Exporters to gain from Japan rebuilding, economic pact

Japan's rebuilding would be a huge opportunity for Indian exporters across sectors. While the tariff cuts on goods under the India-Japan economic pact, which is expected to be operational by September 2011, would help boost Indian exports, New Delhi might not opt to wait for that to give an impetus to trade with the calamity-stricken country. 

As Japanese firms are looking at less expensive and easy imports to meet the sudden rise in demand for a variety of goods and services, Indian exporters are pulling up their socks to seize the opportunity. Sectors like pharmaceuticals, automobile parts and components, engineering goods and chemicals are the ones that are sure to benefit from increased demand. Japan is also expected to enhance its use of professional services from India in areas such as paramedical, educational and IT.

Commerce secretary, Rahul Khullar told FE that opportunities in pharmaceuticals and services would be the most lucrative ones for Indian exporters as far as the Japanese market is concerned.

According to the industry estimates, the bilateral trade between the two countries is expected to double in 2-5 years, thanks to the India-Japan Comprehensive Economic Partnership Agreement (CEPA). The pact is also expected to give a boost to bilateral investments and integrate, to an extent, the production networks of the two countries. “Japan is a very lucrative export market and we expect the trade between the two countries to double in the near future,” said Ficci director-general Rajiv Kumar.

Currently for India, Japan is a “relationship market” and officials say that in areas like pharmaceuticals and manufacturing where earlier Indian players were not reckoned very seriously by potential Japanese buyers could now change this outlook. Reconstruction of Japan is estimated to cost over $180 billion.

Expressing similar sentiments, PV Appaji of pharma export council said the Indian pharmaceutical exports to Japan would increase significantly, thanks to the bilateral free trade agreement signed recently. “Japan is a small market now. But we expect Japan to take about 5% of the total pharma exports in three to four years,” he said. Currently, the Japanese pharma market is pegged to be around $80 billion. However, the share of generics is one of the lowest in this highly regulated market and stands at $8 billion. This could change as the government there has vowed to increase generic penetration to 30% of the total market by 2013 to reduce healthcare costs.

A government official said export of professional services such as IT, yoga, teaching,engineering, medical and paramedicals, are bound to get a boost as Japan rebuilds itself. “Sectors like automobile parts and components, engineering goods, and chemicals are some of the products that Japan might source from India,” said CII president B Muthuraman.

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