20 ASIAN LEGAL BUSINESS – MARCH 2024 WWW.LEGALBUSINESSONLINE.COM CROSS-BORDER INVESTMENT In 1949, Japan was still shattered following World War II. As a gesture of conciliation, India’s then-prime minister, Jawaharlal Nehru, sent Indira to Tokyo to liven the people’s spirits. Indira, an elephant named after Nehru’s daughter and future Indian prime minister, brought “a ray of light into the lives of the Japanese people who had still not recovered from the defeat in the war,” says Japan’s Ministry of Foreign Affairs’ website. Japan and India signed a peace treaty and established diplomatic relations on April 28, 1952. This treaty was one of the first peace treaties Japan signed after World War II. From there started a journey that, apart from a few hiccups like during the Pokhran nuclear tests, never looked to end. On the economic front, Japan has been India’s largest bilateral donor and has been extending loans and grants to India since 1958. As per the Factsheet on Foreign Direct Investment (FDI) Inflow provided by the Department for Promotion of Industry and Internal Trade (DPIIT), Japan is the fifth largest investor in India with cumulative FDI inflows of approximately $41.47 billion from April 2000 to December 2023. There has reportedly been a significant increase in the FDI inflow from Japan to India on a yearly basis. As per the data provided by DPIIT, India received FDI of approximately $1.49 billion in 2021-22, $1.79 billion in 2022-23 and $2.73 billion from April 2023 to December 2023 from Japan. Currently, approx. 1,450 Japanese companies are operating in India in key sectors, including but not limited to manufacturing, automobiles, chemicals, defence, renewable energy, technology, and infrastructure. And this bond is only growing deeper. According to a report by the Japan External Trade Organization, 63.3 percent of Japanese companies aim to increase their sales share in India within the next two or three years, and that number is further expected to escalate to 75 percent in the next five years. This enthusiasm is buoyed by India’s strong domestic demand, political stability, and highest diffusion index score of 44.4 points, indicating superior business performance. “This is due to the emerging socioeconomic and political situation. The need for diversified supply points from Japan’s perspective and need for partners beyond the traditional U.S.-Europe for India have been the main driver behind the closeness of the two Asian countries in recent times,” explains Ashish Jejurkar, a partner at Japanese law firm Atsumi & Sakai in Tokyo. Niti Paul, a partner at Luthra and Luthra Law Offices, says that as a result of increasing cross-border investment, there has been more potential work for law firms. “Indian law firms are focusing on setting up or strengthening the existing designated Japan desks to accommodate the increasing inflow of work and to provide a contented tailored experience to its Japanese clients by delivering ASIA’S NEW Increased economic activity between India and Japan is creating new work for lawyers in both countries, but there is still a long way to go to facilitate cross-border legal market growth and expansion. BY NIMITT DIXIT Image: UniqueEye/Shutterstock.com
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