NEW DELHI: Japan’s foreign minister Yoshimasa Hayashi has called on India to improve its investment environment, with Japanese firms operating in the country highlighting several challenges they face in terms of tax issues and infrastructure.
The issue figured in Hayashi’s discussions with external affairs minister S Jaishankar during the India-Japan foreign ministers’ strategic dialogue on Thursday. A statement on the dialogue from the Japanese side said Hayashi “requested cooperation to improve the investment environment and for the early establishment of a Joint Crediting Mechanism (JCM)”.
The issue also came up at a meeting on Friday between Hayashi and the Japan Chamber of Commerce and Industry in India (JCCII) and representatives of several Japanese companies operating in India, including manufacturers of cars, auto components and machinery.
“The view from the Japanese businesspeople here is that they would like to see a more predictable, transparent and stable business environment in India, including implementing the legislation and tax issues,” Yukiko Okano, deputy press secretary of Japan’s foreign ministry, told a media briefing.
In the past, Japanese businesses operating in India have raised issues related to infrastructure challenges, and JCCII has been in touch with Indian authorities and the Japanese embassy to address these matters, she said.
{{/usCountry}}In the past, Japanese businesses operating in India have raised issues related to infrastructure challenges, and JCCII has been in touch with Indian authorities and the Japanese embassy to address these matters, she said.
{{/usCountry}}“The Japanese business sector sees a growing opportunity in operating in India for investment and trade. So, they would like to see more a stable investment climate and business environment put in place in India,” Okano said.
There was no immediate response on the matter from Indian officials.
As of June 2022, a total of 1,439 Japanese companies have a presence in India, with manufacturing firms accounting for half this figure. Between 2000 and 2022, Japanese investments in India were worth $37.8 billion, ranking Japan fifth among source countries for FDI.
Japanese investments in India have increased in recent years but remain small compared to the country’s total outward FDI. Japan’s FDI in India during 2020-21 and 2021-22 stood at $1.95 billion and $1.49 billion respectively. Most of these investments have been in electrical equipment, general machinery, chemicals and pharmaceuticals, financial and insurance sectors, construction, transportation, wholesale and retail, and services.
During Japanese Prime Minister Fumio Kishida’s visit to New Delhi in March 2022, the two sides set a target of increasing Japan’s public and private investments in India to 5 trillion yen over the next five years. Since then, Okano said, there has been “steady progress” in efforts to achieve this target.
In a post on its website, JCCII said it has made several proposals to the Indian government to enhance the business environment. “In order to further expand future investment, it is essential to...deepen a common understanding of Japanese companies’ perspectives on the business environment in India,” the chamber said.
The proposals include establishing a carbon credit system, easing of Reserve Bank of India regulations, improved export tariff regulations, further incentives for export promotion, revision of corporate income tax for foreign banks, and relaxation of FDI restrictions in the insurance sector.
“While Japanese companies already have a sizable presence in India, it is not surprising that they have an even larger presence in other Asian countries. Even Japanese companies doing business in other emerging economies, such as Southeast Asia, often struggle with India’s unique business environment and challenges,” JCCII added.
JCCII said it is essential to “further improve the business environment in India” to fully leverage the potential for increased investments by Japanese companies.