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Mar. 10, 2015 - Updated 04:16 UTC



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India Investment Boom

Aiko Doden

Dec. 18, 2015

UN experts say India will have the world's biggest population in 7 years. Its economy is growing faster than China's, and the World Bank projects the pace will pick up in the years ahead. Prime Minister Narenda Modi sees foreign investment playing a key role in powering India's growth. The Indian government has put 800 million dollars into a mega-project called the Delhi-Mumbai Industrial Corridor hoping to attract foreign investors. NHK Senior Commentator Aiko Doden has the story.

Prime Minister Narendra Modi came to power last year and pledged to revitalize India’s economy. He launched a “Make In India” campaign.

The idea is to attract foreign investment to boost the manufacturing sector and create more jobs. And he's encouraging states to compete with each other to come up with incentives to bring in capital.

That policy is already starting to pay off in India's largest state. Rajasthan, once ruled by Maharajas, relies on tourism and agriculture. State officials are now working hard to attract foreign investment.

Rajasthan's Neemrana industrial park is a two-and-a-half-hour drive from the capital, New Delhi.

The park's Japanese zone covers 4 square kilometers. It's home to 46 companies. They include makers of auto parts and home electronics. Most of them do business with manufacturers in and around New Delhi.

Some 500 Japanese workers live on-site in what's known as "Little Japan." They can bathe in cypress bathtubs and dine on familiar favorites in Japanese restaurants.

As India’s economy takes off, people are spending more. Sales of home appliances, automobiles and smartphones are growing fast.

Dainichi Color India is a Japanese company that makes plastic materials used in such durable goods. Sales have more than tripled over the last 5 years.

Takayoshi Tokimune, Dainichi Color’s Managing Director, explained the company’s direction:

"A lot of people are joining the workforce and consumer spending will rise sharply in the next few years. We wanted to build a firm base by getting in early."

Japanese firms once had to deal with frequent power outages and backup generators kept plants running. Managers urged local officials to fix the problem. Blackouts are now rare.

"We’re happy now that we don’t have to use this machine so often," said Tokimune of the backup generator.

Modi sees Japan as a promising source of investment. He and Japanese Prime Minister Shinzo Abe stressed the importance of bilateral economic ties when they met in India.

"No partner has played such a decisive role in India's economic transformation as Japan," said Modi.

Abe had this to say: "Japan's public and private sectors will work together to support Prime Minister Modi's initiative to reform his country's economy. I'm determined to work with him to open a bright chapter in our countries' ties."

The 2 countries are working together on a 9-billion-dollar industrial corridor to link New Delhi and economic hub Mumbai with industrial complexes all along the route. It runs right through Rajasthan.

Local officials say their state is the ideal place for businesses to set up. They held an event last month called "Resurgent Rajasthan" to attract firms.

Vasundhara Raje, Rajasthan’s Chief Minister, said she thinks Japanese companies would be a good fit:

"I would want the Japanese investors to further explore business potential in the state."

Executives from 5 Japanese companies signed up on the spot. They've agreed to open or expand their business in Rajasthan.

Hiromi Shiratori, COO of Nagano Products, explained why:

"Car ownership in India is going to shoot up, and that means car production will too. So for us, as a maker of auto parts, I think this is the obvious next destination."

Veenu Gupta of the Rajasthan State Industrial Development and Investment Corp. highlighted another benefit:

"Japanese companies coming in is not just investment coming in, but also a lot of technology, lot of efficiency that comes in."

Many of the biggest players in the Indian auto market are based near New Delhi. They include Maruti Suzuki, a subsidiary of Japanese carmaker Suzuki. It makes more than 40 percent of all cars sold in India.

One of Maruti Suzuki's suppliers has set up a factory in Rajasthan. Koide India produces metal molds for engines.

Executives say they chose the Neemrana industrial park because it offers easy access to their customers, land prices are low, and the local government has slashed taxes to make the state more business-friendly.

Koide executives say one challenge is finding the right staff. They're hiring locally, but skilled workers often head to urban areas.

The solution has been to find interns at the local technical school, and teach them the skills they need. They're currently training 3 students.

"I've been learning so many things here -- new skills and techniques, rules of the workplace, time management and teamwork,” said Ajay Jadeja, one of the interns. “It's giving me a lot of self-confidence."

Toshio Konagai, Managing Director of Koide India, explained the approach:

"We teach them that the longer they stay with us and the more they learn, the more they'll earn. We hire fresh young minds, not veteran workers. Training people takes time, but it benefits us and them."

The state's incentives are attracting domestic interest too. Indian investors looking for opportunities took part in the "Resurgent Rajasthan" event. One of them was entrepreneur Dinesh Jain.

Jain made his fortune building water treatment plants across India. He went on to set up machines that dispense drinking water. He says there's still plenty of room for his business to grow, especially in rural areas, and he's set his sights on Rajasthan.

"The volume of the business available in the water sector in the rural area is so vast and the players in this particular field are very, very limited,” said Jain.” So we have very big field to work on."

India's biggest state enjoyed 11 percent growth last year -- way above the national figure. Investment is flowing in, the economy is growing, and the challenge now for state leaders is to keep the momentum.

Aiko Doden joined Sho Beppu in the studio.

Beppu: Aiko, you told us that the New Delhi-Mumbai corridor is going to transform the region. Can you tell us more about what form it will take?

Doden: The DMIC is India’s largest ever infrastructure project. It spans a vast region linking cities and states by improving rail, road, port and air connections. There will be a dedicated freight corridor, for example, that will make it much cheaper to transport manufactured goods. The deadline for completion is 2017. India will build power plants to meet the demand for energy along the route. The government wants to make the region a global manufacturing and trading hub, and that's expected to create jobs too. Northwestern India was once seen as the country's least developed area, but that's changing fast and the DMIC is at the heart of the transformation. The next challenge is to ensure the prosperity it creates is shared widely to bring about inclusive growth.