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Last Updated: Monday, 20 August 2007, 23:35 GMT 00:35 UK
Japan woos India with funding pledges
By Shilpa Kannan
Business correspondent, BBC News, Delhi

Japanese Prime Minister Shinzo Abe's visit to India, which begins on Tuesday, comes at a crucial time in economic relations between the two countries.

Poster advertising Toshiba products
Toshiba is among many Japanese firms excited by Indian prospects

India and Japan are taking their commercial relationship seriously.

The two countries have come a long way since Tokyo imposed severe economic sanctions on Delhi following India's nuclear tests in 1998.

In recent years the two countries have drawn closer, with Japan seeing growth potential in the Indian market.

The two countries have a fair bit in common.

They both have had long-standing border issues with China, while both share similar democratic ideals.

Both are members of the Group of Four (G4), a body pushing for reform of the United Nations, and each is backing the other's bid for a permanent seat on the UN Security Council.

Exciting opportunities

Japanese companies are excited by the opportunities offered by India's growth and the number of firms operating there has grown by 50% in the past three years.

Toshiba is already manufacturing television sets and personal computers in India. Yuzo Kato, managing director of its Indian arm, believes it could generate sales of $1bn by 2015.

The Indian economy is booming and we can see it all around us
Kazutaka Nishimura, Japanese businessman

Recent initiatives by India to attract foreign investors have been received well in Japan, reflected by the fact that a third of the nearly 475 Japanese companies present in India made their investments over the past year.

Many Japanese businessmen have recently made India their home, seeking to become part of India's success.

"My wife and I really enjoy living here," says Kazutaka Nishimura, who has been in India for six months. "The Indian economy is booming and we can see it all around us. People are very confident and energised."

But this confidence in the future masks the fact that economic links between the two countries are not as strong as they could be.

One of the reasons for this is India's poor infrastructure.

Indian Prime Minister Manmohan Singh
India's leaders know huge spending is needed on its infrastructure

The Indian government has estimated that at least $320bn will need to be spent on its infrastructure alone in the next five years.

Prime Minister Manmohan Singh is said to be personally monitoring all the major infrastructure projects.

In reality, the figure could be much higher than that.

This requires a lot of foreign investment and Japan - whose foreign direct investment in India totals more than $46bn - is willing to help.

Japan is the main foreign financial backer of the $90bn project to build a Delhi-Mumbai Industrial Corridor (DMIC).

Industrial 'superhighway'

Initial work on the 1,483km-long industrial thoroughfare, which will run through Uttar Pradesh, Delhi, Haryana, Rajasthan, Gujarat, Maharashtra and Madhya Pradesh, is set to begin in January, concluding in 2012.

It will boost industrial parks and special economic zones as well as three new ports, six airports, new roads and a 4,000-megawatt power plant to serve it.

The project will further boost economic ties between India and Japan, which is already the largest contributor of overseas development assistance.

If the corridor develops then my shipment will reach the [Mumbai] port in less than half the time. That would be fantastic for my business
Pankaj Jain, Indian businessman

Japan has made many investments to improve India's poor infrastructure. The projects which have benefited include the Delhi Metro to flyovers over the river Yamuna.

Nearly 100 Japanese businessmen will accompany Mr Abe on his visit, many of them chief executives of top Japanese companies.

Many of these firms, such as Mitsui, Hitachi, Mitsubishi, Honda and Orix, have started identifying potential areas of investment around this corridor.

During the visit, India and Japan will also sign an agreement for a dedicated rail freight corridor connecting Delhi, Mumbai (Bombay) and Kolkata (Calcutta), which will significantly reduce the time taken for transporting goods from one city to another.

States along the corridor - among the most populated and most industrialised regions in the country - have begun to market themselves aggressively as ideal investment hot-spots.

With its abundance of cheap skilled and unskilled labour, India is offering itself as a manufacturing base for Japan, while Japan offers a vast and wealthy market to which Indian companies can export.

There is growing demand to boost bilateral trade, which has stagnated at $4bn a year for several years now.

Quicker for business

For exporters, such as the rows of men hand-stitching pink and blue carpets for children in a small factory on the outskirts of Delhi, the industrial corridor will be a huge blessing.

"For exporters like me, time is money," says Pankaj Jain, who has been exporting home furnishings to Japan for the last 21 years.

"Right now, I send my products by road to Mumbai and it takes about four to five days - and another four days at least for customs to clear it at Mumbai port.

Indian businessman
The business community is looking for an increase in trade

"Plus there are numerous delays on our highways. If the corridor develops, then my shipment will reach the port in less than half the time. That would be fantastic for my business."

For many like Mr Jain, closer Indo-Japanese ties mean more business opportunities.

His company's current annual turnover is nearly $15m and he hopes it will increase as trade relations increase.

Many suitors are vying for India's attention.

Japan faces competition from China - whose President Hu Jintao visited India last year - in trying to ensure that it remains India's number one partner in the new "Asian century".

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