THE SHARP focus will be on how Small and Medium Enterprises (SMEs) can contribute to bi-lateral investment in each others’ economies. The summit, which is an initiative of India Center Foundation and the respective governments and chambers of commerce of India and Japan, is aimed to evolve the micro road map of the macro vision of the India Japan Global Partnership of which the Delhi-Mumbai Industrial Corridor (DMIC) is one of the manifestations. Between 2-3,000 people are likely to participate in the summit including business leaders, academics and policymakers, who will also address cultural issues related to setting up and carrying out business projects.  

Presently, SME interaction and engagement between the two nations is not significant enough. There are untapped business opportunities for Indian and Japanese SMEs in areas such as automobiles, chemicals, healthcare, hospitality and manufacturing of electronic hardware and industrial tools. As Japan is the hub of global innovation in the field of industrial tools and equipments – Indian SMEs can be involved in the entire spectrum of manufacturing – from nuts and bolts to manufacturing of advanced machinery.

Though there is interaction between Indian and Japanese SMEs, as promoted by the Indo-Japan Chamber of Commerce and Industry, the investment level is still insignificant compared to the potential. The Chief Director General, Jetro, Misiki Ida, believes that the summit can address untapped business potential, “Presently, the Indo-Japan trade is at a low level compared with other countries in the ASEAN region such as Thailand and China. Only 725 companies have a presence in India, which is low compared to other countries. During the summit large Japanese companies, which have the capital and technology, are likely to sign business agreements first, and then outsource to SMEs who will then engage in India.”

At the same time, Mr Ida believes that post-summit follow-up will be equally important. “The summit is the first step in what we think will be a long term fruitful relationship between companies of India and Japan. Governments and companies from both countries are preparing projects to be discussed at the summit. It is important to remember that the summit is only for three days, which is why it will be critical that India and Japan follow-up after the summit.”

Japanese companies are aware that SMEs have a heavy presence in the economies of both India and Japan. In India, SMEs contribute 45% to industrial output, 40% of exports, employ 60 million people, create 1.3 million jobs, and produce more than 8000 quality products for the Indian and international markets. There are approximately 30 million SME units in India and 12 million persons more are expected to join the SME workforce in the next 3 years. In Japan, SMEs form 99.7 per cent of the total number of companies, and employ 70.2 per cent of the total working workforce in a total of 29,960 SMEs. SMEs in both countries, are therefore, well-geared to absorb projects in the fields of Manufacturing, Precision Engineering Design, Food Processing, Pharmaceutical, Textile & Garments, Retail, IT and ITES, Healthcare, and Agro and Service sector.

Recognizing the importance of the growing Indian economy and the need for Japan to infuse investment in its economy, Mr Ida is upbeat about the Indo Japan Global Partnership Summit – especially after the recent signing of Comprehensive Economic Partnership Agreement, and the decision of the Japanese government to reduce tariff by 97% on more than 8,000 Indian products, which mainly come from SMEs, while India has promised a 90% duty abolition for Japanese exports.

Within this context the DMIC and investment related to industrial and infrastructure along this corridor will be one of the main areas of focus in summit. In this over $90 billion project SME participation will be sought after by Indian and Japanese companies. Inspired by the corridor connecting Tokyo with Hiroshima in Japan, the DMIC will be a game-changer in raising India’s GDP, and giving a fillip to economies of at least six Indian states through which the DMIC will pass. “The DMIC is a long-term investment business opportunity for Indian SME companies. We expect large and SME Japanese companies, and companies from other countries to enter into agreement with many Indian large and SME companies or have direct involvement,” said a spokesperson from CII.

Given the ambitious nature of the summit and the DMIC, both countries acknowledge that increasing business volume is not without challenges. “India is a considered a difficult market by Japanese companies. Land acquisition, company laws, complicated taxation, and cultural differences can be deterrents,” said Mr Ida. The India Japan Global Partnership Summit, therefore, will also address issues of business compatibility, as perceived by foreign companies, including those in Japan, apart from increasing SME to SME interaction.

Nevertheless, India would want Japan to increase its corporate presence in the Indian economy, which is rapidly becoming more mechanized and less labour dependant after socio-economic schemes in India such as NREGA are ensuring basic minimum wages, which will lead to less dependence on pure labour and more on machinery. If one projects this trend onto the future, this holds huge potential for SMEs in both countries to appropriate Indian demand for rapid automation and industrialization.

“The summit will evolve a new socio-economic framework based on energy efficiency, sustenance and would address the 3 important questions – what India can do for Japan; what Japan can do for India; and what India and Japan can do for the rest of the world. SME to SME interaction and engagement between the two countries is important and essential for sustenance of economic relations between India and Japan,” said Mr Vibhav Kant Upadhyay, Chairman, India Center Foundation; and Founder and Director General of IJGPS.

The India Japan Global Partnership Summit, therefore, has positioned itself as the single most important bi-lateral business event in the recent past - one that will aim to push Indo-Japan trade level to a completely new and higher orbit – establishing an even more sustainable and profitable partnership between India and Japan.