Japan has been facing a protracted downturn in domestic investment after the yen appreciation in end-eighties and the burst of bubble economy in early nineties. Both want investment for growth and abate unemployment. Both believe that their campaign for foreign investment will herald a spur in domestic demand. Japan is strangled by low domestic demand and over capacity and India is shackled by low supply and low production base. The concept of export base economy was plagued by Lehman turmoil. Given the situation, where domestic investment has become the axis for development, investment by India and Japan in each other country can trigger the potential for foreign investment in their domestic markets.

A wide communication gap between the two countries is the major obstacle to stimulate the Indian and Japanese investors to invest in each other country. The communication gap narrowed Japanese outlook about India as a potential investment destination, despite India was splurged with a continuous high growth of GDP of 7-8 percent since past six years. FDI in India spurred by over 27 per cent in 2014-15. This tells the story that how domestic demand played a key role to trigger a sustainable growth in the economy, despite the downturn in exports. Notwithstanding India being the biggest Japanese ODA receiver, communication gap plagued the Japanese investment in India.

Indian investors are less aware of investment potential in Japan. This was compounded by less Indian people staying in Japan, such as NRI’s, and lack of any big Indian investment in Japan. Only a few Indian investors are aware of the benefits of Japanese investment. Japan can act as a technology hub for the Indian investors. Combining the technology hub of Japan and the close acquaintance with the Japanese entrepreneurs, which can be developed by the presence of Indian entrepreneurs in Japan, a holistic and pragmatic business relation can be developed for the growth of two-way investment in India and Japan.

Conservative immigration regulations, which deter Indians to go to Japan and the language problem were the main reasons for communication gap. Indians know Japan by its brand image of product and not by the actual business practices and management systems. Few know the role of Sogo and Sogo-Shoshas as business leaders and the nitty-gritty of business practices in Japanese system like lifelong employment, group decision making process and seniority by age.

The lag in the knowledge of Japanese business practices and strict immigration laws restricted Indian investors to invest in Japan and instead encouraged them to invest in the western world, when India emerged an important country in the global investment. In early 2000s Indian investors were on the binge for overseas investment. From a mere US$ 0.7 billion in 2000-01, the overseas investment increased to US $ 2.7 billion in 2005-06 and leapfrogged to US $ 10 billion in 2009-10.

South East Asian countries were the major destinations for India’s investment abroad. Nearly 38 percent of India’s investment abroad flowed into South East Asian countries. Singapore was the biggest receiver of India’s investment abroad. One of the main reasons for Singapore becoming the biggest destination for India’s investment abroad was the presence of Non- Resident Indians. NRIs account for 12 per cent of Singapore population and 41 percent of the Non-Singaporean population.

The notable role played by NRI’s in Singapore was that they acted a gear for the investment in India by Singaporean companies. In 2014-15, Singapore emerged as the second biggest foreign investor in India, after Mauritius. However, in real terms, Singapore was the biggest foreign direct investor in India, while taking into consideration that a large part of investment from Mauritius is a round-trip money from India.

Technology is inseparable for making a nation a manufacturing hub. Technology is fast changing with the global integration. Global manufacturing system has changed vastly. With the advent of electronics and digitization industries, replacing integrated processing industries, along with fast growth of automobile industry, component base industries pitched for high growth in the manufacturing in the world. To make India a global manufacturing hub, it needs to improve its technology and human skill to toe the changes in global manufacturing. Improvement of technology and human skill are long -term measures. Given the situation, improved technology and skill in the manufacturing process are imperative to make the country an attractive manufacturing hub.

The main barriers to foreign investment in Japan are sluggish domestic demand and high cost of production. The export demand for Japanese products can be engineered if the products qualify for price competitiveness. These need low cost and high volume production base, instead of harping on quality only

In this perspective, one can think of Japan-Plus strategy to regenerate the manufacturing activities in Japan. Efficacy of Japan’s export depends upon its manufacturing activities. Japan has an edge in research and product innovation, creating a location advantage for Assembly operations. In parallel, India has the advantage of manufacturing low cost component and parts. With the Japanese technology embedded in the manufacturing process, India can be an important source for low cost and technologically competent component and parts. Component and parts constitute 80 per cent of the final assembly production. Setting up assembly operations in Japan by Indian investors and fostering low cost production of component and parts in India by Japanese SMEs as Supporting Industry will prove conducive to produce competitive products jointly.

India has an edge over Japan in African sub-continent, which is an emerging market in the world. Africa has a large number of Indian population, who were migrants centuries ago. Africa has emerged as an important export destination for India. India’s export to Africa spurred by over 60 percent over a period of five years in between 2010-11 to 2014-15.

To be specific, Japan can be the target for Assembly units for hi-tech manufacturing – such as new Information Technology hardware, robotics, electronics, computer, mobile phones , automobiles, NC control tools and aerospace equipment, high-tech ships , energy saving vehicles, and power equipment industries and India can be the Supporting country for low cost production of components and parts. (IPA Service)