India is emerging as a favourite investment destination for top Japanese companies as large conglomerates from the far-eastern country begin to diversify away from neighbouring China, their earlier hotspot.
A survey on outlook for Japanese foreign direct investment carried out by the Japan Bank of International Cooperation found out that as an investment destination, companies, earlier concentrated in China, are beginning to diversify into other emerging countries.
"There is a growing interest in India in particular," it said.
While China still maintains the top position as an investment destination, a lesser proportion of companies ( 68 per cent) prefer China as a promising country. China has seen a decline for four straight years since its peak in 2003.
"Many companies have already established a presence in China, and one reason for the drop may be the increase in companies waiting to see how the economy, investment climate and related factors change before expanding," the survey said.
India ranked second among Japanese companies as a promising country for investment. More companies responded that "investment plans exist" for India, and this is tying in to real investment at an accelerated pace.
By industry, automobile-related companies show a particularly positive stance. "India is increasingly gaining attention," the survey said.
In fact, India ranked highest among Japanese companies as the promising country for doing business in the long term, ahead of China for the first time since the survey has been conducted for the last 18 years.
"The number of companies planning to strengthen or expand their operations in China remained basically unchanged from the previous year. A major increase was seen in respondent companies planning to strengthen or expand operations in India," it said.
Other than Thailand, many Japanese automobile companies see very active prospects in India. "Many companies responded that they were planning to expand in India, reflecting efforts to meet the skyrocketing automobile demands in the region," it said.
The survey was conducted among 600 large Japanese manufacturing companies. Japanese companies, particularly small and medium enterprises, are expected to invest over $10 billion in the Delhi-Mumbai proposed corridor.