Japan can’t replace products from China in India’s low-income consumer market

By Hu Weijia Source:Global Times Published: 2017/8/22 21:58:39

At this very sensitive moment, when Chinese and Indian troops are engaged in a stand-off in the Doklam region, India is preparing to host Japanese Prime Minister Shinzo Abe in September, in an effort to seek support from Tokyo for its stand on regional issues.

However, India may be disappointed to see what Tokyo could offer, especially in the economic arena. At the very least, India cannot rely on Japan to save it from the economic sluggishness that will undermine its stamina in the stand-off with China.

Business activities contracted sharply in India's manufacturing sector in July, with the Nikkei India Manufacturing Purchasing Managers' Index, which measures manufacturing activity, plunging to 47.9, its lowest mark since February 2009.

Although the ongoing border tension could help divert public attention from domestic problems and buy the Indian government time to dispel the negative effects of the Goods and Services Tax, the still-fragile economy cannot afford a confrontation with China, which is India's largest trading partner. Although interactions between India and Japan increased recently, Japan cannot fill the void left by China as Sino-Indian economic ties are hurt by the border tension.

When it comes to India, Japanese investors face same problems in exploiting the market as do those from China: trade protectionism and insufficient skilled workers.

In recent years, there has been no shortage of failed cases in Japan's efforts to step up investment in India.

While bilateral ties may be in a honeymoon phase during Abe's upcoming trip to India, sweet words won't bring real money into India if the investment climate cannot be improved.

Amid economic sluggishness, it is unwise to boycott products from China, which has become one of the fastest-growing sources of foreign investment into India.

Despite the ongoing border tension, India's small commodity markets are filled with Chinese products. To be honest, most Indian consumers' spending power is too low to support any surge in imports of Japanese products, which are relatively expensive.

That's why India's foreign trade with China is nearly five times higher than that with Japan. It will be hard for India to reduce its trade deficit with China by importing more Japanese products as replacements.

China needs to keep close watch on India's interaction with Japan, but it has no reason to worry about the superficial appearance of India-Japan relations, which lack the internal impetus that drives economic growth.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn



Posted in: EYE ON THE ECONOMY

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