The India-Japan Free Trade Agreement (FTA) is a bilateral trade agreement between two countries aimed at promoting trade and economic cooperation. The agreement was signed in 2011 and has been in place since then, with significant benefits for both countries. The FTA has been successful in increasing her bilateral trade, with Japanese exports to India increasing by nearly 19% in her first year after signing the agreement (Source: Ministry of Commerce and Industry, India government).
One of the major areas of cooperation under the India-Japan FTA is in the area of trade and investment. The level of trade between the two countries has improved significantly in recent years and Japan has emerged as one of India’s major trading partners. According to Ministry of Commerce and Industry data, total bilateral trade between India and Japan reached US$ 20.57 billion in fiscal year 2021-22. In FY2021-22, India’s exports to Japan amounted to USD 6.18 billion and imports to Japan amounted to USD 14.39.
Another area of cooperation under an FTA is that of infrastructure development. Japan is a key partner in India’s infrastructure modernization and expansion efforts, providing financial and technical support for projects such as the Delhi-Mumbai Industrial Corridor, Chennai-Bengaluru Industrial Corridor and the Dedicated Freight Corridor.
Big gains for Maharashtra from FTA
The range of Maharashtra industries involved in the India-Japan FTA is significant. Maharashtra is India’s largest state in terms of Gross Domestic Product (GDP), with GDP surpassing her US$400 billion in 2019-20. It is home to several major industries, including manufacturing, automotive, and pharmaceuticals. FTAs provide opportunities for these industries to expand their operations and enter the Japanese market.
The state has seen a significant increase in Japanese investment in recent years, with Japanese companies setting up operations in various sectors such as automotive, engineering, electronics and chemicals. According to Maharashtra Industrial Development Corporation (MIDC) data, Japanese investment in Maharashtra was US$1.25 billion in 2019-20, up 13% year-on-year.
Major Japanese companies that have invested in Maharashtra include automotive giants, engineering firms and electronics companies. These companies have established manufacturing facilities in the state, created job opportunities, and contributed to the growth of the local economy.
Maharashtra’s automotive industry is well positioned to benefit from an India-Japan FTA. Japan is a global leader in automotive technology and his FTA will allow Indian companies to access this technology and improve the quality of their products. In 2019-2020, Maharashtra’s automotive industry contributed more than his $40 billion to the state’s economy. In turn, Japanese companies can take advantage of his FTA to set up operations in Maharashtra and benefit from the state’s strong automotive industry.
Maharashtra’s pharmaceutical industry is also poised to benefit from an India-Japan FTA. Japan is a major player in the global pharmaceutical market and the FTA will provide opportunities for Indian pharmaceutical companies to access the Japanese market and establish partnerships with Japanese companies. In 2019-2020, Maharashtra’s pharmaceutical industry contributed more than his $15 billion to the state’s economy. This will enable Indian companies to expand their operations and become more competitive in the global market.
In addition to the manufacturing and automotive industries, the services sector in Maharashtra can also benefit from an India-Japan FTA. The service sector is a major contributor to Maharashtra’s economy, accounting for over 60% of the state’s GDP in 2019-2020. The FTA will provide an opportunity for Indian companies to enter the Japanese market and provide services to Japanese companies.
When to Start a Business in Maharashtra
Maharashtra start-ups may benefit from an India-Japan FTA by accessing the Japanese market and exporting products and services to Japan. The FTA will also make it easier for Maharashtra start-ups to import goods and services from Japan, helping them grow and expand their business.
Maharashtra start-ups could also benefit from the Japanese Fund of Funds, a government-backed fund that provides funding and support to venture capital firms investing in start-ups. The fund will help Maharashtra start-ups secure the necessary funding for business development and growth.
The India-Japan FTA has also promoted cooperation in other areas such as technology transfer, skills development and environmental protection. For example, the Japan International Cooperation Agency (JICA) provides technical assistance and training to Indian companies in Maharashtra to help improve their technical capabilities and enhance their competitiveness.
Overall, the India-Japan FTA has brought significant benefits to both countries and has helped strengthen economic ties between the two countries. Maharashtra, in particular, is a major beneficiary of this agreement, attracting significant investment from Japanese companies and benefiting from technology transfer and skills development initiatives. It will be interesting to see how Maharashtra industries expand their operations and take advantage of the opportunity to enter the Japanese market.
Disclaimer: The views expressed in the article above are those of the author and do not necessarily represent or reflect the views of this publisher. Unless otherwise noted, the author is writing in his personal capacity. They are not intended and should not be considered to represent the official thoughts, attitudes or policies of any agency or institution.
