Japan’s engagement with India has reached an inflexion point with Prime Minister Narendra Modi’s recent visit. Like Modi, India’s previous premier, too, shared a warm equation with Japanese PM Shinzo Abe. But that didn’t translate into big-ticket investment opportunities as it has now. “There has been talk of billions and millions. But there has never been talk of trillions”, gushed Modi at the end of the official leg of his five-day visit. The reference was to the 3.5 trillion yen ($33.8 billion) promised by Japan
for bullet trains, smart cities, rejuvenation of rivers like the Ganga and clean energy projects.
No doubt, all of this helps in realising Modi’s vision of building a diamond quadrilateral of bullet trains connecting major metropolises in the country on the Tokaido Shinkansen model. He has talked about dedicated freight and industrial corridors and the first railway budget of the NDA government has invited 100% FDI for such big projects. Japan’s willingness to help out with such proposals is reflected in the massive investment commitment which comprises a mix of public and private funds and Overseas Development Assistance (ODA), of which India is the largest recipient.
However, getting the commitment from the Japanese and using this money are two different things. India does not exactly have a good track-record in utilising ODA funds. For instance, less than a fifth of what was committed could be taken in FY14. A trillion-yen question is also whether India is ready to seize the prospect of attracting the second massive wave of outward investments from Japan that is heading for ASEAN shores. The Japan India Investment Promotion Partnership aims to double both Japanese FDI and the number of companies operating in India over the next five years.
Both these numbers aren’t exactly flattering as Japanese businessmen (like other foreign investors) have their concerns about investing in India. The flagship venture is the Suzuki-controlled Maruti Suzuki India Ltd, which triggered the automobile revolution in the 1980s with its hatchback model, the Maruti 800. In the late 1990s, its frictions with the Indian government cast a shadow over the bilateral relationship. Later on, some Japanese companies have made terrible mistakes as well, like
Daiichi Sankyo’s ill-fated takeover of Ranbaxy in 2008. Labour troubles have also been a hardy perennial.
Net FDI inflows from Japan, in fact, have more than halved to $2.1 billion in 2013 from the peak level of $5.5 billion in 2008 according