Japan Industrial Townships In India: A Silent Triumph Celebrating Modi-Abe Duo's Legacy

Foxconn Industrial Internet (Fii), the subsidiary of Taiwanese firm Foxconn, on 17 July made a proposal to set up a plant at Tumakuru in Karnataka with an investment outlay of Rs 8,800 crore.

The proposal to establish the plant at Japan Industrial Township in Tumakuru, is the latest in the string of such big-ticket projects being established in these exclusive townships.

Japan Industrial Township or JITs are a hallmark of Indo-Japan economic collaboration and an enduring legacy of Japanese PM Shinzo Abe, who shared a personal bond with his Indian counterpart Narendra Modi.

Background

Japan is currently one of the largest investors in India, having made cumulative investment of $38.13 billion as of September 2022, with a total of about 1,455 Japanese companies operating across the country.

The island country was the fifth largest investor for India in FY2021, with investments made in key sectors such as automobiles, Electronics System Design and Manufacturing (ESDM), medical devices, consumer goods, textiles, food processing and chemicals.

Further, Japanese Prime Minister Fumio Kishida during his March 2022 visit had announced plans to invest “five trillion yen” ($42 billion) in India in the next five years.

Seen in the context of the positive trend of Japanese investment, Japan Industrial Townships (JITs) have been envisaged to allow Japanese companies to smoothly establish production and operate their business in India.

Policy Groundwork

The groundwork for JITs was laid during Prime Minister Narendra Modi’s first state visit to Japan in August-September 2014.

The Tokyo Declaration issued after the joint meeting, announced the "Japan-India Investment Promotion Partnership" under which the two Prime Ministers shared the intention to develop "Japan Industrial Townships".

Subsequently, in 2015, the Department for Promotion of Industry and Internal Trade (DPIIT) from Indian side, the and Japan's Ministry of Economy, Trade and Industry (METI) signed the 'Action Agenda for the India-Japan Investment and Trade Promotion and Asia-Pacific Economic Integration', pursuant to which the development of JITs commenced in India.

As per the agreement, India is required to develop business environments and provide incentives.

Further, the investment incentives for companies in JITs would be at par with 'Special Economic Zones' (SEZs) and 'National Investment and Manufacturing Zones (NIMZ)' with both India and Japan providing special packages for attracting Japanese investment into JITs.

Twelve In Number

Presently, more than 110 Japanese companies are operating in an aggregate of 12 JITs set up across nine states.

These include Neemrana and Ghiloth in Rajasthan, Sri City in Andhra Pradesh, Mandal Industrial Part in Gujarat, OneHub Chennai, Origins and Sojitz-Motherson Industrial Park in Tamil Nadu, Supa Japanese Industrial Park in Maharashtra, Tumkur (officially renamed as Tumakuru) in Karnataka, Greater Noida in Uttar Pradesh, Jhajjar in Haryana and Pithampur in Madhya Pradesh.

The centre was planning to set up the 13th JIT at Nagarbera in Assam, However, nothing has moved in the proposed industrial township which was promoted by the Japan External Trade Organization (JETRO).

Apparently, Japanese companies are not interested in setting up companies in the land provided at Nagarbera, and as such, the project remains stalled.

How It Works

The JITs are ready to move in facilities with fully developed land available for allotment in these townships. Further, the State government develops state-of-the-art infrastructure for Japanese companies to set up their business in these townships.

A cluster of incentives in subsidies and reimbursements related to financial investment, land-related charges, taxes, duties and employment generation are provided to Japanese companies if they set up operations in these townships.

For instance, a JIT at Neemrana Industrial Park, Rajasthan, offers a capital subsidy of 25 per cent of the investment made on plant and machinery, up to $70,000. Similarly, it also offers employment generation subsidy in the form of reimbursement of 50 per cent of employers’ contribution towards Employees' Provident Fund (EPF) for a period of seven years

As a step towards investor facilitation and investment promotion, these townships have also established virtual “Japan Desk” which provides customized solutions to Japanese investors, addresses investor queries and provides handholding support during project implementation stage.

Success Story

Of the 12 JITs under implementation, the Neemrana and Sri City industrial townships have a major success with both of them housing a majority of the Japanese companies.

Companies such as Daikin, Isuzu, Kobelco, Yamaha Music, Hitachi Automotive etc. are the marque Japanese investors which have set up manufacturing in these townships.

Up north, the Japan Industrial Township at Jhajjar, also known as Model Economic Township (MET) City at present, houses four leading Japanese firms including Panasonic, Denso, T-Suzuki and Nihon Kohden.

The MET City facility of Nihon Kohden — Japan's leading inventor, manufacturer, developer and distributor of medical equipment and devices - is the company’s largest manufacturing facility in India.

Similarly, the JIT at Vasanthanarasapura in Tumakuru district along the Chennai-Bengaluru Industrial Corridor (CBIC) is steadily making good progress and has emerged as an alternative investment site for Japanese businesses looking to set up manufacturing bases away from China.

Located about 90 km from Bengaluru, the township is already home to some of the biggest Japanese manufacturers such as Kirloskar Toyota Textile Machinery Pvt Ltd.

Foxconn's Tumakuru proposal which involves setting up of a state-of-the-art facility for manufacturing screens, outer coverings and mechanical components needed for phones, if agreed upon, would bring in an investment of Rs 8,800 crore to the state and generate 14,000 jobs.

What Lies Ahead

As things stand, Japan is the only country that has dedicated country-focused industrial townships across India. This speaks volume of the strength of the bilateral ties and importance of Japanese investment in the Indian economy.

JITs established with the general intent of optimising investments in India by Japanese investors, have helped them benefit from the availability of a young work-force in comparison to the ageing work-force in Japan, while boosting manufacturing activities in India.

What's needed now is to do an exhaustive assessment of the scheme taking into consideration influencing factors like cluster of incentives, ease of obtaining approvals, availability of skilled labour and other similar considerations to further the Japanese presence in India.