Japanese businesses in India shrink first time in 11 years

23, Sep. 2020

A file photo showing workers at the Japanese firm Daikin India's factory at Neemrana in the northern Indian state of Rajasthan. (Photo courtesy of Daikin Airconditioning India Pvt. Ltd)
A file photo showing workers at the Japanese firm Daikin India's factory at Neemrana in the northern Indian state of Rajasthan. (Photo courtesy of Daikin Airconditioning India Pvt. Ltd)

By Atul Ranjan

NEW DELHI, NNA - The total number of Japanese business establishments in India declined for the first time in 2019 in over a decade amid growing calls from investors to further improve the country’s business climate.

Data released by the Japan embassy in India on Aug. 31 shows the number of Japanese business units in the country had fallen by 1.6 percent, from 5,102 in October 2018 to 5,022 a year later. This marked the first decline since 2008 when the figure from 838 units kept rising till it slipped last year.

The latest data also shows that the total number of standalone Japanese companies registered in India grew at the slowest pace in 13 years or only 0.9 percent from 1,441 in October 2018 to 1,454 units last October.

“The total number of establishments decreased while the number of companies increased, because some companies became non-Japanese due to the closure of office, corporate restructuring, change of ownership etc.,” the embassy explained in a statement.

Business establishments include liaison or branch offices, local subsidiaries and business enterprises founded in India by Japanese nationals.

The businesses are mostly operating in the manufacturing sector, accounting for half of the total standalone Japanese firms registered in India and more than a third of the Japanese business establishments operating there, the embassy said.

Addressing a webinar during the launch of a knowledge report titled 'India-Japan: Time to Seize New Opportunities' last Friday, Toshihide Ando, a charge d'affaires at the Japan embassy, said while India has made remarkable progress in improving the ease of doing business in the last few years, Japanese companies are "still facing various challenges conducting their businesses” in the country.

He urged the Indian government to address difficult issues related to labor and tax.

In the case of enforcement of labor contracts, India stood way below at 163rd position among 190 economies surveyed in the world, Ando pointed out.

"Imagine how much more Japanese investments you can expect" if this is improved, he said when referring to the 'Doing Business' report, a World Bank Group flagship publication.

Singapore, South Korea, Norway, Kazakhstan and China held the top five spots in the 2020 rankings.

As for ease of doing business, India moved up by 14 positions to 63rd place, from 77th in 2019. In fact, the country had made vast improvements in this area as it had jumped up by 79 positions from 2014 to last year.

“Besides further improvement in the ease of doing business, what the Japanese companies expect to see is consistency in the Indian government’s policies,” an official at the Japan External Trade Organization (JETRO) India office told NNA on Sunday.

According to India’s department of industrial policy and promotion, Japan which currently ranks fourth among India’s major foreign investors, has cumulatively invested $33.5 billion between April 2000 and March 2020, contributing 7.13 percent of the total foreign direct investment (FDI) equity inflow in the country.