Annual Report

Annual Report 2007


A New Partnership between Japan and India
2007 Research Committee Report

Japan Keirin Association Subsidiary Project


India has ever inclined toward the United States and the European Union on economic fronts up until 1991 when the Indian government decided to develop the so-called Look East policy. Amid the background, in 2002, India/China trade volume overwhelmed that of India/Japan and almost rivaled to that of India/US. Korean businesses have also shown significant presence in their direct investment to India, with government-level negotiations are underway to conclude an economic partnership agreement between both countries.

All of these indicate that it is now unthinkable that East Asian regional prosperity and stability could be achieved without the contribution from India. India has become the largest destination for Japan’s financial loan ahead of China since 2003. A bit sluggish Japan/India economic relations have finally picked up its pace toward expansion and growth.

Japan/India Joint Research Workgroup completed a report to be submitted to prime ministers of both countries in July 2007. The report shows that human exchange, science and technological exchanges, official development assistance (ODA) to develop investment infrastructure, and other broad range of commitment including cooperation in environment and energy-related areas are integral to further expand bilateral trade and investment opportunities.

This research committee has thus explored and produced a report based on the discussion at Japan/Indo Joint Research Workgroup on the following: what should be done in future in terms of strengthened partnership for expanded mutual trade and FDI volume, exchange of information and experiences in human and technological areas; and what are the benefits of reinforcing Indo-Japanese partnership.

Overview of the Results
General Recommendations
1) Utilizing Indian high skilled human resources
India has abundance of highly educated population, including highly skilled human resources with strong expertise. Also, they have rich human resources in the cutting-edge science and technology field, which makes it beneficial for both Japan and India, to reinforce mutual cooperation. Japan has lot to learn from India not only in IT but bioinformatics in terms of HRD curriculum.

2) Importance of India in global business launch
For Japanese businesses, China comes first before India in choosing their destinations for outsourcing, because of the number of people who speak Japanese and of geographic proximity. However, considering that India has predominant strength in global business development mainly in English speaking areas, it would be meaningful to consider more about India for Japanese businesses. In order to promote business launch in India, further reduction in withholding income tax on technical services and increased flights or new lines that travel between major cities in India and Japan.

3) India as a global market and production center
Expanding middle class and huge development needs of infrastructure demonstrate the presence of a giant domestic market. The number of cell phones subscribers has been increasing at the world fastest pace in India. When compared to Chinese or Korean products, Japanese products have not so penetrated the Indian retail market. However, the number of automotive production units in India has reached 1,960,000 in 2006. Furthermore, production sites for compact cars targeting export for new emerging markets are also on the increase. Also, a technology developed by a Japanese telecom maker is now being considered for adoption in Indian wireless broadband market. To further promote expansion of Japanese businesses into India, underdeveloped roadway infrastructure and inefficient logistics are key challenges to be addressed, which would require closer cooperative partnership between both governments and industries between two countries.

4) Personnel Exchange
The emergence of Indian software industry was triggered by human network developed between the US and India. Also, active personnel exchange has become the basis for developing close economic relations between Japan and China. To increase the number of Indian students learning in Japan’s high educational institutions and other institutions, it is important to further develop rich and broad scholarship programs and Japanese language education in India. Development and expansion of language learning programs to select Japanese as an optional foreign language at secondary education are vitally important.

5) Japan/India Economic Partnership
One of the impediments that Japanese businesses face to get into India market is the underdeveloped infrastructure in India. Currently, private-led development has been on the move in India. Such mechanisms or schemes as viability gap funding (VGF) and two-step loan for IIFCL (India Infrastructure Finance Company Limited) could be viable options to support such move and the use of ODA would be also promising.