While there is a distinct possibility of Japanese Prime Minister Shinzo Abe putting off his trip to India in April, (the second time in six months) the Covid-19 scare is also likely to impact investments into India from Japan in the short run. However Japan is bullish on India in the long run. Interview with Business Standard by Keiichi Onozawa, representative of Ministry of Economy, Trade and Industry, Japanese Government for South Asia. Excerpts:
To what extent would Covid-19 impact Japanese investment decisions this year?
A: Now, Japanese businesspersons face a difficulty in traveling to and from India. Also, the demand is globally shrinking. These factors can have some effects on foreign companies to delay their investment decisions in the short term. In the long term, however, we reaffirmed the importance of robust global supply chain. For example, many factories in India have been struggling to find alternative sources for procurement after China has closed down and this is where we have the room to provide them alternative inputs. In this sense, India should be seen as a destination to attract additional FDI to make those companies' supply chain robust.
Last December, Prime Minister Abe's visit was cancelled due to the turmoil on CAA. There was an understanding it could be held in April 2020, but with the Covid-19 outbreak when do you see the next occasion happening?
A. It was a huge disappointment to have to reschedule PM Abe’s trip to India in last December. I hope the next occasion will happen as soon as possible.
At this stage which are the big investment areas which you see? Does it still include the bullet train project?
A: At the bilateral summit meeting at Tokyo on October 2018, 57 Japanese companies had declared their interests in broadening business in India with a commitment of $3 billion. Last October, India government’s top officials had met around 40 Japanese companies for the next round of investments from Japan Roadshow. We observe broadening variety of investment areas by Japan from auto-sectors to steels, pharmaceuticals, food processing etc. The high speed railway project is a symbolic big project already agreed between both the prime ministers. I hope that we proceed as soon as possible to expedite Make in India, and to boost economic growth connecting two big cities.
There is a proposal from the NITI Aayog to Japan to launch an India-Japan fund of funds. What is the progress in that respect.
A: 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. We are working hard for the coming launch of that Fund. I aim to facilitate the business matching between Indian Investee startups and Japanese companies. Japan and India can develop globally competitive technologies by complementing Japan’s strength in hardware, and India’s strength in software. This is why my ministry and GOI’s ministry of Electronics and IT signed an MOU on the “Japan-India Digital Partnership” on October 2018. Many Indian IT and software companies already broadened their business in Japan. They have even contributed to the development of engine control software in collaborating with Japanese auto-companies. “Tricog”, an Indian healthcare startup has partnered with Japanese health machinery company Fukuda Electronics to develop AI based diagnostic program on heart beating patterns. They are successfully expanding their business not only inside India but also to Kenya, Thailand, and Indonesia. We want to facilitate such good cycles in terms of technologies, finance and human resources, and expedite Japan-Asian circulations of innovations in many areas including healthcare, logistics, education, agriculture and fin-tech.
What are the chances of RCEP being signed in 2020 with India as a signatory
A: I was disappointed to hear from PM Modi that it is not possible for India to join RCEP. Japan has been trying hard to solve India’s concerns together with other member countries. As is written in Joint leaders’ statement on the RCEP, all RCEP participating countries including India will work together to resolve India’s significant outstanding issues. Japan will make every effort to bridge India and other member countries. Being part of the agreement will benefit India. According to the High-Level Advisory Group (HLAG) on trade, RCEP will benefit India the most compared to other member countries by improving 0.8% of GDP, and pushing up 11% of exports. Second, India should not miss the chance of integration to emerging East Asia market and supply chain. Regional integration will expedite Make in India. Third, India should be aware of the cost of not being part of RCEP. If RCEP without India happens, other rival countries will become more attractive for foreign companies. The later India decides, the less opportunities India can take. I personally think India can improve the trade deficit by herself. According to the Asian Development Bank, the utilisation rate of India’s FTAs varies between 5 per cent and 25 per cent, which is one of the lowest in Asia, while around half of Japanese companies in India are using India’s FTAs. Improving the usage rate of India’s FTA will improve the trade deficit.