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India’s four-D lure for Japan investors

Demography, dynamism, diaspora and diversity — India’s got all four Ds to attract Japanese investments. Or so believes Munim K. Barai, the professor of finance at the College of International Management, Ritsumeikan Asia Pacific University (APU), Oita, Japan.

In his speech on “The growing importance of Indo-Japan economic relationship” at a recent programme hosted by the Army Institute of Management, Barai cited various factors working in India’s favour that could redefine business relations between the two countries. The programme was part of the CMA (Calcutta Management Association) Leadership Lecture Series, in association with The Telegraph.

“America used to be a super-power. China is all set to dethrone the US. Some global thinkers believe India could also be the one to dethrone Uncle Sam, from the economic point of view. This is where pursuing further business interests with the Japanese could prove to be a turning point,” he said.

Barai pointed out that Japan’s economic growth has been slow in the past couple of decades. Quite a few factors are responsible for this. “First, Japan is part of few trade groups in the world. Trade relations aren’t elastic. Second, foreign investors are never allowed to find a strong footing in the domestic market. This exasperates them and most shift base to more lucrative shores. Third, the laws discourage immigration at all levels. In every 1,000 Japanese, barely 3-4 people settle in other countries. Fourth, hardly anyone (in Japan) speaks English, the global trade language,” he said.

On the contrary, America has been the melting pot of the world for a long time and attracting investors to its shores. Lately, however, India is getting there.

India alone, as the 11th largest economy by nominal gross domestic product (GDP) and third largest by purchasing power parity (PPP), is a country of 1,210 million population. This makes it the second largest in the world. Since 1980, its economy has been growing steadily on an average of 6 per cent annually and the GDP growth now is nearly 7 per cent. It also has the highest private domestic consumption as a share of GDP (57 per cent in 2008) in the Asia Pacific region.

“India also has a huge English-speaking qualified manpower capital. Democracy is stable and relations with Japan amicable. Also, the Indian diaspora living abroad is its biggest asset. According to surveys, there are 68 million Indians living abroad who also contribute to the rise of the Indian economy,” he added. In short, a big market, political goodwill, low-cost manufacturing base and regional economic balance are promises the Indian market can make to Japanese investors.

However, there are also a few hurdles. “Most of the labour force in India likes to work within a set job pattern. The ratio of clerical jobs versus manufacturing jobs is 10:2. Hardly anyone wants to be an entrepreneur in India. Another factor that could act against prospective rise of the Indian economy is stiff competition from South-east Asian countries like Indonesia, Hong Kong or even Myanmar. Therefore to position itself as Japan’s prospective business partner, India needs to confront both internal and external forces,” he signed off.