India will demand more market access in Japan for its pharmaceuticals as well as marine and organic products, in a meeting slated for Thursday to help boost bilateral trade and investment ties, official sources told The Hindu.
Japan, meanwhile, has asked India to remove curbs on steel imports (including Minimum Import Price and safeguard duty) and to do away with the Minimum Alternate Tax (MAT) on Special Economic Zones (SEZs). The imposition of 18.5 per cent MAT on SEZ developers and units in the FY’12 Budget was a major factor that led to a slowdown in investments into SEZs. There are Japanese units in SEZs such as Sri City in Andhra Pradesh. India imported iron and steel (and articles) worth around $1.85 billion from Japan in FY’16. India had imposed curbs to counter a surge in cheap imports of steel that were hurting local manufacturers of the item.
Tokyo wants India to ensure “specific timelines for introduction” of the special incentives proposed by many Indian state governments to Japanese Industrial Townships (JIT). States including Gujarat, Rajasthan, Maharashtra, Madhya Pradesh, Uttar Pradesh and Haryana had wooed Japanese investors to set up JITs in their respective territories with proposed incentives such as single window clearance, power, roads and water as well as waiver of taxes (central sales tax, entry tax and land acquisition tax) and duties (electricity duty and stamp duty). Japan now wants these states to act fast on their promises.
The India-Japan Joint Committee will meet on Thursday. The panel was established following the inking of the bilateral Comprehensive Economic Partnership Agreement (CEPA) in 2011. The committee can review the CEPA and suggest amendments to the pact to facilitate an increase in bilateral trade and investment.
Sources in a central government ministry said Japan imposed higher duties on Indian marine products including sardine, tuna, mackerel, shrimp and cuttlefish, vis-à-vis countries such as Vietnam, Indonesia, Malaysia, Thailand, Indonesia and Ecuador. They added that, India will, therefore, ask Japan to eliminate or reduce tariffs on Indian marine products.
In a bid to bring down healthcare costs amid an economic slowdown, Japan had in last year decided to increase the volume share of generic drugs to 80 per cent by 2020 from around 60 per cent currently.
With India being a leading generic drug manufacturer and exporter, New Delhi wants Tokyo to ensure that “barriers” including “complicated registration, testing and application filing norms” are eased. Japanese rules require generic firms to have a presence in Japan to be able to sell in the local market, the sources said, adding that the norms also mandate filing applications in Japanese language and fresh testing. They said since many Indian generic drugs are already approved by American and European regulators, they should automatically find acceptance in Japan without additional tests. India will also seek greater access in the Japanese market for its Active Pharmaceutical Ingredients (or ingredients used in manufacture of drugs).
India is also looking to boost exports of organic products to Japan, which is a large market for such items. However, the hurdle is that there is no ‘bilateral equivalence arrangement’ between India and Japan to recognise as ‘equivalent’ -- under their own rules -- each other's norms and accreditation/certification systems on organic items. During Thursday’s meeting, India will take up this matter, the sources said. Besides, India will also raise the issue of the low share of India’s Information Technology services in the Japanese IT market.
India-Japan trade had shrunk by 6.4 per cent to $14.5 billion in FY’16, with India’s exports falling by 13.2 per cent to $4.7 billion and Japan’s exports contracting 2.8 per cent to $9.8 billion. During April 2000-March 2016, Japanese Foreign Direct Investment into India was worth $20.96 billion (or 7 per cent of overall FDI inflows of $288.5 billion during the period).
