Piyush Woos Japan Subsidy to Divert China Departing Japanese Investors towards India

On the heels of extending a subsidy package to 10 Japanese firms to invest in IT tie-ups in India, Tokyo has made India and Bangladesh part of a larger subsidy programme, estimated at $230 million, unofficially aimed at helping Japanese companies in China to relocate to other countries.

“When the package was initially announced, it was for relocation of Japanese companies to mostly South-East Asian countries including Vietnam, Thailand and Myanmar, but now India and Bangladesh, too, have been added to the list,” an official close to the development said.

The larger part of the package, totalling about $2 billion, is, however, for helping Japanese companies relocate from China to Japan. The total package, amounting $2.23 billion, was announced by the Japanese government earlier this year to help its companies in China that wanted to move out.

There are over 31,000 Japanese business establishments in China compared with just about 5,100 in India. Several Japanese companies in China are keen to relocate due to the growing economic uncertainty in that country post Covid-19 pandemic and its worsening relations with the US and some other nations.

JETRO plan

Last month, the Japan External Trade Organisation (JETRO) announced that it would fund 10 Japanese companies, including Suzuki Motors and Olympus, to get into high-tech projects with Indian companies. Approximately $1 million was set aside for the projects already identified.

“The subsidy for funding technological collaborations is different from the fund for relocation.

“This fund is to support a part of investments in machinery, factory, etc.,” the official explained.

Japanese Minister for External Trade and Investments Hiroshi Kajiyama, at a virtual investment forum for Japanese investors in India last month, had said that India was one of the investment destinations that Japanese investors were keen to expand in.

However, he said that for Japanese companies to select India as an investment destination, it was important to provide an attractive business environment.

He pointed out that 200 investment projects from Japan were facing delays in India due to various problems including the pandemic.

‘Focussed group’

Commerce and Industry Minister Piyush Goyal had assured that a focussed group of key officials will resolve Japanese investors’ concerns including those on logistics, Customs clearance, export procedures and quality issues.

Japan is the fourth largest investor in India, after Mauritius, Singapore and the Netherlands, accounting for cumulative foreign direct investments (FDI) of $33.5 billion in 2000-20 period accounting for 7.2 per cent of the total flows into India. Much of the Japanese investment is in manufacturing.