1. OVERVIEW

India and Japan enjoy strategic bilateral relations owing to the evolving vision of economic strength and cross-border assimilation of aided growth, which is vital to the philosophy of achieving prosperity for both nations. While there is a rich history of shared cultural values of democracy, a heritage of Buddhism and a collaborative framework of defense and security between the two nations, the purpose of this article is to highlight the steady expansion of the economic relations that has led to the development of Japanese Industrial Townships ("JITs") to encourage investment by Japanese investors in India. This article attempts to lay down the context in which JITs have been developed in India, the incentives offered, the process of procuring land on lease in the JITs and the key approval and registration requirements for setting up a manufacturing unit in the JITs, to enable a prospective investor to determine the most viable site for investment and setting up a manufacturing unit, based on their requirements.

2. RECENT TRENDS

Since the establishment of the Strategic and Global Partnership in 2006, India and Japan have conducted Annual Summits for the respective Prime Ministers to adequately capture economic opportunities and take growth driven measures. In the Annual Summit held in September 2014, the bilateral relations between India and Japan were elevated to a Special Strategic and Global Partnership.1 On September 01, 2014, the then Japanese Prime Minister Shinzo Abe had announced the India-Japan Investment Promotion Partnership at Tokyo.

In 2014, Japan forecasted an investment of approx. USD 33.5 billion by way of public and private investment in India in furtherance of the partnership.2 Subsequently, in 2015, the Department for Promotion of Industry and Internal Trade (the, "DPIIT") and Japan's Ministry of Economy, Trade and Industry (the, "METI") signed the 'Action Agenda for the India-Japan Investment and Trade Promotion and Asia-Pacific Economic Integration'3, pursuant to which the development of JITs commenced in India.

The investment forecast made by the then Japanese Prime Minister Shinzo Abe in 2014, has been realized as per official data from 2022. It indicates that there is an aggregate investment of USD 36.2 billion by Japanese investors and the Japanese government (through Japan International Cooperation Agency, a governmental agency that primarily provides debt financing to developing nations in the form of Overseas Development Assistance) across various sectors such as automobiles, chemicals, food processing, electronics system design and manufacturing and food processing. In March this year, the current Japanese Prime Minister Fumio Kishida projected an investment of USD 42 billion in India over the next five years.

Owing to the efforts made to foster the economic relations between India and Japan over the last few years, there has been an increase in foreign direct investment ("FDI") inflow from Japan to India, and Japan was reported to be the fifth largest investor for India in the financial year 2020-2021 with over 1,400 Japanese companies currently operating across India.4

The positive trend of investment from Japan has encouraged the creation of a robust investor-friendly environment in India and one of the major steps in this direction has been the development of JITs as avenues across the country for bolstering the manufacturing sector.

3. INVESTMENT AVENUES: JAPANESE INDUSTRIAL TOWNSHIPS

3.1. Inception of JITs

India and Japan had envisaged the development of JITs mainly in the Delhi-Mumbai Industrial Corridor ("DMIC") and the Chennai-Bengaluru Industrial Corridor regions to facilitate Japanese investment to India. In this regard, 11 candidate sites were identified for setting up of JITs.5 Further, it was agreed that the investment incentives for companies in JITs would be at par with 'Special Economic Zones' and 'National Investment and Manufacturing Zones' with both India and Japan providing special packages for attracting Japanese investment into JITs.6

The first JIT in India was set up in Neemrana Industrial Park in Rajasthan following the establishment of the Special Strategic and Global Partnership between India and Japan. Soon after the success of the first JIT, the government undertook the development of a second JIT in Ghilot, Rajasthan with a vision to make it a hub for ceramics and Electronic System Design and Manufacturing (ESDM) industries.7 At present, companies ranging across various sectors such as auto and auto components, capital goods, chemicals, consumer durables, textile, renewable energy, etc. are operating in Neemrana Industrial Park in Rajasthan, out which 49 are Japanese companies including Daikin, Nissin Brake, Mytex Plymer, and Nippon Pipe.8

Japan is the only country that has dedicated industrial townships in India and various measures and initiatives have been undertaken by the Indian government to hand hold Japanese companies through the entire investment process/cycle in an expeditious manner.

Though COVID-19 caused a hiccup in the robust development of these JITs, the Indian government has developed state of the art infrastructure for Japanese companies to set up their business in these townships. As a part of the 'Invest India' initiative by the Indian government and with a view to take action under the India-Japan Investment Promotion Partnership, 'Japan Plus' desk has been set up by the National Investment Promotion and Facilitation Agency under the DPIIT, which comprises of a special team of consultants to provide specific detailed information to Japanese businesses looking to enter into India.

Presently, 114 Japanese companies are operating in an aggregate of 12 JITs set up across India9 which include the Neemrana Industrial Park in Rajasthan, Mandal Industrial Park in Gujarat, and the Supa Industrial Park in Maharashtra.

Footnotes

1 'Brief Note on India-Japan Bilateral Relations', available online at: https://www.mea.gov.in/Portal/ForeignRelation/India-Japan_Bilateral_Brief_feb_2020.pdf , last accessed on: March 05, 2022.

2 FICCI, available online at https://ficci.in/spdocument/23100/India-Japan-Bilateral-Relations-2019.pdf , last accessed on: March 04, 2022.

3 ET Online, 'India and Japan Sign Action Plan for Investment and Trade Promotion', available online at: https://economictimes.indiatimes.com/news/economy/foreign-trade/india-and-japan-sign-action-plan-for-investment-and-trade-promotion/articleshow/47106630.cms?from=mdr , last accessed on: March 04,

4 ANI, Japan is India's 5th Largest Investor, 114 Japanese Companies Currently Operate Across India, available online at: https://theprint.in/economy/japan-is-indias-5th-largest-investor-114-japanese-companies-currently-operate-across-india/830858/ , last accessed on: March 04, 2022.

5 Japan Industrial Township, Reliance Model Economic Township, available online at: https://www.modeleconomictownship.com/japan-industrial-township.html , last accessed on: March 02, 2022.

6 See footnote 3.

7 IANS, Rajasthan to Have Second Industrial Zone, available online at: https://www.business-standard.com/article/news-ians/rajasthan-to-have-second-japanese-industrial-zone-115040800931_1.html , last accessed on: March 01, 2022

8 Indian Council for Research on International Economic Relations, Post COVID-19 Prospects for India-Japan Economic Partnership, available online at: http://icrier.org/pdf/Post_COVID-19_Prospects_for_India-Japan_Economic_Partnership.pdf , last accessed on: March 04, 2022

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