India’s investment rating up in Japan

modi and abeGiving a new impetus to increasing Japanese investments into India, Nomura, the Tokyo-based lender, has ranked India number one with regard to investment potential in comparison to key emerging markets.

A Japan Bank for International Cooperation Survey (November 2013) conducted among Japan’s manufacturers also ranked India as the most attractive investment destination over the next decade, while for the mid-term (next three years), India came in second to Indonesia.

This ranking underlines the win-win scenario that can emerge from enhanced Japanese investment into India. While India would welcome funds and technical know-how from Japan, India can provide Japan with a large and potential rich market.

This new boost to India’s credentials as an investment hub follows a report by The Nielsen Global Consumer Confidence Index, released on July 21, which ranked India as the most optimistic consumer market.

Nearly half of India’s 1.2 billion nationals are under 25, with about 200 million people expected to enter the workforce over the next decade. The country is also urbanising at a rapid rate, creating fantastic opportunities for Japanese investors.

Optimism about improved India-Japan economic ties has also strengthened with the election of Prime Minister Narendra Modi, who has a reputation for being business-friendly. His strong personal tie swith Japanese Prime Minister Shinzo Abe is also expected to accelerate trade relations. Scaling up economic relations to new level will be a major focus during Mr Modi’s trip to Japan, likely next month.

While Japan and India have often spoken about the need for enhancing investments and even signed the Comprehensive Economic Partnership Agreement (CEPA) in 2011 investment still lags behind potential.

India only accounts for 1.2% of Japan’s FDI, as opposed to 8.8% for China.  Also, the India-Japan trade accounts for just 2% of India’ total trade and 1% of Japan.

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