Japan’s Strategic Investment In India; A Win-Win Partnership For Manufacturing And Consumer Market Growth Says Global Head Of Investment Banking, Nomura

In an interview Masahiro Goto, the global head of investment banking at Nomura, highlighted that Japanese companies view India as a reliable and enduring partner for both manufacturing and as a leading consumer market.

Goto emphasized Nomura’s bullish stance on India, expressing a positive outlook, attributing it to the nation’s rare combination of scale and long-term growth potential.

Recognizing India’s strategic importance in the Asian market, Nomura plans to sustain its investment efforts to further enhance its presence and operations in the country, according to Goto.

 

Global Economic Headwinds and Regional Variances
Goto acknowledges the impact of rising interest rates, inflation, and geopolitical tensions on global deal-making. While these factors have led to a slowdown in M&A activity globally, Japan stands out as an exception.

Favourable macro conditions have propelled Japan’s equity capital market, with active M&A, both domestic and international, indicating resilience in the face of broader economic challenges.

India’s Appeal Amidst Global Uncertainty
Despite the global economic scene, India emerges as an excellent opportunity market.

Goto spotlights India’s potential with a projected GDP growth of 6.5%, positioning it to become the world’s third-largest economy in the medium term.

Post-pandemic, India is viewed as an attractive long-term partner for manufacturing and a compelling investment destination due to its unique combination of scale, sustained growth, and robust domestic consumption.

Japanese Economic Resurgence and Investment Trends
Japan’s economic resurgence in 2023 is attributed to three key factors – moving out of a deflationary environment, improvements in corporate governance, and increased interest as an investment diversification target within Asia.

At the same time, the Japanese stock market’s multi-decade highs reflect a changing economic environment, making it an appealing destination for global investors.

Growing Japanese Interest in Indian Stock Markets
Goto notes the increasing flow of Japanese capital into Indian stock markets. The appeal, he said, lies in India’s long-term growth potential, structural stability, low volatility, and sustainable macro factors.

Thus, Japanese retail investors, as well as institutional investors, are showing growing interest in tapping into India’s vibrant public and private markets.

Strategic Sectors Attracting Global Investors
India’s growth story is marked by two major trends – the rise in domestic consumption and its emergence as a global manufacturing hub.

Sectors like automotive, consumer durables, healthcare, green energy, and electric vehicles are witnessing strong growth and attracting global strategic investors.

Similarly, according to Goto, the financial services industry, fueled by economic growth and under-penetration, is also a hotspot for significant investments.

Re aligning Supply Chains, Japan’s Growing Manufacturing Focus on India
Post-Covid, countries and companies are reevaluating and realigning their supply chains.

Japanese firms, especially in manufacturing, are seeing India not only as a lucrative consumer market but also as an ideal manufacturing base.

The enduring political and economic ties between Japan and India have emerged as another factor further strengthening the commitment to continued investments, positioning India as a preferred destination for expanding manufacturing operations.

A Snapshot of Japan-India Bilateral Trade and Investments
The fiscal year 2022–2023 marked a significant chapter in the economic relations between Japan and India, with a bilateral trade volume totaling $21.96 billion.

Delving into the specifics, Japan exported goods worth $16.49 billion to India while importing products valued at $5.46 billion.

Investments
Japan stands as the fifth-largest investor in India, with cumulative Foreign Direct Investment (FDI) inflows amounting to an impressive $40.84 billion from April 2000 to September 2023.

This substantial investment reflects Japanese entities’ confidence in India’s economic potential and business environment.

Prominent Japanese Companies in India
Several renowned Japanese corporations have established a notable presence in India, contributing to the strengthening economic ties.

Among them are industry giants such as Mitsubishi, Toyota, Sony, and Yamaha; these companies operate across diverse sectors, showcasing the broad spectrum of collaboration between Japan and India.

Trade Dynamics
Examining the trade components, India’s exports to Japan encompass a diverse array of products, including petroleum products, chemical elements, fish and fish preparations, non-metallic mineral ware, metalliferous ores and scrap, clothing and accessories, iron and steel products, textile yarn/fabrics, machinery, and feeding stuff for animals.

Conversely, Japan’s key exports to India include automobiles, integrated circuits, motor vehicles and their parts and accessories, machinery with individual functions, and photo lab equipment.

The Last Bit, The bilateral trade and investment figures between Japan and India in the fiscal year 2022–2023 stress a thriving economic partnership.

Japan’s enthusiastic outlook on India’s consumer market and manufacturing capabilities stresses a symbiotic partnership with immense potential.

As Japan continues to invest strategically in India, leveraging its growth prospects and economic stability, both countries stand to gain from a resilient and mutually beneficial collaboration.

The evolving dynamics paint a promising picture of long-term economic cooperation between Japan and India, paving the way for shared prosperity in the years to come.