Introduction: Strong
Historic Business Ties
Prime
Minister Narendra Modi’s call to Japanese businessmen to "Come, Make in
India" has laid the groundwork for a special strategic global partnership
between the two great Asian nations.
India
and Japan are natural synergistic partners who can mutually benefit from closer
commercial ties. Japan, the world’s third largest economy by GDP, is known for
its unparalleled focus on quality. India, the world’s 10th largest economy, has
successfully used its low-cost advantage to emerge as a strong manufacturing
destination.
Maruti
Suzuki and Hero Honda have demonstrated the immense potential of
Indo-Japanese business partnerships. Started in the early 1980s, these JVs have
built enormous value for both partners and shareholders besides benefitting a
large pool of customers.
Indian and Japan had signed a
Comprehensive Economic Partnership Agreement (CEPA) in 2011, but its potential
has not been exploited fully. Though Japan is the fourth largest investor in
India, the $2.8 billion of FDI it injected into our country in 2012 was only 2%
percent of what it invested globally that year. Similarly, Indo-Japanese
bilateral trade stood at $16.3 billion in FY14, which is quite dismal given the
huge potential that exists.
Common Economic Goals
Prime
Minister Modi’s recent visit to Japan has breathed new life into the economic
ties between the two countries.
Both
PM Modi and the Japanese Premier Shinzo Abe share a common economic ethos and
vision focussed on strong GDP growth and job creation.
While
PM Modi is focussed on reviving a sluggish economy and navigating India towards
a path of robust and sustainable economic growth, PM Abe is also trying to
boost the Japanese economy by increasing export oriented growth and reducing
inflation.
Given
the commonality of their economic goals, I believe India and Japan should seize
this historic opportunity to forge a world-beating partnership.
India’s ‘Low Cost’ Advantage
India’s
unique position between Africa and Asia makes it an ideal partner for Japanese
companies to use it as the low cost regional manufacturing hub.
The
Indo-Japanese JVs in the auto sector have already established India’s strategic
importance as a manufacturing partner. These successful partnerships need to
extend to other areas as well.
As
the largest and lowest-cost producer of generic drugs, India has much to offer
to the Japanese healthcare system. The Indian pharma industry has already
started playing its part in making healthcare affordable in Japan, which is
increasingly looking at generic alternatives to costly innovator products.
It
is estimated that nearly a quarter of the Japanese people are over 65 years of
age. Japan’s population is projected to shrink from 127 million to about 87
million by 2060, and nearly 40% will be aged over 65 years. A rapidly ageing
population means that Japan’s healthcare costs are likely to skyrocket in the
coming years. Indian pharma can certainly help Japan to address this looming
healthcare challenge.
The
Indian pharma industry, which accounts for 40% of US generic drug imports based
on volume, has already made a big difference in the world’s largest pharma
market. Data from a 2013 US Report on Generic Drug Savings (which includes
generics from other countries including the US) show that generic
pharmaceuticals saved the US health system and patients a staggering $1.3
trillion in the most recent decade.
‘Made
in India’ Generics and Biosimilars can therefore help Japan in scaling down its
healthcare spends which stood at a staggering $3,200 per person in 2013.
Japan’s ‘High Quality’
Differentiator
Japanese
manufacturers have an enviable reputation when it comes to quality systems,
process efficiency and productivity through techniques like Kaizen & Six
Sigma, which are considered global best practice.
Indian
manufacturers can significantly boost product quality levels and operational
efficiencies by institutionalizing these quality principles through training
and skill development, thus improving their competitiveness in global markets.
Bilateral
co-operation will boost local manufacturing operations in India, creating
tremendous job opportunities for the growing Indian workforce.
India
also stands to gain from Japanese expertise and investments in infrastructure,
especially rail & road and the renewable energy sector, which can be great
economic drivers for the country.
The
$90 billion Delhi-Mumbai Industrial Corridor, a mega infrastructure project for
which Japan is providing financial and technical aid, points to the immense
potential of similar collaborations in future.
Looking Ahead
PM
Modi’s Japan trip has underscored the need for a deeper economic engagement
between the two nations.
To
take this promising partnership to the next level, the Prime Minister announced
the creation of a special Japan cell that will include two Japanese nominees
for fast-tracking investment proposals from Japan. It will also help to allay serious investment
concerns relating to regulatory and operational impediments expressed by
Japanese companies at the India-Japan Business Leadership Forum.
Japan
has committed to doubling its current investment in India to $35 billion over
the next five years. However, this is modest in the context of Japan’s total
FDI outflow that was nearly half a trillion dollars between 2008 and 2012.
Clearly there are enormous opportunities that await a steady, committed and
long-term Indo-Japanese economic partnership.
I
sincerely believe the combination of Japanese quality & technology with
Indian manufacturing experience and cost advantage will reap enormous dividends
for both the nations by ensuring market leadership through the supply of
world-class products at the lowest cost to global markets.
Image adapted from: http://bit.ly/1pbk5MR
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