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India Front Line Report
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Cooperation between Japan and India is going to expand despite frictions.
Although the talks on the Comprehensive Economic Partnership Agreement between Japan and India still face some differences and expectations between the two countries regarding plans to connect Mumbai, Delhi, and Kolkata with a freight corridor and the so-called Delhi-Mumbai Industrial Corridor, for which the Dedicated Freight Corridor will serve as its backbone, contradict, the trend in which the economic cooperation between the two countries expands more and more, is believed not to be changed.
This year's GDP growth close to 9%
India's gross domestic product (GDP) growth dipped to 8.9 per cent in the second quarter (July-September) of the current fiscal, from 10.2 per cent during the corresponding quarter of 2006-07 and the 9.3 per cent growth of the first quarter of this fiscal. However the growth for the whole year is believed to be pretty close to nine per cent.
Flush of FDI inflow
Such strong GDP growth is driven by the bullish local investor sentiment and rapid increase in Foreign Direct Investment (FDI) inflow. FDI inflows into India recorded $11.4 billion in the first six months of 2007, as against $3.6 billion received during the same period in 2006, registering a growth of 218 per cent. FDI inflows during the first quarter of 2007-08 were $ 4.9 billion, a growth of more than 185%, as against $ 1.7 billion received during the corresponding quarter of 2006-07. It means that FDI inflows in the second quarter of 2007-08 was much faster than the first quarter.
Services, telecom, electrical equipment, real estate and transportation are the 5 major sectors which received most FDI in 2007-08.
Top foreign investments received during the current financial year (2007-08 up to May 2007) were Vodafone (Mauritius) pumping in $ 801 million in telecom, Matsushita Electric Works-Japan ($ 342 million) in electrical products, GA Global Investments Ltd ($258 million) in National Stock Exchange, EMAAR Holdings-Mauritius ($204 million in real estate construction and L B India Holdings Mauritius Ltd ($ 118 million) in real estate).
After including retained earnings reinvested by foreign investors in India, the FDI inflow would be $ 19 billion for the year 2006-07, a 147% increase compared to $ 7.7-billion in 2005-06. Of this, $15.7 billion were just FDI equity inflows, a 185% jump over $5.5 billion in 2005-06.
Japanese investment in India to touch $5 billion in the next three years
Japanese FDI in India shot up from Rs 517 crore in 2003 to a whopping Rs 2068 crore in 2006. There were 231 Japanese Companies operating in India in 2003. At present, there are 475, Consul General of Japan Noro Motoyoshi said.
Between 1991 and July 2004, Japan's cumulative FDI inflow into India stood at $ 2,585 million. This was about five per cent of the total FDI of $ 60.2 billion that India has received since 1991. Japanese investment in India should touch $5 billion in the next three years. A substantial portion of Japanese FDI was expected in sectors such as auto, chemicals and infrastructure, according to Mr Sanjay K. Thade, Director in the Department of Industrial Policy and Promotion, Government of India.
Trade between India and Japan to cross $20 billion by 2010
Trade between India and Japan increased from $4.6 billion in 2003 to $8.6 billion in 2006. It is expected to touch $10 billion this year and cross $20 billion by 2010.
"Japan is India's 13th largest trading partner and the balance of trade is in favour of Japan. A closer look at the Japanese investment pattern over the last decade and a half reveals that Japanese companies invested in countries of Asean and China for the purpose of re-exports to Japan. This clearly indicates that trade and investment are interlinked," Mr Thade said.
Between August 1991 and September 2006, 852 technical collaborations have been approved, representing 10.92 per cent of the total number of collaborations that have been approved.
The Confluence of the Two Seas
Japanese Prime Minister Shinzo Abe, who addressed a joint session of Parliament when he visited India on August last year, quoted the title of a book authored by the Mughal prince Dara Shikoh, "the Confluence of the Two Seas" and proposed the concept called "broader Asia" to form "the Arc of Freedom and Prosperity" along the outer rim of the Eurasian continent.
Without mentioning about Mr. Abe's proposal, the economic and cultural activities are getting more and more delocalized. However when different cultures and religions interact with each other, frictions often arise. Therefore we may need to study the words of prince Dara Shikoh and his ideological successor Swami Vivekanand.
January 2008 Atsushi Murakami
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