Japan high on India, but wants Modi to ease policy barriers

modi and abeJapan, Asia’s second largest economy, is looking to scale up economic ties with India under the new government in Delhi, but has pressed Prime Minister Narendra Modi to ease policy hurdles and sort out issues relating to tax and labour for Japanese companies.

Japan’s ambassador to India Takeshi Yagi has written to Prime Minister Narendra Modi asking him to take action in clearing policy hurdles faced by some of its companies. He met the secretary of Department of Industrial Policy and Promotion and discussed the future course of investment plans in India’s industrial corridors.

Japanese companies like Eisai Pharma, Mitsubishi, Honda and Toyota are facing tax hurdles, limiting their business interests in India. The Japanese envoy also asked for his intervention in fast-tracking the projects backed by Japan in India.

Eisai Pharma has put its expansion plans in Vizag special economic zone or SEZ on hold due to the minimum alternate tax announced in 2011 budget. The minimum alternate tax imposed minimum alternate tax at 18.5% on the book profits of developers and the units located inside. The original scheme provided for a complete tax holiday. Eisai Pharma had invested $50 million in India for a manufacturing unit in Vizag SEZ. The issue pertaining to Mitsubishi and Honda facing tax demand of about $2 billion and $600 million was also raised. Toyota has been hit by labour unrest which has affected its plant production at Bidadi. The Prime Minister’s Office (PMO) has asked the concerned departments to look into the matter.

Japan ties a major priority: Modi

Economic ties between India and Japan, Asia’s two leading democracies, have been steadily burgeoning, but the current bilateral trade of around $20 billion is seen way below the potential. With the reform-friendly Modi government in charge in Delhi, Tokyo is hoping for a marked upswing in trade and investment. Providing a fresh impetus to economic relationship will be a major focus of Prime Minister Modi’s trip to Tokyo in August.

Japan, the fourth largest foreign investor in India, is poised to emerge as a key player in India’s infrastructure sector, which needs at least $1 trillion to shore up. Tokyo has already pledged $4.5 billion for the Delhi Mumbai Industrial Corridor project and is looking to provide financial and technical support to the planned Chennai-Bangalore corridor. India has traditionally been the biggest receiver of Official Development Assistance from Japan.

In a separate meeting with a visiting Japanese parliamentary delegation in Delhi June 27, Prime Minister Modi said that the strategic and global partnership with Japan has high priority for India and underlined “fundamental identity of values, interests and priorities” between the two countries. Besides economic ties, Modi also underscored strong Buddhist cultural linkages between the two countries.

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