NEW DELHI: Investments from Japan into India are compensating for the widening trade deficit between the two countries following implementation of the free trade agreement in 2011, a Japanese official said today.
"If we look at the relationship in its totality, we can conclude that on a capital transfer basis, the investment flow from Japan to India has more than compensated the trade deficit," Tamaki Tsukada, Minister (Economic),Embassy of Japan in India said here at a FIEO function.
The Indian industry raised concerns that Japan is benefitting more from the Comprehensive Economic Partnership Agreement (CEPA) than India.
Tsukada said people should not raise concerns over the increasing exports of Japan to India after implementation of the CEPA in August, 2011.
"In the past two years, some people complain that after CEPA, the trade deficit has increased and they jump to the conclusion that CEPA has not served well Indian exports but I think this is very much short sighted or simplistic view of what CEPA is?.
"Of course trade component of CEPA is important but it is not just the trade aspect which makes CEPA, we also have to acknowledge the very important and robust provision in the investment chapter which provides the very fundamental framework to our economies," he said.
Tsukada said that Japanese investment into India has increased seven fold between 2008 and 2012 and Japan is the third largest source of investment for India.
He said that over 1,000 Japanese companies have set up offices in India and have created over 1,50,000 jobs in India.
Citing examples of Toyota, HitachiBSE 0.77 % and Panasonic, he said that Japanese companies are using India as a hub to export in the overseas market.
During April 2000 and March 2013, India has received USD 14.55 billion FDI from Japan.
On trade he said that, since 2002, bilateral commerce between the countries have increased by six times. Currently it stood at USD 18.77 billion.
While, India's imports from Japan has increased by over 3 per cent to USD 12.5 billion the last fiscal, the country's exports to Japan declined to USD 6.26 billion during the last fiscal, from USD 6.32 billion in 2011-12.
Speaking at the occasion, Joint Secretary in the External Affairs Ministry G H Bambawale said that huge business opportunities exists in both the countries to enhance economic relations.
Citing the success story of the country's largest car-maker Maruti SuzukiBSE 1.28 % India, Bambawale said: "we need few more success stories in few other sectors".
Speaking at the occasion, Vice President in the Federation of Indian Export Organisations(FIEO) Amit Goyal said that they have inked an MoU with Japan External Trade Organisation(Jetro) to promote and strengthen business relations between the countries.