Japan-India Economic Relationship: Trends and prospects

This research paper tracks Japan-India trade and investment relations. India's potential as a market for Japanese companies is now well understood by the business community, which is particularly interested in the rising middle class. Analysis of the significance of the Comprehensive Economic Partnership Agreement (CEPA), which took place in August 2011, is provided in addition to present-day characteristics of Japanese investment in India, including mergers and acquisitions (M&A) and interest in the IT industry as well as other service industries such as finance and retail. Japanese small- and medium-sized enterprises (SMEs) are also increasingly turning their eyes to India. Another recent trait in Japanese business strategy has been to diversify regions for investment from the area surrounding the national capital, Delhi, to southern cities such as Chennai. The research also addresses the remaining obstacles that challenge investors. The extent and time scale for tariff reduction following CEPA is one concern, as is the continuing problem of land acquisition. The paper concludes, however, that while 2011 was challenging for the Japanese economy, prospects for greater economic cooperation with India remain. Japanese companies are gradually adjusting their business models to suit the nuances of the Indian market, providing opportunities for both the Indian and Japanese economies.