By: Rahul Koul
Last updated : March 26, 2021 12:54 pm
Indian chemical industry looks at increased investments from Japan, various stakeholders expect predictable regulations and a better business environment for encouragement
Indian chemical industry looks at increased investments from Japan, various stakeholders expect predictable regulations and a better business environment for encouragement.
In the recent past, the India-Japan relationship has transformed into a partnership of great substance and purpose. In a survey conducted by Japan Bank for International Cooperation, India has been rated as the most attractive investment destination by Japanese manufacturing companies. In sync with these findings, Japan has emerged as the 5th largest investor in the Indian economy with cumulative FDI inflows of US $34.15 billion during April 2000 and September 2020, contributing 7% to India’s total FDI inflows during the same period.
Specifically, in the context of the chemical industry, India’s primary exports to Japan have been petroleum products, chemicals, elements, etc. whereas India’s primary imports from Japan are machinery, electrical machinery, iron and steel products, plastic materials, organic chemicals, and manufactures of metals.
Deepak C. Mehta, Chairman, FICCI National Chemical Committee and Chairman and Managing Director, Deepak Nitrite Ltd feels that there is enough room for Japanese investors in the Indian chemical industry.
Deepak C. Mehta said, “Be it Acrylonitrile, Acrylic acid, SAPs, I do think that India will become a market for such products. India continues to be a major purchaser of EDC and PVC. Even today we are talking of unmet demand of million tonnes. Indian customers have loved the products from Japan and now is the time for Japanese companies to establish themselves and forge a strong relationship with their customers. From trading with India to investing in India, there is a long way towards consolidating the bilateral trade. In the case of few products, if the demand is growing at a surplus of 8%, there is a possibility of immediate growth to 12% if the companies look at expanding locally.”
Calling chemicals and petrochemicals an important part of the bilateral trade between India and Japan, Ramkumar Shankar, Managing Director, Chemplast Sanmar says, “India imported chemicals and petrochemical products worth US $2.7 billion and exported products worth US $0.9 billion to Japan. India’s primary export to Japan includes Cyanuric acid, Caprolactam, nucleic acids, Pyrimidine derivatives such as novel positron emission tomography (PET), and carbon black. Japan’s primary exports to India include PVC, VCM, Caustic soda, superabsorbent polymer, MDE, etc. Instead of exporting so many products, there is an opportunity for Japanese companies to invest and expand in India due to the limited space in Japan."
"With the investment climate improving in India, the country is the fastest-growing economy. The Ease of Doing Business ranking has improved from 142 in 2014 to 63 in 2019. Based on these factors, the Indian chemical industry is expected to cross US $300 billion by 2025,” added Shankar.
As per Shingo Miyamoto, Minister, Head of Economic Section, Embassy of Japan in India, the two countries have made strides in taking forward the relationship. “The right business environment for Japanese companies, the predictability of the regulatory system in India would be extremely important. In order to realize the full potential, two countries would have to work together on this. The idea of self-reliant India might be counterproductive and at odds with Make in India as many companies from Japan are manufacturing here and contributing to local production. Currently, over 1,455 companies are operating in India, and out of that 100 companies and 200 establishments across various parts. We must enhance our cooperation in the field.”
A huge number of Japanese companies are operating in India and contributing to the generation of employment, human resources development, supply chain management, and in various other ways, says Asoko Kobayashi, Director- International Affairs Material Industry, METI who lauds the contribution of Indian chemical industry to the world economy.
“Indian products not only find a place in Japan but global trade as well. For Japanese companies to select India as an investment destination, it is important to provide an attractive business environment. Due to the COVID-19 pandemic, it becomes even more imperative to expand the product development and supply chain globally. Japan and India are taking a lead in improving supply chain management,” added Kobayashi.
Hisaya Kobayashi, Regional Director, UPL - Japan says, “Japanese agrochemical firms are a key source of new technology. Some of them have their own footprints in India. On the other hand, mid-small size companies including bio space need strategic partners like UPL. For the Indian market, various licensing deals with Japanese firms realized and many still under discussion. Japan's interest in India is increasing – India's large and growing market. In India, UPL is manufacturing some products for Japanese agrochemical firms. “Make in India initiative attracts this opportunity.”
Calling upon Japanese companies to invest in India, Yogendra Tripathi, Secretary, Department of Chemicals & Petrochemicals, Ministry of Chemicals and Fertilizers, Government of India says, “India’s improved rank of Ease of Doing business has shown continued focus on making right changes. It will only go better and offers room for tremendous opportunities for domestic demand and supply chain management. If anybody is looking at making investments in India, this is the time as the delay will only be a loss of the first movers’ advantage. If you make the decision today, you will become a part of the economic story that India has embarked on.”
Dialogue between the two countries is a continuous process and in chemicals, it is only growing, says Ryuji Kawabe, General Manager, International Affairs Department, Japan Chemical Industry Association who believes that India is set to become an economic superpower in the near future. “The manufacturing base of the country is expanding and there are a lot of potential areas to be tapped.”
Japan's interest in India is increasing due to a variety of reasons including India's large and growing market and its resources, especially the human resources. The bilateral trade between India and Japan for FY 2019-20 (April – December) totalled US $11.87 billion. India’s exports from Japan amounted to US $3.94 billion while India’s imports from Japan amounted to US $7.93 billion.