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Japan among India’s top five trading partners
Economic cooperation between India and Japan took off in 1984, after the visit of Y. Nakasone, then Prime Minister of Japan. Since then, there have been a large quantity of Foreign Direct Investment (FDI) in India with Suzuki, Yamaha, Toyota, Honda and others entering the Indian market.
The current economic momentum in India is one the prime reasons for companies to have aggressive future plans. Most companies are planning to expand their production capacity, increase product portfolio, target new consumer segments and increase market share in India. Further, companies are also planning to establish India as a global hub for manufacturing thereby leveraging the lower installation and operating cost in India.
Establish R&D centre Japanese companies have enjoyed the advantage of technical supremacy in the Indian market. Companies, apart from transferring their technical expertise to India, are now establishing their R&D base in India. For instance, Maruti Suzuki is planning to set up a complete automobile design centre in India.The centre will be equipped with complete design capabilities.As part of the plan, Maruti is sending some of its engineers to Japan to get some hands-on experience in car designing at Suzuki Motor Corporation.
Increase Localisation In order to reduce import cost of components and accessories, companies are planning to localize components sourcing to a greater extent. For instance, Maruti has achieved over 90 per cent localisation for Maruti 800, Zen, and Alto cars.
Expanding Capacity Companies are expanding their capacity in order to meet the growing demand from Indian market. Companies are also setting up new plants. Hero Honda is planning to increase capacity of its existing production line as well as build a new plant with annual production capacity of 450,000 units.
Manufacturing Hub Companies are targeting India as a global hub for manufacturing. This is because of availability of skilled workforce and availability of natural resources. Following are some companies that plan to make India a manufacturing hub: • Panasonic is planning to make India a global manufacturing hub. The company has decided to source colour television sets from India for its international markets. • Sakata Inx Corporation is planning to make India its global outsourcing hub for offset printing inks. The company plans to export the offset ink to Sri Lanka, Bangladesh, Middle East, Central Asia, CIS countries and Africa.
Establishing Global Service Centres Companies are setting up technical support centres in India to meet the growing needs of global customers and strengthen global solution businesses worldwide. Companies are seeking to provide global outsourcing services to their customers along with focus on technical skills, English language proficiency and multinational project management. • Fujitsu Services has partnered with Zensar Technologies (India) to provide integrated business solutions to Fujitsu's clients in Europe, Middle East and Africa markets through a Global Delivery Centre in Pune. • Hitachi has recently established a 'Global Service Centre' in Bangalore with an initial staff strength of approximately 100 people. It aims at providing services such as application development, and maintenance and operation support to its facilities worldwide.
India's Advantage:
India is the fastest growing free market democracy in the world.
India has a mature and dynamic private sector, which accounts for 75 per cent of India's GDP, and a market with enormous potential due to its large size and diversity. India offers significant business opportunities to the manufacturing as well as the service sectors. This is because of benefits that India offers with respect to cost advantage in product development and back-office processing, and availability of a large network of skilled Englishspeaking professionals.According to the findings of this study, Japanese companies in India considered market potential as the main advantage that India offers.
86 per cent of the companies surveyed, considered market potential to be a major advantage offered by India. Skilled labour (79 per cent of the companies) was another major advantage offered by India.
MNC experiences have proven that India is an attractive investment destination. It is expected to achieve the highest growth rate amongst the BRIC countries (Brazil, Russia, India and China). AT Kearney ranked India as the most attractive democracy in its FDI confidence index in 2005.
Strong economy India's economy is on the fulcrum of an ever increasing growth curve.With positive indicators such as a stable 8 per cent annual growth, rising foreign exchange reserves of over US$ 160 billion, a booming capital market with the popular BSE "Sensex" topping the majestic 10,000 mark, flowing foreign direct investment (FDI) close to US$ 8 billion, and a more than 20 per cent surge in exports, it is easy to grasp why India is a leading destination for foreign investment.
Market potential India is one of the largest consumer markets in the world. Due to rapid growth of the economy and a rise in disposable income, the spending power of the consumer is increasing rapidly. In 2001, about 54 per cent of the total population was below 25 years of age. By the year 2013, another 200 million people will be joining that number, representing exponential growth in the 'consuming' class.
Availability of skilled manpower India has over 380 universities and about 1500 research institutes, which cull out approximately 2,00,000 engineers; 3,00,000 post graduates; 21,00,000 other graduates and around 9,000 PhDs.This large base of skilled manpower offers unparalleled advantages to companies operating in India.
Availability of natural resources India has large reserves of metals, minerals, coal, oil and gas, rubber and wood. India has the fourthlargest coal reserves in the world. India's long coastline ensures supply of marine products also.
Low cost of infrastructure and operation The Ministry of Commerce, Government of India, has estimated that off-shoring operations to India can lead to a cost benefit of up to 40 to 60 per cent, as compared to developed countries.
It has one of the lowest labour costs among the developing countries. India also offers a cost effective manufacturing base.The country has also emerged as a major R&D and design hub with over 200 of Fortune 500 companies setting up base in India.
