India has overtaken China for the first time as the most attractive business destination for long-term Japanese investments, according to a survey by Japan Bank for International Cooperation (JBIC).
JBIC's annual survey revealed that 70 per cent of surveyed Japanese manufacturers regarded India as an attractive country to do business in over the next 10 years or so, while 67 per cent preferred China. Russia came third, with a 37 per cent rating, followed by Vietnam at 28 per cent.
ROI
The returns of being in India are substantial.
Indian companies give a higher return on equity than other countries in Asia. It is 18 per cent in India compared to 11.5 per cent in China says a JP Morgan study.
India subsidiaries of global companies often outperform their parent companies. And Japanese companies, in particular, are doing remarkably well. Seventy per cent of the Japanese companies in India are making profits in operations, 69 per cent achieve profitability targets, while 83 per cent utilise 70 per cent of their capacities, reveals a FICCI survey.
Corroborating this position, an AT Kearney report says that India is the best place to start a business.
Japan has now been identified as the fourth-largest foreign direct investor to India from July 1991 to July 2007 accounting for US$ 2.7 billion FDI, out of US$ 60.2 billion that the country received in total. According to data released by the Ministry of Finance of Japan, Japan's FDI in year 2006 alone was US$ 515.5 million, which was almost double of US$ 254.7 million received in 2005. Incidentally, 2006 saw the largest annual FDI inflows from Japan to India. During 2005-07, Japanese investment into India has been to the tune of US$ 1.8 billion.
With a growing engagement profile between the two countries, the year 2007 was designated the Indo-Japan Friendship Year. In the month of April 2007 alone, Japanese companies invested around US$ 353 million in India.
Not only Japanese FDI, equity investment from Japan into India is also on the rise, touching US$ 2.6 billion during August 1991-March 2007. The number of Japanese business establishments operating in India increased from 231 in August 2003 to 475 in February 2007.
India is also the biggest recipient of Japan's official development assistance (ODA). Since Japan's first ODA to India in 1958, the country has received monetary aid worth US$ 2.27 million so far.
Japanese FDI into India
Japanese FDI into India is estimated to reach US$ 5.5 billion by 2010. Some FDI projects involving Japan:
Japanese automobile giant Honda is setting up its second car manufacturing unit in Rajasthan at an investment of US$ 254 million with a capacity to produce 60,000 units in the first phase.
Japan's Itoh Oil Chemicals (ITOH) is picking up a 4.8 per cent stake in Mumbai-based Jayant Agro Organics (JAOL), a leader in castor oil and castor derivatives. India produces nearly 70 per cent of the world consumption of castor oil.
Mitsui Group of Japan has picked up 24 per cent stake in JAOL's subsidiary Ihsedu speciality & Chemicals (ISCL). ISCL is currently setting up a chemical manufacturing unit for manufacturing speciality chemicals based on castor oil.
Maruti Suzuki plans to invest between US$ 438.5 million-U$ 877 million for a research and development (R&D) facility in India over the next three to five years.
The above examples point to a singular fact. That Japanese presence in India is on a rise. So is Indian presence in Japan. Indian companies are exploring opportunities to invest in Japan. Around 70 Indian IT companies have already established their offices in Japan.
Bilateral Trade
Japan is among India's top five trading partners. Bilateral trade between Japan and India has been on the steady rise since the year 2003 with trade figures increasing from US$ 3.7 billion in 2002-03 to US$ 6.5 billion in 2005-06, rising further to US$ 7.5 billion in 2006-07, according to the Commerce Ministry.
The reasons behind this interest in India are obvious. India offers a large domestic market base. Besides, mutual synergies between businesses in the two countries are driving initiatives.
Japan is a relatively labour-scarce, capital abundant country that complements India's rich spectrum of human capital.
India's prowess in the software sector lends synergy to Japan's excellence in the hardware sector.
India's abundance of raw-materials and minerals matches well with Japan's capabilities in technology and capital to produce knowledge intensive manufactured goods.
India's large domestic market has been the main factor for investments by Japanese companies. The majority of investments are in traditional fields like automobiles and auto parts. However, some companies have invested in businesses like pharmaceuticals (EISAI), health drinks (Yakuruto), pulp (Nihon Koso) and rice processing (Yanmar).
Japanese small and medium enterprises have begun to discover India as the new growth market. Japan and India share a common vision for the world. This is aptly illustrated by the fact that there has been an increase in the number of joint declarations, delegation visits and other business events between the two countries.
Imports
India's imports from Japan are dominated by capital and knowledge intensive manufactured products such as machinery, transport equipment, electronic goods, chemicals and metal products. Imports from Japan have grown at a CAGR of 24 per cent for the period 2003-06. According to figures provided by the Indian Commerce Ministry, Indian imports from Japan were worth US$ 4.6 billion in 2006-07 compared to US$ 4 billion in 2005-06.
Exports
India's exports to Japan comprise mostly raw material and minerals such as marine products, minerals and iron ore, gems and jewellery and textile products. Exports from India to Japan were worth US$ 2.8 billion in 2006-07 compared to US$ 2.4 billion in 2005-06.
Japan's portfolio investment (FIIs)
There has been an increase in the number of portfolio investment funds through which Japanese investors can enter the Indian stock market. After the first "India Portfolio Investment Funds" was set up in 2004, the number of such funds has doubled from 8 in November 2005 to 16 as of March 2007, attracting large Japanese investments to the Indian stock market. The net asset of the Japanese "India portfolio investment funds" in March 2007 was US$ 8.2 billion, increased from US$ 4.7 billion in end November 2005.
Portfolio investors from Japan into India include funds such as Nomura India Security Investment (US$ 920.5 million), Shinko Pure India Equity Fund (US$ 617.1 million), JF India Fund (US$ 142.7 million), BlackRock India Equity Fund (US$ 929.1 million) Mitsui-Sumitomo India-China Equity Fund, HSBC India Open Fund (US$ 1033.3 million) from HSBC Investments (Japan) K. K, Sumitomo Mitsui Asset Management Co., Ltd. (US$ 264.1 million) and Shisei Investment Management Co., Ltd (US$ 241.9 million) among others.
India's popularity with Japanese investors can be gauged from the fact that an array of new India retail funds have been launched in Japan, which by the end of July were worth US$ 4.05 billion. In fact, the Nomura Asset Management Co. Ltd. in Tokyo had to close its India fund just a day after its launch on June 22 because it collected more money than it could invest without artificially shooting up Indian stock prices. Such has been the growth in Japanese investment in India that much of the US$ 1.9 billion foreign institutional investment inflow in July came from Japan alone
JBIC's annual survey revealed that 70 per cent of surveyed Japanese manufacturers regarded India as an attractive country to do business in over the next 10 years or so, while 67 per cent preferred China. Russia came third, with a 37 per cent rating, followed by Vietnam at 28 per cent.
ROI
The returns of being in India are substantial.
Indian companies give a higher return on equity than other countries in Asia. It is 18 per cent in India compared to 11.5 per cent in China says a JP Morgan study.
India subsidiaries of global companies often outperform their parent companies. And Japanese companies, in particular, are doing remarkably well. Seventy per cent of the Japanese companies in India are making profits in operations, 69 per cent achieve profitability targets, while 83 per cent utilise 70 per cent of their capacities, reveals a FICCI survey.
Corroborating this position, an AT Kearney report says that India is the best place to start a business.
Japan has now been identified as the fourth-largest foreign direct investor to India from July 1991 to July 2007 accounting for US$ 2.7 billion FDI, out of US$ 60.2 billion that the country received in total. According to data released by the Ministry of Finance of Japan, Japan's FDI in year 2006 alone was US$ 515.5 million, which was almost double of US$ 254.7 million received in 2005. Incidentally, 2006 saw the largest annual FDI inflows from Japan to India. During 2005-07, Japanese investment into India has been to the tune of US$ 1.8 billion.
With a growing engagement profile between the two countries, the year 2007 was designated the Indo-Japan Friendship Year. In the month of April 2007 alone, Japanese companies invested around US$ 353 million in India.
Not only Japanese FDI, equity investment from Japan into India is also on the rise, touching US$ 2.6 billion during August 1991-March 2007. The number of Japanese business establishments operating in India increased from 231 in August 2003 to 475 in February 2007.
India is also the biggest recipient of Japan's official development assistance (ODA). Since Japan's first ODA to India in 1958, the country has received monetary aid worth US$ 2.27 million so far.
Japanese FDI into India
Japanese FDI into India is estimated to reach US$ 5.5 billion by 2010. Some FDI projects involving Japan:
Japanese automobile giant Honda is setting up its second car manufacturing unit in Rajasthan at an investment of US$ 254 million with a capacity to produce 60,000 units in the first phase.
Japan's Itoh Oil Chemicals (ITOH) is picking up a 4.8 per cent stake in Mumbai-based Jayant Agro Organics (JAOL), a leader in castor oil and castor derivatives. India produces nearly 70 per cent of the world consumption of castor oil.
Mitsui Group of Japan has picked up 24 per cent stake in JAOL's subsidiary Ihsedu speciality & Chemicals (ISCL). ISCL is currently setting up a chemical manufacturing unit for manufacturing speciality chemicals based on castor oil.
Maruti Suzuki plans to invest between US$ 438.5 million-U$ 877 million for a research and development (R&D) facility in India over the next three to five years.
The above examples point to a singular fact. That Japanese presence in India is on a rise. So is Indian presence in Japan. Indian companies are exploring opportunities to invest in Japan. Around 70 Indian IT companies have already established their offices in Japan.
Bilateral Trade
Japan is among India's top five trading partners. Bilateral trade between Japan and India has been on the steady rise since the year 2003 with trade figures increasing from US$ 3.7 billion in 2002-03 to US$ 6.5 billion in 2005-06, rising further to US$ 7.5 billion in 2006-07, according to the Commerce Ministry.
The reasons behind this interest in India are obvious. India offers a large domestic market base. Besides, mutual synergies between businesses in the two countries are driving initiatives.
Japan is a relatively labour-scarce, capital abundant country that complements India's rich spectrum of human capital.
India's prowess in the software sector lends synergy to Japan's excellence in the hardware sector.
India's abundance of raw-materials and minerals matches well with Japan's capabilities in technology and capital to produce knowledge intensive manufactured goods.
India's large domestic market has been the main factor for investments by Japanese companies. The majority of investments are in traditional fields like automobiles and auto parts. However, some companies have invested in businesses like pharmaceuticals (EISAI), health drinks (Yakuruto), pulp (Nihon Koso) and rice processing (Yanmar).
Japanese small and medium enterprises have begun to discover India as the new growth market. Japan and India share a common vision for the world. This is aptly illustrated by the fact that there has been an increase in the number of joint declarations, delegation visits and other business events between the two countries.
Imports
India's imports from Japan are dominated by capital and knowledge intensive manufactured products such as machinery, transport equipment, electronic goods, chemicals and metal products. Imports from Japan have grown at a CAGR of 24 per cent for the period 2003-06. According to figures provided by the Indian Commerce Ministry, Indian imports from Japan were worth US$ 4.6 billion in 2006-07 compared to US$ 4 billion in 2005-06.
Exports
India's exports to Japan comprise mostly raw material and minerals such as marine products, minerals and iron ore, gems and jewellery and textile products. Exports from India to Japan were worth US$ 2.8 billion in 2006-07 compared to US$ 2.4 billion in 2005-06.
Japan's portfolio investment (FIIs)
There has been an increase in the number of portfolio investment funds through which Japanese investors can enter the Indian stock market. After the first "India Portfolio Investment Funds" was set up in 2004, the number of such funds has doubled from 8 in November 2005 to 16 as of March 2007, attracting large Japanese investments to the Indian stock market. The net asset of the Japanese "India portfolio investment funds" in March 2007 was US$ 8.2 billion, increased from US$ 4.7 billion in end November 2005.
Portfolio investors from Japan into India include funds such as Nomura India Security Investment (US$ 920.5 million), Shinko Pure India Equity Fund (US$ 617.1 million), JF India Fund (US$ 142.7 million), BlackRock India Equity Fund (US$ 929.1 million) Mitsui-Sumitomo India-China Equity Fund, HSBC India Open Fund (US$ 1033.3 million) from HSBC Investments (Japan) K. K, Sumitomo Mitsui Asset Management Co., Ltd. (US$ 264.1 million) and Shisei Investment Management Co., Ltd (US$ 241.9 million) among others.
India's popularity with Japanese investors can be gauged from the fact that an array of new India retail funds have been launched in Japan, which by the end of July were worth US$ 4.05 billion. In fact, the Nomura Asset Management Co. Ltd. in Tokyo had to close its India fund just a day after its launch on June 22 because it collected more money than it could invest without artificially shooting up Indian stock prices. Such has been the growth in Japanese investment in India that much of the US$ 1.9 billion foreign institutional investment inflow in July came from Japan alone
