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India emerging hot for Japanese investors

business Updated: Mar 22, 2009 20:56 IST
Gaurav Choudhury

The Land of the Rising Sun is finally rising for India, which is emerging as a hot favourite as Japan diversifies from earlier hotspot China.

A survey on outlook for Japanese foreign direct investment (FDI) in 2008 carried out by the Japan Bank of International Cooperation (JBIC) says that as an investment destination, companies that earlier concentrated in China are beginning to diversify into other emerging economies.

“China occupies the top position overall, but India continues to make gains, leaving it almost on a par with China,” said. The survey, conducted among 620 large Japanese manufacturing companies, has been conducted for the last 18 years.

India has been voted as the Number 2 destination for the fourth consecutive year. China stays on top, but its percentage share has dipped from 74 per cent in 2006 to 63 per cent in 2008.

The number of Japanese companies having concrete plans to enter Indian market has increased from 89 companies in 2007 to 104 companies in 2008.

Underdeveloped infrastructure, however, remains the biggest ever issue bothering potential and existing Japanese investors in India. “Infrastructure improvements are believed to be making progress, but the demands of companies seeking to make forays into India also appear to be on the rise,” the survey report said.

By industry, automobile-related companies show a particularly positive stance.

While comparing the number of companies listing the countries and regions they planned on expanding in, North America has waned while India has shown a rising trend, the report said.

Japanese FDI in India has grown from less than $1.78 billion in 2007 to $5.43 billion in 2008. Japanese companies, particularly small and medium enterprises, are expected to invest over $10 billion in the proposed Delhi-Mumbai industrial corridor.