Our world at present has been withstanding the pernicious coronavirus and the ramifications have been felt on the world economies, their financial sector and the healthcare facilities[i]. COVID-19 has rattled the economic and the social well-being of the human civilisation leading to an ever-increasing death toll. China’s Wuhan emerged as the nucleus of the COVID-19 and China being the manufacturing hub for the world had to shut down the factories which greatly impacted the supply chains globally. This jolt on the supply chain left the world’s supply chains and trade practices hanging in mid-air and a major uncertainty loomed on the global economy. This brought in a trend, where countries like Japan started to shift out their factories from China and started their search for a new manufacturing hub and India emerged as the prime destination for Japanese investment. In this context, the present article would be tracing India’s emergence as a prime destination of investment for Japan and would also discuss the India-Japan Post-COVID relations.
Japan’s Predicament in the COVID-19 times
On 7 April 2020, Prime Minister Shinzo Abe declared a state emergency in 7 prefectures and metropolitan areas like Tokyo, Kanagawa, Saitama, Chiba, Osaka, Hyogo and Fukuoka, in accordance with the revised law on special measures against new stains of influenza and the Novel Coronavirus. The respective Governors took necessary steps like restraining the residents from unnecessary outings, closing down of many facilities and events. The aim of the declaration of an emergency would help provide a widespread understanding of awareness and spread a sense of urgency to protect oneself by not going out frequently. This was followed by an emergency economic measures approved by the Cabinet and this program covered a total of 108.2 trillion yen with fiscal expenditures of approximately 39.5 trillion yen. This emergency economic stimulus included comprehensive economic amounts of two phases draw out between February and March 2020 and apart from this program, a total of 86.4 trillion yen with fiscal expenditures of around 29.2 trillion yen were set up. The first phase starting from April 1 to June 30 would aim to control the spread of infection and support was provided to livelihoods of households, corporate business operations and maintaining employment and 6 trillion yen in cash would be provided to households and to small and medium-sized enterprises and to small-scale business proprietors. A maximum of 2 million yen would be provided to the small to medium-sized enterprises for operations experience that faces a 50 per cent drop in business income and a maximum of one million yen would be provided to sole proprietorships including the freelancers. The companies facing difficulty in paying off the taxes and insurances would be allowed to pay delays for one year and it is expected that the amount only in this sector would be 26 trillion. If the small to medium-sized enterprises experience difficulty in business conditions, property tax and city planning tax would be reduced for one year. Also, low-income households facing a decline in their income would be paid 300,000 yen per household and the current allowance being paid to dependent children would be increased by 10,000 yen per child. The Government would also be providing cloth masks to all households as part of the prevention of infection program, improve medical services and develop a drug to treat the disease, like Avigan, the anti-influenza drug proven to treat COVID-19 and it would be stockpiled in order to teat 2 million people.[2]
This Novel COVID-19 stimulus has already exceeded the economic crisis measures taken in April 2009, and is the biggest so far put together by the Japanese Government. The impact of the virus has led to drastic changes in the service industry like tourism, cruise, food and beverage and retail, which have all taken a beating. In order to save these private and public sectors, a consumption stimulus campaign for both the sectors will be implemented for a limited period of time, where purchases of gift certificates and tickets for travel, events and restaurants would be supported as part of the program. Points and coupons will be provided to consumers which they could use to make reservations at cafés, bars and restaurants, and that would also help reduce the consumption taxes paving away for a big impact. The Government has been providing the best possible support, but the concern remains that in the long term, it will put immense pressure which would cause a budget deficit, hence the social security system provided to all ages would become more distant.
One needs to understand that these provisions as well as programs have been up in place to avoid and keep bankruptcies and unemployment under control, and this would further help the economy get back to a normal pace once the virus is gone. The Japanese Government faces enormous pressure due to such a huge support of economic stimulus as it by far, the biggest ever economic stimulus provided by the Government and has also, brought the Japanese economy to a brim of recession, because, along with the delay in the Tokyo Olympic games, fiscal generation from the games would help kick start the economy and provide a balance to the much needed Japanese economy. The worsening of economic conditions are worrying for Japan as many Japanese manufacturing centers, factories and firms are facing the heat, which is, in turn, threatening the jobs and leading many companies to bankruptcy. This entire bound situation is bound to have a negative impact.
A majority of the manufacturing industry of Japan is in China, and with the spread of the COVID-19 from Wuhan as the epicenter, the manufacturing factories shut down. This affected the supply chains in Japan and a drop of 50 per cent in exports was recorded. Many Japanese firms wanted to come back, and this request was accepted by Prime Minister Shinzo Abe. On 5 March 2020 at the meeting of the Council on Investments for the Future, he highlighted his willingness to bring home the high value-added product manufacturing bases to Japan and signed the first Government funded relocation of domestic businesses away from China. A budget of 220 billion yen was put aside to move out the Japanese production units out of China and move it to Japan. The production line was geared up to move to other Southeast Asian countries, and the Government gave 23.5 billion yen for the same. This was done as part of the relief economic package of 108.2 trillion yen by Japan. Since Japan has decided to move out its production line from China, and for years, it has been investing in India and aiming to make it a manufacturing hub, according to Japan’s plan of diversification of its supply chain, India would emerge to be the first choice for Japan as India has ranked as the most attractive investment destination in the survey of the Japanese manufacturing conducted by Japan Bank for International Cooperation (JBIC). In this survey, India was ranked second in 2017.[3] Therefore, it is very clear that India does emerge as a prime destination for Japan in the post-COVID-19 period.
Emergence of India as the prime destination
India has emerged as the prime destination for Japan and other countries like South Korea and the United States. The impact on the China and Japan relations in the COVID-19 times is also one of the reasons why India has benefitted. The bulk of Japanese manufacturing units are placed in China and with the shutting down of the factories due to the spread of the coronavirus, it massively affected the supply chains. Many Japanese companies and firms wanted to move their manufacturing units back to Japan or to other Southeast Asian nations. Japan has been investing in many manufacturing as well as industrial cum infrastructural projects in India and so, India emerges as a prime destination. Also, China behavior of hot and cold with Japan, and their issue of the Senkaku/Diaoyu Islands in the South China Sea and the East China Sea which also makes the relations rather uncomfortable, especially as Japan’s Free and Open Indo-Pacific (FOIP) vision are being threatened in recent times with China’s maritime aggressiveness. Also, the United States of America has been very serious about China’s Coronavirus and has blamed China for being ignorant and not informing the world on time about the spread of the COVID-19. America is also severely critical of Beijing, as Beijing has been misbehaving in the international waters and leading to several threats to U.S. allies, friends and partners like Viet Nam, Taiwan and the Philippines and with the U.S. interest in the Indo-Pacific, this has only led to a greater stake of the Indo-Pacific especially with the growing Chinese aggression.
The standoff between the U.S. and China tariff war before the COVID times was a major point of conflict for Japan, as both nations are trade partners of Japan and it needs to understand that since Japan stands amidst America and Beijing, it also important to understand that Japan is in a Security Alliance with the U.S, and China is Japan’s immediate neighbor. As most of the times, China controls North Korea, who is a major threat for Japan, it leaves Japan in a rather difficult position. China was also losing its attractiveness among the Japanese companies, and about 159 Japanese companies have relocated from China and diversified to Viet Nam and Thailand. This has led to a loss for China and a gain of 730 billion dollars for ASEAN nations and India. Chinese labor costs have been rising, while India’s labor cost is low, and the current changes in the labor laws in India has made India more suitable of a manufacturing hub for Japan.
India and Japan have a long-standing relationship, especially with their cultural and economic exchanges being pillars of strength for both the nations. According to Japan, India is the largest democracy accompanied with an abundant labor force with a perfect combination of a large and rapidly growing market economy. India is the largest recipient of Japan’s Official Development Assistance (ODA), which has been an essential part of industrial and infrastructural development in India, especially in Northeast India, with projects aimed at the water supply in Guwahati, the road network in Assam-Meghalaya and many other projects like forest management and agricultural development have also been crucial as it paves a way towards the markets in the Southeast Asian nations. Japan International Cooperation Agency (JICA) signed an agreement with India to provide 610 million dollars for Phase 1 of the Northeast Road Network Connectivity Improvement Project for Meghalaya and Mizoram. Successful projects like Delhi Metro has been the highlight of this relationship and both the nations have been setting up Japanese Industrial Townships (JITs). and the most sought after Japanese Bullet Trains System ‘Shinkansen’ project, the Delhi-Mumbai Industrial Corridor would help enhance the connectivity in India and also accelerate the economic growth of India. Both the countries are also working on more projects in Uttar Pradesh, Haryana, Rajasthan, Gujarat and Maharashtra, along with the western Dedicated Freight Corridor (DFC) of the Indian Railways and in the south, the Chennai-Bengaluru Industrial Corridor (CBIC) aiming for regional growth in the industries, paving a way for greater private investments and smooth industry access in these parts of India. In 2019, the India-Japan Industrial Competitiveness Partnership (IJICP) was launched to enhance industrial competitiveness and make India globally visible as the manufacturing sector. JICA has also provided a 500 crore rupees loan for the development of the smarter mobility project in Chennai to develop an intelligent transport system for the effective traffic management system, to ease the city’s congestion and promote economic growth. It has also set up a Chennai-based seawater desalination plant with the help of ODA of 1,800 crore rupees.[4]
Many Japanese companies have already invested in many Indian sectors like automobile, chemicals, textiles and renewable energy. These sectors have been very successful, and have been able to reap a large share of dividends which have been reinvested in the Indian economy, further boosting the Indian economy and helping in enhancing India’s position as an attractive destination of manufacturing, business and investment. Therefore, India has emerged as a prime destination for Japanese investment. This, together with the ongoing exchanges in trade, economy and the various sectors of investments, has paved a successful way for India and Japan relations to blossom in the post-COVID-19 period.
India-Japan Post-COVID Aeon
The relations in the post-COVID-19 period between India and Japan are bound to grow in leaps and bounds, as there are many future convergences left to be tapped. Defense Industry of India has developed in a big way, and the greatest example is the 2020 Defense Expo, which showcased India’s strength in the Defense manufacturing and industry. With the help of Japan as a world class economy, India has been able to work and build defense projects on artificial intelligence and robotics for surveillance and targeting, and Japan can collaborate with India and improve these products, which could be used during military drills and exercises by the forces. Also, Japan has been traditionally the largest producers of world-class automobiles and aircraft, and if Japan agrees, India can take the help of Mitsubishi Heavy Industries to expand their aircraft production, which would ultimately benefit India’s flagship Initiative of ‘Make in India’. Since many of these heavy industries in Japan during the Second World War were strategically bombed, they collapsed because of the earthquakes. Theycan be remade, and India can also be there in providing steel and iron as India is abundant in these resources. Together, India and Japan can produce aircraft, arms and ammunitions which would help reduce their dependency of the United States, Russia, Israel and China. By creating their own defense manufacturing industries, Japan would again regain its lost economic growth, and bring the Japanese economy out of a mere state of recession. India would be benefitted as it would be the provider of natural resources, labor, and scientists from DRDO, which would also give DRDO more freedom to create better weapons and satellites. All this boosts the Indian and Japanese Defense production capabilities, and also builds more industrial cum infrastructural projects, which JICA is a pioneer in. That would also help JICA expand its footprint within India. Also, since JICA has been investing heavily in infrastructural building; Japan can help India build industrial parks which are well-equipped along with world class facilities for factories and set up more industrial townships in India.
India and Japan have been actively involved in the automobile industry, and here, India is the 4th largest automotive market, and the 5th largest auto-producing nation. Japanese companies like Maruti Suzuki and Mitsubishi have been an integral part of this industry and it is important to understand that Japan has been investing a great deal in transportation and infrastructural development in India, especially building railways and roadways. It is important to understand with economic growth comes industrial and infrastructural growth, and if Japan has been heavily investing in railways projects, it is because the High Speed Railways (HSR) project would help boost the market for Japans’ bullet trains. The HSR project is important for Japan as it would help other countries also want Japan to build these trains for them. Similarly, Japan has been investing a great deal in roadway projects, especially in Northeast India, and JICA has been providing many ODA loans for the same, but there is another catch to it, in order to travel by road one would need a vehicle and Japan has always been the epitome of the automobile industry, it is sure that its automobile industry and products would get a boost companies like Maruti Suzuki, a trusted car company in India would be the first choice of the people when they buy a car, therefore, by building roads, this is a major step towards development but also, in the longer run, it will help boost the automobile companies both from India and Japan.
Japan is the world’s electronic hub and India’s electronic industry is bound to grow and so, electronic system design and manufacturing industry can fast develop in India with the help of the Japanese electronics industry help and since, India is a fast-moving-Consumer-Goods market, Japanese companies like Daikin and Panasonic have already been an active part of the Indian electronics market and can further expand. The ‘India-Japan Digital Partnership’ would also boost these sectors of electronics, and digital partnership can go hand in hand, which could provide greater technological and scientific advancement to the Indian as well as the Japanese companies. It could also further pave a way for digital exchange in electronics, space technology development and global navigation which could lead to a joint collaboration in the post-COVID-19 scenario.
India is being cultivated into a pharmacy of the world in the present COVID-19 times, but the domestic medical devices industry is still nascent, and with the help of companies like Nipro Corporation, Otsuka Corporation and other Japanese companies who can provide Japanese technology, would help benefit and create quality production and affordable medical devices in India. India, the land of Ayurveda and Yoga can promote greater cooperation between India’s health initiative, Ayushman Bharat and Japan’s Asia Health and well-being Initiative (AHWIN), and use the traditional streams of medicines, yoga and Kerala Ayurveda body massages and treatment for holistic development of body, mind and soul. Avigan has been developed by FujiFilm Corporation, and further, if Indian Medical Research teams work together, a vaccine can be soon developed and COVID-19 can be cured.
Kansai Nerolac, Mitsui Chemicals and Sumitomo Chemicals are present in India, as India is the 4th largest agro-chemical producer, and in the future, there would be a major need for these products, as India is investing in a major way in agro-based chemical industries. As India is traditionally an agricultural country, it would like to support its farmers with not just agro-based chemicals, but also with a proper supply chain, from where their products would reach the markets and restaurants on time, without any damage or spoiling of the products. Japan would help India, one, by building greater road connectivity which otherwise is damaged due to rains, and second, it would help India build a stronger supply chain of products which would need for transportation like trucks which Japan can help India with.
India offers a huge market for Japanese food processing industries which would help to grow and expand as due to the large geographical spread of India, Japanese companies can invest in a big way. The advantage of India is that it is the largest producer of milk, second largest global producer of horticultural crops and world’s largest producer, consumer and exporter of spices and this leaves Japan with a huge potential of investment. As Japan has a fascination for Indian curry, if Indian companies can try and make more products like ready to cook curry with a longer date of expiry, it can pave a greater way for companies like Haldiram who are already making these ready to eat curries. The Curry Market is a major point of exploration left for India as Japanese demand for authentic South Indian Food among the Japanese is immense. Also, India should set up cooking classes in collaboration with the Pusa School of Hotel Management, and set up institutions and creative centers which would help the Japanese learn about Indian cooking and different styles of curries. Japanese sweet making is a major part of their culture, and there is a need to tap into the Indian food industry and this can be done through Sweet institutions like Haldiram, Bikanerwala in collaboration with Pusa School of Hotel Management, which would open up a market for Indian sweets and Indian sweet making classes. At present, there is a major demand for Vegan food, and India can promote Sathwik food, the Northeast States’ food and cultural habits which are much similar to the Japanese style of cooking, especially through the use of bamboo. These efforts would help strengthen the robust relations between India and Japan more.
Conclusion
Recently, Prime Minister Narendra Modi and Prime Minister Shinzo Abe discussed the situation and tackling of COVID-19 in their respective countries, and also discussed the post-COVID-19 relations, where they decided that “India-Japan special strategic and global partnership can help develop new technologies and solutions for the post-COVID-19 world for our peoples, for the Indo-Pacific region and for the world.†It is clear that the leadership is ready for greater and higher levels of cooperation in the post-COVID-19 period, and it is important to understand that the various points mentioned in this article lead to convergences between India and Japan, and portray India’s emergence as a prime destination for Japanese investments which would help build a stronger relationship among the two nations and would future display cooperation globally and become key international players replacing China’s hegemonic power and flourish though various opportunities, leading to growth and development in the post-COVID-19 aeon.
Pic Courtesy- Dr. Rajaram Panda
(Gitanjali Sinha Roy is a Ph.D. scholar in the Department of East Asian Studies, University of Delhi and is currently a visiting scholar at the University of Tokyo.The views expressed are personal).
Notes
[1]Please refer to a report prepared by Devika Chawla, Strategic Investment Research Unit and Seerat Kohli, Japan Plus, Invest India.†Why is India the best place for Japanese investments in the post Covid-19 world†dated May 2020 published by Invest India. Gov.In. URL: https://www.investindia.gov.in/bip (Accessed on 12 May 2020)
[2] The data quoted here has been taken from Daiwa Institute of Research, “Special Report: The Corona Crisis and the Global Economy.†https://www.dir.co.jp/english/research/report/analysis/20200417_021475.pdf (Accessed on 16 May 2020)
[3] Gitanjali Sinha Roy. 2020. “India-Japan Relations Post-COVID-19: Moving Towards New Avenues†published by Nepal Institute for International Cooperation and Engagement (NIICE), Kathmandu, Nepal dated 14 April 2020. URL: https://niice.org.np/archives/4082 (Accessed on 16 May 2020)
[4] Ibid.
