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Wednesday, September 3, 2014

The Brouhaha over Indian PM’s visit to Japan

Business leaders in both Japan and India have a deep anxiety about the proposed trip of the Indian Pm Shri Narendra Modi to Japan. While this visit does have a political significance form the perspective of foreign policy, there are few items on the economic agenda that can boost economic ties between both the countries. 
Here is a snapshot of the economic agenda:
1. An important element in India-Japan Joint Statement following Modi-Abe Summit on September 1 will be expression of Japan's interest to fund High Speed Railways in India. Japan faces competition in this sector from China who has also shown keen interest for building this.
2. A key milestone from the visit will be MoU between EXIM Bank of India and Japan Bank of International Cooperation (JBIC). The Japanese side has been requesting JBIC be allowed to engage in swap transactions so that JBIC can projects in INR across India not limited to DMIC projects.
3. While civilian nuclear deal may not concluded in this trip owing to differences over 'no-test' clause in the agreement, Modi will reiterate India's commitment to disarmament and moratorium on nuclear tests during the banquet speech. A significant defence agreement on upgrading the dialogue mechanism and expanding the scope of cooperation to increase drills and exercises are on the cards.

4. A big ticket item that will be highlight of Modi's Tokyo trip will be substantial agreement for supply of rare earth metals from India. Thereafter contracts will be signed for two year supply. This has been delayed since the days of the UPA regime. Tokyo has been pushing for supply of rare earth metals, exports of which are yet to kick off even as the two sides have held a few rounds of discussions since the bilateral agreement was signed in 2012. The pact was aimed at reducing Japan's heavy rel ..
5. Delhi and Tokyo will explore and deliberate on doubling current Japanese FDI into India during the next five years. This is directly proportional to number of Japanese companies in India (currently numbering 1072) doubling in India in next five years. Figures from Maharashtra and Gujarat show that Japanese companies interested in India keeps climbing, year-on-year. But FDI inflows have sagged. From a peak of $2 billion in 2011-12, Japan's FDI into India, according to the Reserve Bank of India (RBI) slipped to $1.3 billion in 2012-13. Modi and Japanese counterpart Shinzo Abe are aiming high to double FDI inflows into India from Japan over next five years across existing and new sectors (IT & hydrocarbon).
6. Presence of whos who of Indian business tycoons in Tokyo coinciding with Modi's trip will play a key part increasing FDI inflows into India as they explore Japanese partners for new ventures. Mukesh Ambani, Gautam Adani, Azim Premji, Chanda Kochhar, Shashi Ruia, S Ramadorai and Kiran Mazumdar Shaw are some of the big names in that delegation to Japan.
7. Presence of whos who of Indian business tycoons in Tokyo coinciding with Modi's trip will play a key part increasing FDI inflows into India as they explore Japanese partners for new ventures. Mukesh Ambani, Gautam Adani, Azim Premji, Chanda Kochhar, Shashi Ruia, S Ramadorai and Kiran Mazumdar Shaw are some of the big names in that delegation to Japan.