Japan warns against India investment climate
November 11, 2014, 7:09 am

Indian Prime Minister Narendra Modi with his Japanese counterpart Shinzo Abe at the Akasaka Palace in Tokyo on 1 September 2014 [PMO, India]

The Modi-government must roll out economic reforms, build up infrastructure and cut red tape for the Japanese funds to reach the country, a Japanese Minister said in an interview to leading Indian daily The Hindu on Tuesday.

“Japanese companies will move forward with investment, but only if there is a visibility with regard to these reforms. Despite the quite large investment to date, infrastructure development is not catching up with rapid economic growth. This is a major bottleneck for growth,” said Yasutoshi Nishimura, State Minister of Japan’s Cabinet Office, responsible for economic and fiscal policy.

Nishimura also explained that the $35 billion commitment made to the Indian Prime Minister is a combination of government outlay for infrastructure projects and the “projected expectation” from private companies.

Official data shows in the past five years, India’s imports from China have shot up more than 60 per cent, while imports from Japan have risen only 12 per cent.

In September this year, the Indian Prime Minister was in Tokyo, trying to capitalise on his personal affinity with Japanese Prime Minister Shinzo Abe to bolster trade ties.

Abe had said Japan would invest 3.5 trillion yen ($35 billion) in Indian infrastructure and clean energy projects.

In return, Modi had promised to introduce a special mechanism like a “Japan Fast Track Channel for Japanese investors in India” to woo investment into the country.

Earlier last month, Japanese officials also expressed disappointment at the Indian government’s refusal to ratify the WTO trade deal and “reluctance” in joining negotiations of the crucial multi-lateral trade pact, the Regional Economic Comprehensive Partnership (RCEP).

Japanese daily Nikkei reported that Japan and other Asian nations are deliberating on “arranging a deal without India”.

“We should not have included India in the RCEP negotiation framework in the first place,” a Japanese official was quoted in the report.

The China-led RCEP trade negotiations will conclude by the end of next year, Economic Ministers from the 16 countries said in August this year. India had skipped the August meet held in Naypyitaw, the capital of Myanmar and the negotiations had hence failed to reach consensus on a target for tariff removal.

TBP