Prime Minister Narendra Modi’s bilateral summit with the Japanese Prime Minister Shinzo Abe on October 29 has sought to significantly alter te nature of Japanese investment in India by focusing on more job oriented projects by the Japanese Medium & Small Scale units as against the investments by the large companies. Indian PM made a special appeal to the Japanese SMRs this time to seriously explore opportunities in India.
So long, Indian PM had been harping on investments from the large Japanese companies. Lot of promises were made by the Japanese government and the leading companies but the flow of investments has not been adequate enough. The generation of additional jobs was not as per the expectations. The Indian officials could assess that enough wooing of the Japanese MSMEs has not been done uptill now and this has been a mistake taking into account the high potential of job generation by the MSME sector.
So this time, the PM took special care in pointing out to the Japanese investors that” there are ample opportunities for Japan’s SMEs in India. It is not only the big companies but MSMEs that are welcome to India. Through MSMEs too, Japanese investors can take their businesses to new high”. PM also spoke of India-Japan cooperation in third countries co0vering the areas like health care and agriculture apart from infrastructure and capacity building. He said that the two countries will further cement their partnership for development work in third countries in South Asia, India-Pacific region and Africa.
Till now, the Japanese investors were from large sectors. In Japan External Relations Organisation (JETRO) Seminar, PM Modi focused on FDI from Japanese Small and Medium scale (SME) industries and India-Japan joint venture in third countries. Though not elaborated, it is presumed that he wanted Japanese SME to bolster GVC manufacturing facilities in India as Japanese have invested substantially in component based industries in ASEAN. With regard to focus on India-Japan joint venture in third countries, he seemed to emphasize on development of infrastructure for connectivity between North East and ASEAN and between India and Africa.
The transformational change in the manufacturing practices reflects that GVC manufacturing network has become crucial to reap the benefits of low cost production, labour intensive industries in developing countries, especially in ASEAN. Automobile, electronics and the digitization are the hallmark for new world manufacturing practices and India should follow this transformational change in the manufacturing practices
Firms in developed countries have established transnational manufacturing network, combining their high tech know how – with low wage labour in developing countries. Eventually, production has become increasingly fragmented across the borders with growing prevalence of GVC for production of components and parts in low wage countries. Initially, South East and East Asia exemplified this new pattern of production.
So far, India trailed behind in this race. Reasons, inadequate skilled labour, lackluster export infrastructure, limitation of scale and difficulty in accessing cheap credit. These economic ills shadowed India’s potential as manufacturing exporter and became detrimental for it to enter the GVC network of manufacturing.
There was a turnaround in the Japanese zeal to invest in India. Rejecting the old sullied image, Japanese investors underwent for a new look towards India. According to a survey by JETRO (JETRO Survey on Business of Japanese Companies in Asia and Oceana), 70 per cent of Japanese investors in India were expected to expand their operations in next few years. Interestingly, the survey revealed that Japanese business expansion plan in India is the highest among the Japanese investors in Asia and Oceania. The sustainable growth in the Indian economy, continuous flow of deregulations and increase in sales attributed to the turnaround in the Japanese interest to invest in India.
Prime Minister wanted that Japanese investments should lead to substantial Job generation in India at this time of Jobless growth. That is why this appeal to the Japanese SMEs. (IPA Service)
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