corporation
Honda Motorcycle And Scooter India Pvt. Ltd.
Yamaha Motor India Limited
Consumer Appliances/Goods
Daikin Airconditioning India Pvt. Ltd.
Panasonic India Pvt. Ltd.
Hitachi Home & Life Solutions
Sharp India Ltd.
Industrial Machine/Tools
Mitsubishi Heavy Industries Ltd.
Panasonic Industrial Asia Pvt. Ltd.
Industrial Goods
Honda Siel Power Products Ltd.
DIC Group
IT/IT Enabled Services
Olympus (India) Pvt. Ltd.
Indo-Fuji Information Technologies Pvt. Ltd
Logistics/Transportation
Indo-Japan Air Service Pvt. Ltd.
Nippon Express Co. Ltd
Chemicals
Sumitomo Chemical India Pvt. Ltd.
Sudarshan Chemical Industries Ltd.
Trading
Mitsubishi Corporation India Pvt. Ltd
Hitachi India Trading Pvt. Ltd.
SECTORS TOP COMPANIES IN THE SECTOR

13. (USD Billion)
TRADE RELATIONS
Engineering
Toyo Engineering India Ltd.
Yuken India Ltd.
Nippon Koei Co. Ltd.
Media/Advertising
Percept Holdings Pvt. Ltd.
Dentsu Communications Pvt. Ltd
Telecommunications
Fujitsu India Ltd
NTT Communications Corporation
Apparels
All India Handloom & Nippon Apparels Cor
Mirai Apparels
Food/Food Processing Ajinomoto India Pvt. Ltd.
Financial Services IFFCO-TOKIO General Insurance Co. Ltd.
Precision Equipments
Canon India Pvt. Ltd.
Fuji Photo Film Co. Ltd.
Aviation/Hospitality/Tourism The Metropolitan / Hotel Nikko New Delhi
Educationt Revo Industry & Trading Company Limited
Metals/Mining Jindal Steel & Power Ltd.
Pharmaceuticals/Healthcare Terumo Penpol Ltd.
Consulting
India’s export to Japan
YEAR 2012-13
6.10
-
12.41
-
18.51
-
6.81
5.81
9.48
8.48
16.29
15.29
5.38
4.38
10.13
9.13
15.51
14.51
4.66
3.66
9.85
8.85
14.51
13.51
3.85
2.85
9.75
8.75
13.60
12.6
4.73
3.73
10.97
9.97
15.71
14.71
4.86
3.86
12.77
11.77
17.6
16.6
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
YoY Growth rate (%)
Pacific Consultants International
Construction
Sumitomo Mitsui Construction Co. Ltd.
L & T Chiyoda Ltd.
There has been significant growth in the number of Japanese affiliated companies in
India, and in 2018, the number of Japanese companies registered in India increased by
5.2 percent taking the tally to 1,442 Japanese companies in October 2018. Most of
these companies are manufacturing firms.
Japan bilateral trade with India totaled to USD 17.63 billion during FY 2018-19.
Exports from Japan to India during this period were USD 12.77 billion and imports
were USD 4.86 billion. Japan’s exports to India were 2.48% of India’s total imports and
India’s exports to Japan were 1.47% of India’s total exports. This underlines that there
remains a big potential. The export-import statistics for the last five years as per India’s
Ministry of Commerce data bank are as follows:
India’s import from Japan
YoY Growth rate (%)
India-Japan bilateral trade
YoY Growth rate (%)

14. YEAR Bilateral Trade (USD billion)
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
16.39
14.51
15.71
17.63
13.48
15.51
India’s major exports to Japan includes:
BILATERAL TRADE FIGURES
S.No. Commodity 2016-2017 2017-18 %Growth
1. 27
Mineral fuels, mineral oils and products of their
Distillation; bituminous substances; mineral waxes.
564.10 866.14 53.54
2. 03
Fish and crustaceans, molluscs and other aquatic
Invertebrates.
383.19 443.85 15.83
3. 29 Organic chemicals 413.56 408.83 -1.14
4. 84
Nuclear reactors, boilers, machinery and mechanical
Appliances; parts thereof.
267.53 294.02 9.90
5. 71
Natural or cultured pearls, precious or semiprecious
stones, precious metals, clad with precious metal and
articles thereof; imitation jewelry; coin.
310.37 278.09 -10.40
6. 72 Iron and steel. 154.98 252.49 62.92
7. 26 Ores, slag and ash. 67.14 229.68 242.11
8. 87
Vehicles other than railway or tramway rolling stock,
and parts and accessories thereof.
166.08 207.78 25.11
9. 38 Miscellaneous chemical products. 134.65 165.46 22.88
10. 62
Articles of apparel and clothing accessories, not
knitted or crocheted.
146.89 157.62 7.30
(USD Million)
HSCode

15. IMPACT OF COVID-19
India and Japan have already made significant
headway in terms of their bilateral relationship
in the past few years. The target for doubling
Japanese investment within five years committing
USD 35 billion for different infrastructure projects
to bolster the ‘Make in India’ program set by
Japanese PM Abe is indicative of the strong
economic partnership envisaged by the two leaders,
and the growth stories of both the countries are
strong indicators to show that these aspirational
targets may be converted to reality.
Imports by India from Japan for 2017-18 are USD 10,973.35 million.
Major items imported from Japan are as listed below:
(USD Million)
S.No.
HS
Code
Commodity 2015-2016
2016-
2017
1. 84
Nuclear reactors, boilers, machinery and
mechanical appliances; parts thereof. 2,784.12 2,669.19 -4.13
2. 85
Electrical machinery and equipment and parts thereof;
sound recorders and reproducers, television image and
sound recorders and reproducers and parts.
1,141.44 1,335.74 17.02
3. 72 Iron and steel. 930.55 1,169.67 25.70
4. 39 Plastic and articles thereof. 697.68 830.38 19.02
5. 90
Optical, photographic cinematographic measuring,
checking precision, medical or surgical instruments and
apparatus parts and accessories thereof.
639.60 700.88 9.58
6. 87
Vehicles other than railway or tramway rolling
stock, and parts and accessories thereof.
573.10 637.16 11.18
7. 89 Ships, boats and floating structures. 447.34 385.20 -13.89
8. 29 Organic Chemicals. 419.83 471.79 12.38
9. 73 Articles of iron or steel. 377.47 317.81 -15.80
10. 40 Rubber and articles thereof. 228.12 288.51 26.47
%Growth

16. SECTORAL IMPACT:
As recently many of the countries are going to ban the global exports of the
components to the other country. Over-dependence on one country is hurting the
global economy and countries are now on the lookout for alternative
production hubs. For foreign investors looking for alternative investment
locations, there are very few countries that have strong governments and are also
capable of replacing China as an important source of cheap, skilled labour. Arguably,
India and Indonesia top the list of candidates. They are large countries located near
China. Moreover, India has been unusually effective in dealing with the Covid-19 crisis
so far.
The void created by disruption in global supplies can be filled by India, and offers a
great opportunity for the country to revive its economy. Hence, India will try to focus
on these categories and increase their production.

17. China’s constant ‘push and pull strategy’ towards Japan has made the country
rethink this option. The recent slump in the supply chain has only strengthened
Japan’s policy of shifting its manufacturing hub to a more stable democracy like
India which would also help strengthen India’s flagship projects ‘Skill India’ and
‘Make in India’. The significant increase in FDI is a major sign in itself.
The post-pandemic world will see a much larger exodus from China. Tokyo has
already announced it will help Japanese firms diversify away from China either to
Japan or to other Asian countries. Governments of many advanced countries
are also likely to urge their investors to invest in other countries.
Machinery and electronics, transportation and chemicals have a major share in
Japan’s trade with the rest of the world. The coronavirus impact on China and
other countries dependent on China for trade, would result in a further fall in
Japanese trade in 2020.
China accounts for half of Japan’s Asian exports and imports. Lower production
due to factory shutdowns and reduced demand could affect Japan’s trade in Asia.
Japan’s trade with China, both exports and imports fell, resulting in trade deficit in
January 2020. The exports and imports fell by approximately 5% each in 2019
after witnessing growth in 2017 and 2018.
This critical situation will make the world think and formulate the strategies to
reduce the over dependence on only one country. Going by that policy, Japan is
also likely to look out for other countries besides China, as presently 25% of
imports in Japan is from China only. In this situation, India looks like the best bet
for Japan given the cheap labour, a democratic system and a robust manufacturing
ecosystem of which Japan already is a part of.

18. AS PER THE POLICY, THE JAPANESE
GOVERNMENT HAS ALREADY
TAKEN SOME MEASURES TO
LOOSEN BILATERAL TIES WITH
CHINA. THIS INCREASING
PARANOIA REGARDING CHINA
OPENS UP SEVERAL AVENUES FOR
INDIA AND JAPAN TO BUILD A
STRONGE BILATERAL PARTNERSHIP.
Japanese PM Shinzo Abe announced
a corpus of USD 2.2 billion to help
Japanese firms relocate their supply
chain network from China.
India tweaked its FDI policy to
include China in the list of countries
where any investment would need
the government’s approval.
Japanese FDI invested USD 25.2
billion in India & invested USD 2
billion in Gujarat with factories of
Maruti Suzuki and Honda.
India is already in talks with the Japanese
government and investors to make the
best out of the opportunity that lies ahead.
The Gujarat government is preparing a
bouquet of incentives and sops to lure
Japanese firms looking to shift from
China. It also has a dedicated Japanese
park that has several supplier companies. The state government is offering
incentives and subsidies for manufacturing units across thirty sectors.
Major items imported
from China include
machinery, textiles, metal,
chemical products, plastic
& rubber, instruments etc.

19. Some identified opportunity areas where India can expand its business with Japan are:- .
As every cloud has a silver lining, this pandemic can open doors for India to
increase its bilateral trade with the land of rising sun. With ‘Make in India’ initiative
by the government of India, the country is focusing majorly on machinery and
ancillary parts. At present, India exports machinery and equipment worth USD
35.8 billion and Japan majorly depends on China for machineries. With
lockdown in China, the price of Man-Made Fiber (MMF) imports is expected to rise
significantly, resulting in higher price for some goods in the domestic market. If the
current scenario persists over the next few months, the domestic retail market
would also be impacted significantly. The shift in paradigm will allow India to open
up more export avenues in this sector along with Textiles.
The FDI equity flows in textile sector (per cent of total) is 0.75 percent
(Apr 2000- Dec 2019). The key export markets for textile includes US, UK, Canada,
Russia, UAE, Italy. The sector is one of the largest employers in the country,
employing nearly 45 million of workforce.
Automobile contributes 7.1 per cent to GDP and auto components contribute
2.3 per cent to GDP. The FDI equity flows in the sector (per cent of total) is 5.2
percent (Apr 2000- Dec 2019). The key export markets for automotive includes
US, Mexico, Bangladesh, African region and Asia.
The other commodities/ sector where India have an edge are Metal, Instrument,
Foodstuffs, Footwear and vegetable products, etc., which can be exported on a
large scale to Japan to increase its share, which is at present only 0.83% of Japan’s
import share.
Apart from the auto sector, other sectors where Japan is likely to focus are
pharmaceuticals and electronics where both have achieved sophistication and
produce quality products at competitive prices.
0.83
Machine (Auto ancillary parts)
7.2
For machinery and textiles, the country primarily depends on
China
Textiles
7.9
Metal 7.5
For Metals, the country majorly depends on South Korea,
followed by Philippines and India
Instrument 1.7
For Instruments, the country majorly depends on Singapore,
followed by Thailand
Foodstuffs 2.8
For Food stuffs, the country majorly depends on Thailand,
followed by Singapore
Footwear and Headwear 1.1
For Footwear and Headwear, the country majorly depends on
Vietnam, followed by China
Vegetable Product 4.1
For Vegetable product, the country majorly depends on
Philippines, followed by India
Current exports to
JapanProducts %
(fig.2017 in %)

20. Japan’s plan of diversification of its supply chain means that India could be the first
choice for Japan as India has been ranked as one of the most attractive investment
destinations in a survey of Japanese manufacturing companies conducted by the
Japan Bank for International Cooperation (JBIC), where India was ranked second
in 2017.
Healthcare is yet another avenue that could secure benefits for both India and
Japan. Japan has been actively involved in its mask diplomacy and has been
providing protective gear to countries like China.
Other possible avenues for trade between India and Japan would be digital
technology, artificial intelligence, machine learning, robotics, automation and B2B
software.
Japan has been instrumental in pushing the manufacturing hub in India for the
past few years, as it has been facing challenges like the shortage of manpower,
higher costs of production and rising costs.
If India complements its capabilities with more open trade and investment policies,
it could be a major beneficiary of these supply chain realignments and its
‘Make in India’ strategy would get a jump-start. India could be a winner in a post
Covid-19 world. Together India and Japan can be leaders in healthcare facilities
and equipment. It is for sure that under the great leadership and bonhomie
amongst the leaders, Indo Japan relations would develop in leaps and bounds
post-COVID with the help of new technologies and solutions.
THE SUN MAY JUST RISE FOR THE
INDIA-JAPAN PARTNERSHIP

21. References
https://www.oecd.org/economy/surveys/Japan-2019-OECD-economic-survey
overview.pdf
https://pib.gov.in/newsite/PrintRelease.aspx?relid=190834
https://www.ibef.org/economy/trade-and-external-sector
https://www.oecd.org/economy/surveys/INDIA-2019-OECD-economic-surve
-overview.pdf
https://www.indembassy-tokyo.gov.in/india_japan_economic_relations.html
http://ficci.in/publication.asp?spid=23195#
https://oec.world/en/profile/country/jpn/
https://oec.world/en/profile/country/jpn/
http://ficci.in/spdocument/23100/India-Japan-Bilateral-Relations-2019.pdf
https://www.oecd.org/economy/surveys/Japan-2019-OECD-economic-survey
-overview.pdf
https://asia.nikkei.com/Spotlight/Tokyo-2020-Olympics/Olympics-delay-to-cost
-Japan-6bn-in-economic-losses
https://www.financialexpress.com/economy/india-to-grow-fastest-among-g20
-economies-despite-coronavirus-these-countries-to-be-worst-hit/1912880/
https://economictimes.indiatimes.com/news/economy/policy/view-with-more-open
-trade-and-investment-policies-india-could-well-emerge-to-be-a-post-covid-winner/
articleshow/75415183.cms?utm_source=contentofinterest&utm_medium=text&utm
_campaign=cppst

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