India and Japan: Comparative Economic Analysis of

International Trade & Economy

A
Report
Submitted
in partial fulfillment
for the award of the Degree of

Master in Business Administration

(Session 2020-2022)

With reference to

360tf, Singapore

Project Head: Submitted by:

Mrs. Binita Shah Manasi Tiwari
Designation
Head- Global Strategic
Alliances at 360tf
Singapore

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 CANDIDATE’S DECLARATION
I hereby declare that the work, which is being presented in this Report, entitled India

and Japan: Comparative Economic Analysis of International Trade &

Economy for partial fulfillment for the award of internship in Dept. of Finance is a
record of my own work carried under the guidance Project Head Mrs. Binita Shah,
Head- Global Strategic Alliances, 360tf, Singapore
I have not submitted the matter presented in this report anywhere for the award of any
other degree.

MANASI TIWARI

MBA (Finance & Marketing)

Reg. No: 2020PUSMCMMBX08924

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 ACKNOWLEDGEMENT
By making this project I want to acknowledge a special thanks to all those people
without whose support it was not possible for me to complete my project report.

Firstly I want to extend my thanks to Poornima University and Mr. Suresh Chandra
Padhy (Vice-Chancellor of PU) as because of them I got this opportunity of doing my
internship in 360tf.

The internship opportunity I had with 360tf was a great chance for learning and
professional development. Therefore, I consider myself as a very lucky individual as I
was provided with an opportunity to be a part of it. I am also grateful for having a
chance to meet so many wonderful people and professionals who led me though this
internship period.

I am using this opportunity to express my deepest gratitude and special thanks to my

mentor Mrs. Binita Shah, Head Global Strategic Alliances- 360tf who in spite of being
extraordinarily busy with her duties, took time out to hear, guide and keep me on the
correct path and allowing me to carry out my project at their esteemed organization and
extending during the training.

I perceive as this opportunity as a big milestone in my career development. I will strive

to use gained skills and knowledge in the best possible way, and I will continue to work
on their improvement, in order to attain desired career objectives. Hope to continue
cooperation with all of you in the future,

Sincerely,

Manasi Tiwari

MBA – Finance & Marketing

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 POORNIMA UNIVERSITY

Summer Internship Project

MBA Batch (2020-22)

Certificate by Faculty Guide

This is to certify that Summer Internship Project, titled

India and Japan: Comparative Economic Analysis of
International Trade & Economy
Submitted by Manasi Tiwari was carried under my guidance and supervision.

To the best of my knowledge and belief, the information presented has not been
submitted elsewhere.

Signature

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TABLE OF CONTENT
S.no Particulars
Abstract
1 Industry Overview
1.1 Industry Introduction
1.2 Major Players
2 Company Overview
2.1 Company Introduction
2.2 SWOT Analysis of Company
3 Introduction of the Topic
4 Literature Review
5 Research Methodology
5.1 Research Design
5.2 Data Sources
5.3 Outline of Analysis
6 Data Analysis & Interpretation
6.1 Chart Analysis
6.2 Statistical Analysis
7 Recommendations & Conclusions
References
Annexure

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List of Tables
4.1 Background of Countries
4.2 Cultural Comparison
6.2.1 Mean Calculations
6.2.2 Median Calculations
6.2.3 Correlation between GDP & Trade Balance (India)
6.2.4 Correlation between GDP & Trade Balance (Japan)
6.2.5 Correlation between GDP & Population (India)
6.2.6 Correlation between GDP & Population (Japan)
6.2.7 Correlation between FDI Inflows & Currency (India)
6.2.8 Correlation between FDI Inflows & Currency (Japan)
6.2.9 Correlation between FDI Inflows to Exports (India)
6.2.10 Correlation between FDI Inflows to Exports (Japan)
6.2.11 Correlation between Population to Exports (India)
6.2.12 Correlation between Population to Exports (Japan)
6.2.13 Correlation between Population to Imports (India)
6.2.14 Correlation between Population to Imports (Japan)

List of Charts
6.1.1 Top 10 Indian Export partners 2019-20
6.1.2 Top 10 Japanese Export partners 2019-20
6.1.3 India’s top Export commodities 2019-20
6.1.4 Japan’s top Export commodities 2019-20
6.1.5 Top 10 Indian Import partners 2019-20
6.1.6 Top 10 Japanese Import partners 2019-20
6.1.7 India’s top Import commodities 2019-20
6.1.8 Japan’s top Import commodities 2019-20
6.1.9 Sector wise count of India’s Global companies
6.1.10 Sector wise count of Japan’s Global companies
6.2.1 Correlation Chart of GDP & Trade Balance (India)
6.2.2 Correlation Chart of GDP & Trade Balance (Japan)
6.2.3 Correlation Chart of GDP & Population (India)
6.2.4 Correlation Chart of GDP & Population (Japan)
6.2.5 Correlation Chart of FDI Inflows and Currency Value (India)
6.2.6 Correlation Chart of FDI Inflows and Currency Value (Japan)
6.2.7 Correlation Chart of FDI Inflows & Exports (India)
6.2.8 Correlation Chart of FDI Inflows & Exports (Japan)
6.2.9 Correlation Chart of Exports & population (India)
6.2.10 Correlation Chart of Exports & population (Japan)
6.2.11 Correlation Chart of Imports & Population (India)
6.2.12 Correlation Chart of Imports & Population (Japan)

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 ABSTRACT

India and Japan are 2 important nations from East Asian market. They share many cultural
traditions. The modern states have carried on the positive legacy of the old association which
has been strengthened by shared values of belief in democracy, individual freedom and the rule
of law.

The Indian economy has emerged as one of the fastest growing economies of the world. The
major contributors of growth are a spurt in exports, resurgence of the manufacturing sector,
and substantial flow of foreign direct investment that has complemented the domestic
investment. India has managed foreign trade and balance of payment due to introduction of
external sector reforms in 1990s. However, growth in the near future is likely to be driven by
investment. There has been paradigm shift in India's foreign trade which shows the significant
impact of trade reforms. Present paper purports to examine the emerging trends and patterns
of India's foreign trade in the light of trade reforms.

Japan's aggressive export drive and chronic balance of trade surplus has generated considerable
interest in the Japanese international trading sector. The amount of land in Japan suitable for
agriculture is insufficient to produce enough food for Japan's large population. As a result,
Japan imports most of its food from other countries. Japan lacks many raw materials needed for
industry and hence Japan must import most of these goods. Trade with other countries
(international trade) is therefore very important to Japan.

This paper presents an overview of comparative performance of India and Japan in its trading
relations for the period of 5 years (2015-2019). The paper begins with a discussion of the
development, size, and importance of India & Japan's international trading Sector trade. It then
examines the composition, institutions, and policies. This is followed by a review of balance of
trade, capital flows (FDI’s), value of the yen & INR, and direction of trade, population growth,
GDP trends of both the nations.

Keywords: Balance of trade, FDI, Exports, Foreign Exchange

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 CHAPTER 1
INDUSTRY OVERVIEW

1.1 INDUSTRY INTRODUCTION

Financial technology (abbreviated fintech or FinTech) is the technology and innovation
that aims to compete with traditional financial methods in the delivery of financial
services. It is an emerging industry that uses technology to improve activities in finance.
The use of smartphones for mobile banking, investing, borrowing services, and crypto
currency are examples of technologies aiming to make financial services more
accessible to the general public.

It is an innovative business model that transforming the financial sector with digital
technology from Artificial Intelligence to Cryptography and created a plethora of
possibilities and product and services. The FinTech aims is to fill the inefficiency gap in
traditional banking and its legacy system with specialized software and algorithms.

The statement of Bill Gates in the year 1994, “banking is necessary, banks are
not” has become more realistic now. Fintech business model is designed to enhance
the user experience, improve productivity, cost reduction, and resulted in innovation and
services transformation in financial sectors. Financial technology companies consist of
both startups and established financial institutions and technology companies trying to
replace or enhance the usage of financial services provided by existing financial
companies. The areas that fintech covers can be broadly described as: (i) credit,
deposits, and capital-raising services; (ii) payments, clearing and settlement services,
including digital currencies; (iii) investment management services (including trading);
and (iv) insurance. Part of the technological backbone of fintech is the Block chain
technology.

Companies dealing in financial technology are either in the form of new businesses or
already existing financial companies that tend to improve the technology of financial

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services that use traditional methods of banking. Modern industries currently use
technology and software to avail financial services to their customers. Nowadays,
companies dealing with FinTech have stiff competition with banks and aligned with new
generation’s expectation such as fast and easy banking operations.

Trade and Supply Chain Finance (T&SCF)

It has been closely associated with the commerce and history of human trade evolution.
It is a century-old financing model and influenced the Government policy, economic
conditions, standard of living, and degree of financial inclusion. There are multiple
parties involved in the transactions and core principle has been trusting among buyers
and the sellers. However, the main challenges in the trade transactions arise on
enforcement of trust among stakeholders as well as mitigation of payment risk. This
trust imbalance is overcome by the support of Banks and Financial institutions (B&FI) by
creating a safety net between the buyers and the sellers. Banks provide financing
facility from short to a medium-term loan in exchange of goods (domestic and
international), generally through letters of credit, guarantees, factoring, invoice
discounting and whereas 80% to 90% of trade transactions depend on this facility.

Global supply chains are transforming and influenced by emerging technology. FinTech
companies do intermediate between the institution and its suppliers. They do provide
working capital for the sellers and loans to buyers. This means both the suppliers and
the buyers will benefit increasing liquidity and timely payments. Global Companies such
as Colgate, Dell, Apple, Adidas, Acer.Inc, among others, use FinTech to get capital that
was never accessible in the past in supply chains to finance the growth of companies,
develop new products on market, improve their financial standing and increase the
capital available to the suppliers.

The transactions under trade finance are manual process and paper intensify work.
Therefore, the benefit of digitalization of trade procedures is a significant cost saving by
eliminating the manual processes and administrations of trade documents. This can be
roughly estimated to one out five of the total costs in physical transportation Moreover,
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the digitalizing the process also helps governments getting stronger visible international
trade and supply chain documents to eradicate black marketing, smuggling among
other related problems. This is true because the existing supply chain process has been
not doing well especially in promoting international trade among the countries.

1.2 MAJOR PLAYERS

The global fintech market size is expected to grow to USD 124.3 Billion by the end of
2025 at a Compound Annual Growth Rate (CAGR) of 23.84%. FinTech market's growth
is driven by the omnipresence of technology and innovation in the market which is
helping financial advisors to come up with new solutions to meet customers' financial
needs. A significant majority of global banks, insurers, and investment managers plan to
partner with financial technology firms over the next 3-5 years and expect an average
investment return of 20 percent on their development projects.

Major Players in the FinTech Market

Ant Financial

Ant Financial Services Group, formerly known as Alipay, is an affiliate company of the
Chinese Alibaba Group. Ant Financial is the highest valued fintech company in the
world, and the world's most valuable unicorn company, with a valuation of US$150
billion.

Adyen

Adyen is a multinational payment company that allows businesses to support e-

commerce, mobile, and point-of-sale payments. Adyen has over 3,500 clients and is
listed on the Euronext stock exchange.

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Qudian

Qudian is a small consumer credit company Chinese online. The firm was founded in
2014 and had its headquarters in Xiamen. In 2017 Qudian raised US$ 900 million on
the New York Stock Exchange in its initial public offering.

Major Players in Trade Finance Fintech Market

Mitigram

Mitigram has been operational for around 3 years. A Nordic fintech based in Stockholm,
Mitigram is a networking and communications tool aimed at helping corporates
facilitating trade finance, through finding out confirmation prices for Letters of Credit,
guarantees, receivables and performance bonds. Mitigram is the world’s first global
trade finance collaborative platform for corporates, commodity traders and risk takers/
liquidity providers to access counterparties in funding and hedging risk of trade
transactions.

Tradeteq

Tradeteq is a London based fintech which allows bank and non-bank investors to
connect, interact and transact. Trade finance is deemed a reliable asset class, known to
achieve consistent yields even during macroeconomic events. With low default rates,
high yields and high recovery rates, trade finance has been named an asset class
deemed for growth by many.

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Tradeteq partners with banks to provide them with a platform to connect, interact and
transact with Non-Bank Financial Institutions. Tradeteq transforms trade finance in to an
investable asset for traditional credit investors such as pension funds and insurance
companies. This process creates greater capacity within banks, subsequently
generating more financing for SMEs.

Levantor

Levantor is a London based fintech focused on helping enable sales. Supply chain
finance programmers have proven very successful amongst corporates and their
suppliers when it comes to managing working capital and providing some level of
payment terms to suppliers.

Traydstream

Traydstream is designed to speed up and make trade finance processing more efficient
by looking at the process of document checking, compliance and scrutiny. According to
Traydstream, currently, physically checking an LC takes around 2 hours. With
Traydstream’s technology, this can be reduced to 45 seconds.

Using an OCR engine that extracts data from the LC, Traydstream conducts the
document scrutiny – which includes resolving issues around missing fields, ensuring
consistency and compliance regarding ISBP and UCP rules.

Tradeassets

Tradeassets focuses on financial inclusion. The risk of financial exclusion at the

corporate and bank level can have huge implications to trading businesses in emerging
markets, but the effect of financial exclusion at the institutional can have an impact and
disconnect at a level that is much greater to entire nations. Tradeassets is a Dubai
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based digital ecosystem which looks to address and enable financial inclusion, focusing
on digitalization within the secondary trade finance market.

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 Chapter 2
Company Overview

2.1 Company Introduction

360tf enables global trade finance. It brings the trade world closer by connecting
Importers & Exporters with partner banks to fulfil their LC financing requirements.

The 360tf marketplace will operate as a market creator enabling all the entities
operating on the platform to gain from the offering. We envision providing businesses
instant working capital funding through various Trade Finance products. The platform
also envisages to provide analytics to all the participants to aide their businesses.

While 360tf is Headquartered in Singapore, Nimai as a group is present in UAE, Qatar,

Kenya, Nigeria, Bangladesh, Sri Lanka & India with associate partners & Clients in more
than 40 countries including significant coverage in Africa, South Asia, GCC & Europe.
The Nimai group also cherishes 500+ relationships with the various Financial
Institutions comprising Commercial Banks, Debt & Sectoral Funds, Private Equity
Funds, Multilateral Agencies, Alternate Financing Institutional Funds and Development
Financial Institutions with a specific focus on Trade Financing. With a proven track
record of having raised USD 1.9 billion for its clients since inception, the group is best
positioned to digitize the entire business process. In this new avatar, 360tf is poised to
transform the business and to help make a quantum leap into the Future of Trade
Finance.

The 360tf platform will connect issuer and or receiver of trade products across the world
with one another efficiently addressing their requirements with demonstrated benefits of
wider access, savings on time and costs.

Objectives

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  Open-up instant access to a wide network of credible counterparties spread
across the globe

 End-to-end digitization of the whole process of engaging with counterparties

 Significant savings on cost of financing trade flows

 Fully digitized customer engagement & sourcing for vastly improved turnaround
times

 Seamless and straight-through-processing of transactions

 Actionable insights through advanced analytics & dashboards

2.2 PEOPLE BEHIND 360TF

PANKAJ MUNDRA

Pankaj Mundra is a Chartered Accountant and Postgraduate in Management with 20+

years of Banking experience in the fields of Strategic & Financial Planning, Fund
Raising, Trade Finance, Debt Syndication, Re-structuring, Investment Advisory & Risk
Consulting in the Middle East and Asia region.

VIKRAM LODHA

An all-round career banker, Vikram Lodha comes with extensive experience in retail and
wholesale banking. In his previous assignment, he helmed the Trade Product & Supply
Chain Finance business for Kotak Mahindra Bank in India. Vikram has a demonstrated
track record of creating positive business impact by building new revenue streams and
leapfrogging growth in every initiative he has undertaken.

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CAPT. SUNIL SARAF

Having served an illustrious military career in the Indian Army, Capt. Sunil Saraf is an
alumnus of Officers Training Academy. He also holds a Masters’ Degree in Economics
in addition to an MBA in International Business & Diploma in Real Estate. He joined the
corporate world in 1996. He is a strategic thinker with an entrepreneurial mindset, clear
vision and deep passion.

NISARG DUGAD

With over 17 years of diverse experience in the field of finance, Nisarg Dugad has been
advising clients on raising debt, capital, restructuring and M&A transactions. A strong
communicator, Nisarg has leveraged his interpersonal and relationship management
skills to develop strong networks with individuals and institutions.

2.3 SWOT Analysis of the Company

A SWOT (strengths, weaknesses, opportunities and threats) analysis is a strategic

planning tool that helps your company overcome challenges and determine what new
leads to pursue.

The primary objective of a SWOT

analysis is to help organizations
develop a full awareness of all the
factors involved in making a business
decision. This method was created in
the 1960s by Albert Humphrey of the
Stanford Research Institute, during a
study conducted to identify why
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corporate planning consistently failed. Since its creation, SWOT has become one of the
most useful tools for business owners to start and grow their companies.

SWOT Analysis of 360TF

Strength Weakness
Success in entering new markets Low brand awareness
Highly agile Limited market appeal
Good identifier of market insights Small sales team
Reaching emerging market segments Strong existing competitors
Analytical marketing approach Many emerging new entrants
Superior product design
Clearly differentiated products
Attracting many new customers

Opportunity Threat
Attract new customers through special Increased market fragmentation
offers Slower growth due to the inability to raise
Raise capital funding to invest in new funds
ventures Increased operating/technology costs
Generate license revenue streams from Ability to meet cash flow requirements
key patents Unpredictable trends and disruption
Develop an innovation culture Rapid technological change
Leap-frog competitor’s technology Hacking/loss of data & breach of
Develop strategic alliances data/privacy issues
Develop propriety software More efficient competitors, competing on
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 Build our IT/software expertise price
Become a first-mover in an emerging Growing competitive set
markets

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 Chapter 3
Introduction of the Topic

India and Japan share many cultural traditions. The modern states have carried on the
positive legacy of the old association which has been strengthened by shared values of
belief in democracy, individual freedom and the rule of law.

India is developing into an open-market economy, yet traces of its past

autarkic policies remain. Economic liberalization measures, including industrial
deregulation, privatization of state-owned enterprises, and reduced controls on foreign
trade and investment, began in the early 1990s and have served to accelerate the
country's growth, which averaged under 7% per year since 1997. . India's diverse
economy encompasses traditional village farming, modern agriculture, handicrafts, a
wide range of modern industries, and a multitude of services. Slightly more than half of
the work force is in agriculture, but services are the major source of economic growth,
accounting for nearly two-thirds of India's output, with less than one-third of its labor
force. India has capitalized on its large educated English-speaking population to
become a major exporter of information technology services, business outsourcing
services, and software workers. In 2010, the Indian economy rebounded robustly from
the global financial crisis - in large part because of strong domestic demand - and
growth exceeded 8% year-on-year in real terms. However, India's economic growth
began slowing in 2011 because of a slowdown in government spending and a decline in
investment, caused by investor pessimism about the government's commitment to
further economic reforms and about the global situation. High international crude prices
have exacerbated the government's fuel subsidy expenditures, contributing to a higher
fiscal deficit and a worsening current account deficit. In late 2012, the Indian
Government announced additional reforms and deficit reduction measures to reverse
India's slowdown, including allowing higher levels of foreign participation in direct
investment in the economy. The outlook for India's medium-term growth is positive due

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to a young population and corresponding low dependency ratio, healthy savings and
investment rates, and increasing integration into the global economy.

India has many long-term challenges that it has yet to fully address, including poverty,
corruption, violence and discrimination against women and girls, an inefficient power
generation and distribution system, ineffective enforcement of intellectual property
rights, decades-long civil litigation dockets, inadequate transport and agricultural
infrastructure, limited non-agricultural employment opportunities, inadequate availability
of quality basic and higher education, and accommodating rural-to-urban migration.

Japan In the years following World War II, government-industry cooperation, a

strong work ethic, mastery of high technology, and a comparatively small defense
allocation (1% of GDP) helped Japan develop a technologically advanced economy.
Two notable characteristics of the post-war economy were the close interlocking
structures of manufacturers, suppliers, and distributors, known as keiretsu, and the
guarantee of lifetime employment for a substantial portion of the urban labor force.

Japan's industrial sector is heavily dependent on imported raw materials and fuels. A
small agricultural sector is highly subsidized and protected, with crop yields among the
highest in the world. While self-sufficient in rice production, Japan imports about 60% of
its food on a caloric basis. For three decades, overall real economic growth had been
spectacular - a 10% average in the 1960s, a 5% average in the 1970s, and a 4%
average in the 1980s. Growth slowed markedly in the 1990s, averaging just 1.7%,
largely because of the after effects of inefficient investment and an asset price bubble in
the late 1980s that required a protracted period of time for firms to reduce excess debt,
capital, and labor. Measured on a purchasing power parity (PPP) basis that adjusts for
price differences, Japan in 2012 stood as the fourth-largest economy in the world after
second-place China, which surpassed Japan in 2001, and third-place India, which
edged out Japan in 2012. The new government will continue a longstanding debate on
restructuring the economy and reining in Japan's huge government debt, which exceeds
200% of GDP. Persistent deflation, reliance on exports to drive growth, and an aging
and shrinking population are other major long-term challenges for the economy.
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Background of Countries

INDIA JAPAN
Full name Republic of India Japan
Independence August 15 April 28
day date

Land border 14,103.1km 0.0

length Ranked 4th. Ranked 170th.

National Jana Gana Mana ( Hail Kimigayo ( His Majesty’s Reign )

anthems the ruler of all minds )

Neighboring Afghanistan, China, North Korea, South Korea,

countries and Bangladesh, Bhutan, Philippines, Russia, Northern Mariana
territories Burma, China, Islands ( United States ), Taiwan
Indonesia, Maldives,
Nepal, Pakistan, Sri
Lanka, Thailand

Table 3.1

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Cultural Comparison

India Japan
Food & 0.75 8.03
drink > Alcohol  Ranked 168th. Ranked 69th. 11 times more than India
Food & drink > October 13, 1996 July 20, 1971
Fast food >
McDonalds
> First outlet
date
Food & drink > Delhi Tokyo
Fast food >
McDonalds
> First outlet
location
Food & drink> 1,995 1,970
Fast food Ranked 7th. 1% Ranked 18th.
outlets > KFC more than Japan
> Year entered
Happy Planet 50.9 47.5
Index Ranked 32nd. 7% Ranked 45th.
more than Japan
Sexuality > Illegal since 1860. Legal since 1880 (was illegal from 1872-
Homosexuality Penalties up to life 1880; before that there were no laws
> Legality of imprisonment. forbidding same sex relationships) UN
homosexual decl. sign.
acts
Smoking 96 1,841
> Cigarettes Ranked 158th. Ranked 17th. 19 times more than India
per adult per
year
Tobacco 18 20
> Purchase Ranked 30th. Ranked 5th. 11% more than India
age
Wellbeing 5 6.1
> Experienced Ranked 37th. Ranked 22nd. 22% more than India
well-being

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 World Heritage 24 13
Sites Ranked 7th. 85% Ranked 14th.
more than Japan
Table 3.2

The current research study focuses on a comparison between economic conditions of

India & Japan. Various parameters have been used which help us to put light on trends
of international trade and growth of economies of 2 powerful yet very different countries.

Both the nations belong to East Asian region and this research puts light on impact of
both countries on world trade.

Objectives of the Study:

 To assess the Intensity & growth trends of International trade of India and the
Japan.
 To identify the potential sectors for enhancing trade in both the nations.
 To further explore the areas of emerging trade opportunities and to assess the
future prospects of trade in both the nations India and Japan taken for study.
 To understand the trade finance trends of both nations which would assist the
company in right policy adaptation for clients of respective nations

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 Chapter 4
Literature Review

Rani.D.Mullen and Kashyap Arora (2017) viewed that India and Japan constitute two
of the oldest democracies in Asia and also stand among Asia’s three biggest
economies. To strengthen their relationship, India and Japan have also been engaged
in crucial annual summits since 2005 along with other initiatives such as the annual
strategic dialogue at the foreign minister-level, India-Japan consultations on non-
proliferation and disarmament and ministerial-level economic dialogue. They viewed
that both India and Japanese leaders also laid out the future roadmap of India-Japan
ties in a joint statement referred to as ‘Japan and India Vision 2025: Special Strategic
and Global Partnership Working Together for Peace and Prosperity of the Indo-Pacific
Region and the World’ during the year 2015. Also both the economies find themselves
in a mutually beneficial situation with Japanese economy finding it difficult to sustain
economic growth due to its ageing and shrinking population size, whereas India suffers
from infrastructural bottlenecks

Observer Research Foundation (2016) observes that Japan and India have
complementarity in the economic structures. Japan has high-end technology in the
manufacturing sector. However, declining population and aging society are the major
challenges of Japan. India, on the other hand, has a very aspirational young population.
Its requirements are FDI especially in the manufacturing sector and has vast
infrastructure development needs in highways, sanitation, farming and so forth. So both
the nations share strategic values and interests. Japan needs a strategic partner for our
deterrence and self-protection. The same can be said for India as well.

Mathew Joseph & Subhasis Bera (2012) finds that the total trade with Japan as a
proportion of India’s global trade had been declining and the FDI inflows into India from
Japan had remained low for a long time. The share of India in Japanese global trade
and FDI outflows had been almost insignificant. There has been a positive shift in the

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recent years with respect to India’s imports from Japan and Japanese FDI outflows to
India. However the paper finds that there is still a lack of momentum in India’s exports
and FDI outflows to Japan. The implementation of the India-Japan Comprehensive
Economic Partnership Agreement (CEPA) is expected to boost trade and investment
between the two countries

Helpman 1984; Eitier 1979 In the literature a further distinction is drawn between scale
economies (external to the firm) that are of “national” origin as distinct from the ones
that are “international,” the latter arising from developments in the global industry. As
with other scale economies, both are disruptive to the predictive power, as well as the
major theorems, of the traditional HOS model. However, gains from trade arise with
increased output of industries in trading countries that enjoy national-level scale
economies. Similarly, gains from trade are also made possible to industries that enjoy
economies arising at an international level. In particular, small economies that otherwise
cannot access these economies are supposed to gain by opening up. Thus trade can
be beneficial/loss-making with external economies at the international level for nations
with possibilities of reaping economies—avoiding diseconomies of scale with integrated
markets. The above obtains even for countries having resource endowments and pre-
trade prices that are identical. In this case, a small country has more to benefit as
markets are opened up and external economies of scale are availed of at an
international level.

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 Chapter 5
Research Methodology

5.1 Research Design

The researcher has followed descriptive research design for studying the trend and
comparing the trade environment between 2 powerful nations of East Asia.

Descriptive research is a type of research that describes a population, situation, or

phenomenon that is being studied. It focuses on answering the how, what, when, and
where questions If a research problem, rather than the why.

This is mainly because it is important to have a proper understanding of what a

research problem is about before investigating why it exists in the first place. Descriptive
studies report summary data such as measures of central tendency including the mean,
median, and mode, deviance from the mean, variation, percentage, and correlation
between variables.

5.2 Data Sources

The study is based on secondary sources of information collected from the following
sources-
 Research papers
 Websites of Reserve bank of India (RBI)
 UNCTAD database
 IMF
 World Bank Database
 Ministry of Commerce and Industry (India)
 Ministry of Economy, Trade and Industry (Japan)
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  EXIM
 Japanese Trade Database
Yearly data from 2015 to 2019 has been used to analyze and compare the trade
conditions between India & Japan.

5.3 Outline of Analysis

(i) Mean

The mean is a parameter that measures the central location of the distribution of a
random variable and is an important statistic that is widely reported in scientific
literature. Mean implies average and it is the sum of a set of data divided by the number
of data. It can prove to be an effective tool when comparing different sets of data;
however this method might be disadvantaged by the impact of extreme values.

x =∑xi /n
here,
xi = ith observation, 1 ≤ i ≤ n

∑xi = Sum of observations

n = Number of observations

(ii) Median

Median is a descriptive statistic that researchers commonly use to characterize the data
from their studies. The median provides a helpful measure of the center of a dataset. By
comparing the median to the mean, you can get an idea of the distribution of a dataset.
When the mean and the median are the same, the dataset is more or less evenly
distributed from the lowest to highest values.

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Median= {(n + 1) ÷ 2}th value

(iii) Correlation

Correlation means association - more precisely it is a measure of the extent to which

two variables are related. There are three possible results of a correlational study: a
positive correlation, a negative correlation, and no correlation.

The main result of a correlation is called the correlation coefficient (or "r"). It ranges from
-1.0 to +1.0. The closer r is to +1 or -1, the more closely the two variables are related.

Range of Correlation

-1.00 to -0.80 Very Strong Negative

-0.79 to -0.60 Strong Negative

-0.59 to -0.40 Moderate Negative

-0.39 to -0.20 Weak Negative

-0.19 to -0.01 Very Weak Negative

0.00 to 0.19 Very Weak Positive

0.20 to 0.39 Weak Positive

0.40 to 0.59 Moderate Positive

0.60 to 0.79 Strong Positive

0.80 to 1.00 Very Strong Positive

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 Chapter 6
Data Analysis
6.1 Chart Analysis

(i) Top Exports categorized by country

Top 10 Indian Export Partners

2019-20 ($ bn)

6.19 United States

6.26
China
7.66 United Arab Emirates
Hong Kong
7.77 49.32
Singapore
Bangladesh
7.91
United Kingdom
Germany
Netherlands
8.3
Malaysia

9.54

17.95 19.01

Chart 6.1.1, Source: Based on Annexure Table 5

Top 10 Japanese Export Partners

2019-20 ($ bn)

17.12 12.6 China

17.58
United States
17.7
South Korea
25.53 Other Asia, nes
141.4 Hong Kong
Thailand
32.01 Singapore
Germany
Vietnam
44.43 Malaysia

44.69 118.7
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Chart 6.1.2, Source: Based on Annexure Table 6
Manasi Tiwari
These charts put light on export partners of India & Japan. By closely analyzing it can
be seen that while India has major trade partners from all around the world, Japan deals
more with South Asian & East Asian nations. Out of top 10 Export partners of Japan 8
are South or East Asian countries which shows the inclination of Japan towards these
counties.

On the other hand India has export relations with UAE, UK, Netherlands, and USA etc.

Another observation is China and USA are major export partners for both the nations.

(ii) Top Exports categorized by commodities

India's Top Export Commodities

2019-20 ($bn)

Plastics 6.6

Cereals 8.67

Iron and steel 10.63

Vehicles other than railway, tramway 13

Electrical, electronic equipment 13.46

Organic chemicals 17.43

Machinery, nuclear reactors, boilers 17.97

Pharmaceutical products 18.43

Pearls, precious stones, metals, coins 24.46

Mineral fuels, oils, distillation products 27.63

0 5 10 15 20 25 30

Chart 6.1.3, Source: Based on Annexure Table 5

Japan's top Export Commodities

2019-20 ($bn)

Miscellaneous chemical products 12.08

Pearls, precious stones, metals, coins 13.33

Organic chemicals 14.91

Iron and steel 22.8

Plastics 25.57

Optical, photo, technical, medical apparatus 37.44

Commodities not specified according to kind 41.06

Electrical, electronic equipment 102.55

Machinery, nuclear reactors, boilers 121.73

Vehicles other than railway, tramway 122.54

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 Chart 6.1.4, Source: Based on Annexure Table 6

These charts put light on export commodities of India & Japan. India’s top exported
commodities are mineral fuel, pearls, pharmaceutical products, chemicals etc. whereas
Japan’s top exported commodities are vehicles, machinery, and electric equipment,
medical and plastic products.

(iii) Top Imports categorized by country

Top 10 Indian Import Partners

2019-20 ($ bn)
11.31
12.02
China
United States
58.8 United Arab Emirates
12.17 Saudi Arabia
12.31 Iraq
Hong Kong
Singapore
14.58 South Korea
Indonesia
Switzerland

16.17
26.62

17.72
23.9

Chart 6.1.5, Source: Based on Annexure Table 7

Top 10 Japanese Import Partners
2019-20 ($ bn)
16.4
18.45
21.22 China
United States
22.05 Australia
Other Asia, nes
South Korea
23.78 163.85
Thailand
Vietnam
Germany
26.6
Saudi Arabia
United Arab Emirates
26.78

35.79
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 Chart 6.1.6, Source: Based on Annexure Table 8

These charts show us that both India and Japan have common import partners like
USA, UK, China, UAE, etc. Some nations like Iraq & Switzerland has major trade
relations with India only whereas Australia, Germany, Thailand are top import partners
for Japan. China and USA are 2 common and top 2 import partners for both the nations.

(iv) Top Imports categorized by commodities

India's Top Import Commodities

2019-20 ($bn)

Fertilizers 7.18

Iron and steel 7.55

Optical, photo, technical, medical apparatus 8.22

Animal, vegetable fats and oils, cleavage products 10.6

Plastics 11.97

Organic chemicals 18.15

Machinery, nuclear reactors, boilers 35.2

Pearls, precious stones, metals, coins 41.05

Electrical, electronic equipment 42.94

Mineral fuels, oils, distillation products 104.36

0 20 40 60 80 100 120

Chart 6.1.7, Source: Based on Annexure Table 7

Japan's top Import Commodities

2019-20 ($bn)

Miscellaneous chemical products 12.08

Pearls, precious stones, metals, coins 13.33

Organic chemicals 14.91

Iron and steel 22.8

Plastics 25.57

Optical, photo, technical, medical apparatus 37.44

Commodities not specified according to kind 41.06

Electrical, electronic equipment 102.55

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Manasi Tiwari Vehicles other than railway, tramway 122.54
0 20 40 60 80 100 120 140
 Chart 6.1.8, Source Based on Annexure Table 8

The charts show top imported commodities by both the nations. India’s top imported
commodities include mineral oils, electronic equipment, nuclear reactors, pearls,
precious stones, vegetable fats and oils & fertilizers.

Japan’s top imported products are vehicles, machinery, technical & medical apparatus,
chemical products.

(v) Top Companies in different Sectors

Sector wise count of India's Global Companies

Utilities 14

Technology 27

Real Estate 7

Materials 88

Industrials 73
Total
Health Care 29

Financials 37

Energy 9

Consumer staples 38
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Consumer discretionary products 83
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Communications 13
0 10 20 30 40 50 60 70 80 90 100
 Chart 6.1.9, Source Based on Annexure Table 3

Sector wise count of Japan's Global Companies

Utilities 5

Technology 29

Real Estate 5

Material 38

Industrial 55
Total
Health Care 17

Financial 16

Energy 3

Consumer Staple 26

Consumer Discretionary 39

Communication 11
0 10 20 30 40 50 60

Chart 6.1.10, Source Based on Annexure Table 4

These chart show the top companies of both nations who are major players in
international trade.

Author has classified these top companies into sectors to put light on which sectors are
giving maximum share into exports & imports respectively.

India has big players in sectors like consumer discretionary, materials & Industrials. We
have names like TATA Group, Larsen and Turbo, Mahindra & Mahindra, Jindal Group,
Raymond, Bajaj and many more.

Japan has big companies working in automobile, industrial, technology & materials
sector. Some of the big names are Honda, Nissan, Toyota, Suzuki, Daikin, Fuji, Hitachi,
Mitsubishi, Canon, Casio, and Panasonic.

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6.2 Statistical Analysis

(i) Mean

Mean India Japan

Exports ($ bn) 484.47 848.894
Imports ($ bn) 553.576 829.716
GDP Growth Rate 6.73% 0.90%
Population 1,338,481,294 127,462,723
Currency Value 67.54 112.248
FDI ($ bn) 44.234 26.044
Table 6.2.1, Source: Author’s calculations based on Annexure Table 1 & 2

The mean calculated on basis of data for last 5 years shows alarming differences in
volume and trend of trade of Japan & India. Average exports of India for last 5 years are
484.47 billion US dollars whereas it is 848.89 for Japan. These figures show that
difference between exports is nearly double. Imports also are larger for Japan then
India. This shows robust domestic demand and a growing economy of Japan. Japan
lacks many raw materials needed for industry and energy, such as oil, coal, iron ore,
copper, aluminum and wood. Japan must import most of these goods. In order to pay
for these imports, Japan must export a variety of manufactured goods to other
countries.

The average GDP growth rate for 5 years of India is 6.73% whereas for Japan it is
0.90%, reason being India is a developing nation and it is growing at fast rate. Foreign
Direct Investment figures show higher FDI payments to India. As the third-largest
economy in the world in PPP terms, India has attracted high foreign direct investment
(FDI).

The value of Currency for Indian rupee compared to US dollar for period of 5 years from
2015-19 has been 67.54= $1 whereas for Japanese Yen it is 112.24=1$.

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(ii) Median

Median India Japan

Exports 498.26 863.96
Imports 582.02 818.68
GDP Growth Rate 6.80% 0.52%
Population 1,338,676,785 127,502,725
Currency Value 67.79 110.34
FDI 44.01 25.29
Table 6.2.2, Source: Author’s calculations based on Annexure Table 1& 2

The median calculated and values of table 7.2.1 are nearly similar. This means the
mean and median of the data collected is same or very close to each other. When any
data gives same mean & median it means the data has symmetrical distribution. Such
data gives bell curve when plotted on graph.

(iii) Correlation

1. GDP & Trade Balance

Trade
balanc
e
Billions
INDIA  GDP of US $  
GDP 1  

Trade balance ( $ bn) 0.76576 1  

Table 6.2.3, Source: Author’s calculations based on Annexure Table 1

Trade
balanc
e
Billions
JAPAN  GDP of US $  
GDP 1  

Trade balance ( $ bn) 0.01351 1  

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 Table 6.2.4, Source: Author’s calculations based on Annexure Table 2

India-GDP to Trade balance ($ bn) Japan- GDP to Trade balance ($ bn)

Chart 6.2.1, Source Based on Annexure Table 1 Chart 6.2.2, Source Based on Annexure Table 2

The balance of trade is one of the key components of a country's gross domestic

product (GDP) formula. GDP increases when there is a trade surplus: that is, the total
value of goods and services that domestic producers sell abroad exceeds the total
value of foreign goods and services that domestic consumers buy. If domestic
consumers spend more on foreign products than domestic producers sell to foreign
consumers—a trade deficit—then GDP decreases.

The correlation between GDP & trade balance for India is positive and very strong. This
shows that trade is an important factor for growth of GDP of India. Both imports and
exports are rising which indicate growing domestic demand and production capacity of
the country.

The correlation of Japan’s GDP and trade is not strongly related. Japan lacks many raw
materials needed for industry and energy, such as oil, coal, iron ore, copper, aluminum
and wood. Japan must import most of these goods. In order to pay for these imports,
Japan must export a variety of manufactured goods to other countries. Major Japanese
exports include electronic equipment and cars. Trade with other countries (international
trade) is therefore very important to Japan. The goods that Japan has exported have
changed over time, from agricultural products to manufactured goods, textiles, steel,
and cars. Japan is no longer competitive in agriculture because it has little farmland.
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Today simple manufacturing is too expensive because of the high wages paid to
Japanese workers. Japan is also less competitive in energy intensive industries such as
petrochemicals and aluminum since the country has few domestic energy resources.

2. GDP & Population

Table 6.2.5, Source: Author’s calculations based on Annexure Table 1

Populatio
 INDIA GDP n
GDP 1  

Population 0.97496583 1

 JAPAN GDP Population

GDP 1  

Population -0.8024782 1
Table 6.2.6, Source: Author’s calculations based on Annexure Table 2

India- GDP to Population Japan- GDP to Population

Chart 6.2.3,
Chart Source
6.2.4, Based
Source on Annexure
Based Table
on Annexure 1 2
Table
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The relationship of India’s GDP to population is highly positive and very strong, whereas
Japan’s GDP and population are negatively correlated. However the negative
correlation is quite strong.

Population is very closely linked to the economic development of a society. The

quantity, quality, structure, distribution, and movement of a population can help or
hinder the rate of economic development. A developed country like Japan with low
population density and a low percentage of employable people needs an increase in
population in order to keep up with economic development. On the other hand, for a
developing country like India high population density and a high percentage of
employable people, any increase in population will be detrimental to its economy.

The population of japan is decreasing over the years whereas it is continuously

increasing for India. High population growth rate with high GDP also shows that per
capita GDP for India would not increase.

Negative correlation of Japan’s population and GDP indicate higher per capita
availability of goods and higher per capita income

However a sharp decline in population would lead to shortage of work force in the long
run.

3. Currency Value to FDI

FDI Currenc
Inflows, y 1 USD
 INDIA US $ to INR
FDI Inflows, US $ 1

Currency (1 USD to 0.2588

INR) 8 1
Table 6.2.7, Source: Author’s calculations based on Annexure Table 1

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 FDI Currenc
Inflows y 1 USD
 JAPAN , US $ to JPN

FDI Inflows, US $ 1

Currency (1 USD to
JPY) -0.9101 1

Table 6.2.8, Source: Author’s calculations based on Annexure Table 2

India- Currency value to FDI Japan- Currency Value to FDI

Inflows of FDI can also influence the appreciation

Chart or depreciation
6.2.5,
Chart Source of on
Based
6.2.6, Source theAnnexure
local
Based exchange
Table 1Table 2
on Annexure

rate through the increased demand for home currency.

It is generally accepted that a depreciation in the currency of one country increases

foreign direct investment flows into that country. ... We find that a depreciation in the
currency of the host country will unambiguously raises FDI flows from foreign firms only
if initially the firms are mainly exporting.

The existing literature has conflicting issues, with some studies supporting the
significant relationship whilst others reject it. The direction of the relationship between
FDI and exchange rate also varies with some findings showing a positive effect of
exchange rate on FDI and other findings suggesting a negative effect. The objective of
the FDI, cost reduction, and FDI as a tool for exchange rate risk are some of the
explanations behind the issue.

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In this study also India’s exchange rate and currency value are positively related to each
other. The strength of relationship is week but it is positive. This shows that both FDI
and exchange rate are moving in same direction but indecently of each other. This
indicates that over the course of 5 years from 2015-19 FDI has increased with increase
in exchange rate and there can be various other reasons for this rise in FDI like high-
tech industrial development, market size, and advancements in the digital and
technology ecosystem. “Make in India” campaign is also a big reason for sharp
increase in FDI flows to our country. FDI in India has followed a positive trend since the
launch of Make in India. FDI inflow from April 2014 to March 2019 ($286 Bn) is 46.94%
(approx.) of the overall FDI received in the country since April 2000 ($592.08 Bn).

If we see Japan’s chart we can observe that there is negative but strong relationship
between FDI & exchange rate. This indicates that that while the value of YEN is
continually dropping in international market yet Japan is getting good FDI payments.
However the FDI inflows to Japan do not follow a trend and they are moving up and
down in various years. While the government is keen on promoting imports and
investments in Japan, FDI inflows to the country remain low compared with other
developed nations around the globe. These are some of the reasons for low FDI to
Japan

 Excessive regulation that hinders economic growth as it increases the cost of

starting activities
 The difficulties the country faces in restoring public finances and deflation
 International competition restricted by a very insular local business culture:
Japanese prefer to do business (especially M & A transactions) with known
partner companies. In the same way, it is preferable to establish networks and
alliances with companies and national professional organizations.
 Cultural and linguistic challenges that can be complicated to overcome for an
SME
 Low productivity of Japanese SMEs.
 Still insufficient female labor participation, lack of child care
 Ageing population at risk of jeopardizing the social security system
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 4. FDI to Exports

Exports
Billions
INDIA  FDI Inflows, US $ of US $
FDI Inflows, US $ 1
Exports Billions of
US $ 0.134407742 1
Table 6.2.9, Source: Author’s calculations based on Annexure Table 1

Exports
Billions
  JAPAN FDI Inflows, US $ of US $

FDI Inflows, US $ 1
Exports Billions of
US $ 0.345050268 1
Table 6.2.10, Source: Author’s calculations based on Annexure Table 2

India- FDI to Exports Japan- FDI to Exports

It is

Chart 6.2.7, Source Based on Annexure Table 1 Chart 6.2.8, Source Based on Annexure Table 2

argued that FDI promotes exports of the

host countries by increasing the productivity and productive capacity of the host country
by increasing capital stock, transfer of technology, managerial skills and upgrading the
skills of the local workforce through training. Many studies have shown how FDI and
trade can be complementary to each other and it is widely held that inward FDI has a
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net positive impact on a country’s exports. This is due to the transfer of technology and
new products for export, facilitating access to international markets, increasing domestic
capital, and providing training to the local workforce. FDI can facilitate the transfer of
intangible assets such as skills and technological knowledge that trade cannot.

In addition to this, by facilitating access to large international market, FDI makes a

significant positive contribution to the host country’s exports. However this is true if FDI
comes for efficiency reason and not for domestic market. FDI also helps in improving
productivity of labor force by providing training to the local workforce and upgrading
technical and managerial skills. These activities benefit the country’s exports through
improvement in productivity of the labor force. This is especially true for export-oriented
investments in advanced technological capabilities. FDI has both direct and indirect
effect on host country’s exports. The direct effects refer to exports by foreign affiliates
themselves. The indirect effect includes spillover effect of MNCs on local firms’ export
activities.

For Indian economy which has tremendous potential, FDI has had a positive impact.
FDI inflow supplements domestic capital, as well as technology and skills of existing
companies. It also helps to establish new companies. All of these contribute to
economic growth of the Indian Economy. Export growth in India has been much faster
than GDP growth over the past few decades. Several factors appear to have
contributed to this phenomenon including foreign direct investment (FDI). If we
specifically study the data of 5 years from 2015-19 we can see there is a week positive
correlation between the two variables. The reason for this week correlation may be
underutilization of resources due to lack of infrastructure. The support of the political
structure has to be there towards the investing countries abroad. This can be worked
out when foreign investors put forward their persuasion for increasing FDI capital in
various sectors like banking, and insurance. So, there has to be a common ground
between the Parliament and the foreign countries investing in India, this will help in
faster implementation of policies, better coordination and efficient implementation which
will eventually lead to faster development of trade.

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FDI flows to Japan remain low compared to most other developed nations across the
world and relatively unstable. The reasons might be

 Excessive regulation that hinders economic growth as it increases the cost of

starting activities
 The difficulties the country faces in restoring public finances and deflation 
 International competition restricted by a very insular local business culture:
Japanese prefer to do business (especially M & A transactions) with known
partner companies. In the same way, it is preferable to establish networks and
alliances with companies and national professional organizations. 
 Cultural and linguistic challenges that can be complicated to overcome for an
SME 
 Low productivity of Japanese SMEs.
 Still insufficient female labour participation, lack of child care
 Ageing population at risk of jeopardizing the social security system

5. Population to Exports

Exports Populatio
INDIA  ($ bn) n
Exports($ bn) 1
Population 0.947297 1
Table 6.2.11, Source: Author’s calculations based on Annexure Table 1

Exports Populatio
  JAPAN ($ bn) n
Exports ($ bn) 1
Population -0.88492 1
Table 6.2.12, Source: Author’s calculations based on Annexure Table 2

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 India-Population to Exports Japan-Population to Exports

Several cross country studies have provided empirical

Chart
Chart support
6.2.10,
6.2.9, Source for
Source the
Based hypothesis
Based
on that
on Annexure
Annexure Table
Table 1 2

population size and population density are positively related to the performance of
manufactured exports in developing countries. Population size gives the economies of
scale which provide comparative advantage in manufactured goods.

The study proves true in case of India as we can see that population and export data
are very strongly positively related to each other. Huge young population of India
provides large manpower and active workforce which has increased the productivity and
quality of Indian goods making them competitive in International market.

Talking about Japan there is a strong negative correlation between 2 variables. Japan is
a highly developed nation and its economic growth is more dependent on technology
rather than manpower or human workforce. Hence despite of continuously dropping
population, exports of Japan are following increasing trends. Also with declining
population domestic consumption is also coming down which is yet another reason for
increasing exports.

6. Population & Imports

INDIA  Imports ($ bn) Population

Imports($ BN) 1

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 Population 0.890380478 1
Table 6.2.13, Source: Author’s calculations based on Annexure Table 1

JAPAN  Imports ($ bn) Population

Imports ($ bn) 1

Population -0.83352683 1
Table 6.2.14, Source: Author’s calculations based on Annexure Table 2

India- Population to Imports Japan- Population to Imports

Chart 6.2.11,
Chart Source
6.2.12, Based
Source on Annexure
Based Table
on Annexure 1 2
Table

It is a well-known fact that rapid increase in population leads to increase in imports if he

country is not able to fulfil the demands with domestic production. Higher imports may
also be due to increased production capacity and increased need of raw materials.

The data here reveals that there is very strong positive relationship between imports
and population of India. This proves that with increasing population the demand is also
rapidly increasing. Also with 65% young population India has a very high consumer
durables demand which is mainly fulfilled by imports. This young population is also
adding huge skilled workforce which is why there is yet more demand for raw material
supplies.

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If we look at Japan’s graph it clearly shows strong negative relation between imports
and population. Japan’s population is falling down but still its imports are growing. The
amount of land in Japan suitable for agriculture is insufficient to produce enough food
for Japan's large population. As a result, Japan imports most of its food from other
countries. Japan lacks many raw materials needed for industry and energy, such as oil,
coal, iron ore, copper, aluminum and wood. Japan must import most of these goods. In
order to pay for these imports, Japan must export a variety of manufactured goods to
other countries. Trade with other countries (international trade) is therefore very
important to Japan.

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 Chapter 8
Recommendations & Conclusion

INDIA & JAPAN are two important countries in East Asian market. One is world’s 3 rd
largest and another is world’s 5 th largest economy in the world. Close examination of
macro variables of both nations has shown some alarming differences and trends.

 Both the exports and imports of Japan are almost double than India’s average 5
year figures.

 GDP growth rate and population are sharply declining for Japan whereas India’s
GDP is growing at an average rate of 6.5%. It is assumed that India will become
3rd largest economy in the world by year 2025

 The relation between India’s GDP and population is strong and positive whereas
for Japan it is negative correlation. This shows that with increasing GDP
population of India is also increasing and this leads to less growth in per capita
GDP for India. For Japan there is sharp decline in population with increasing
GDP, this indicates to higher per capita GDP, better living standards, higher per
person availability and consumption of goods by people of Japan.

 Population is very closely linked to the economic development of a society. The

quantity, quality, structure, distribution, and movement of a population can help
or hinder the rate of economic development. A developed country like Japan with
low population density and a low percentage of employable people needs an
increase in population in order to keep up with economic development. On the
other hand, for a developing country like India high population density and a high
percentage of employable people, any increase in population will be detrimental
to its economy.
 Inflows of FDI can also influence the appreciation or depreciation of the local
exchange rate through the increased demand for home currency. India’s
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 exchange rate and currency value are positively related to each other. The
strength of relationship is week but it is positive. This shows that both FDI and
exchange rate are moving in same direction but indecently of each other.
However the FDI inflows to Japan do not follow a trend and they are moving up
and down in various years. While the government is keen on promoting imports
and investments in Japan, FDI inflows to the country remain low compared with
other developed nations around the globe.

 It is argued that FDI promotes exports of the host countries by increasing the
productivity and productive capacity of the host country by increasing capital
stock, transfer of technology, managerial skills and upgrading the skills of the
local workforce through training. For Indian economy which has tremendous
potential, FDI has had a positive impact. FDI inflow supplements domestic
capital, as well as technology and skills of existing companies. It also helps to
establish new companies. All of these contribute to economic growth of the
Indian Economy. For Japan’s economy also FDI and Exports have shown a
positive correlation. However Japan’s FDI flows are less as compared to other
developed nations but still they are having a positive impact on exports.

 Several cross country studies have provided empirical support for the hypothesis
that population size and population density are positively related to the
performance of manufactured exports in developing countries. The study proves
true in case of India as we can see that population and export data are very
strongly positively related to each other. Japan is a highly developed nation and
its economic growth is more dependent on technology rather than manpower or
human workforce. Hence despite of continuously dropping population, exports of
Japan are following increasing trends.

 It is a well-known fact that rapid increase in population leads to increase in

imports if the country is not able to fulfil the demands with domestic production.
The data here reveals that there is very strong positive relationship between
imports and population of India. If we look at Japan’s graph it clearly shows
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 strong negative relation between imports and population. Japan’s population is
falling down but still its imports are growing. The amount of land in Japan
suitable for agriculture is insufficient to produce enough food for Japan's large
population. As a result, Japan imports most of its food from other countries.

The overall comparison shows that Japan’s development is independent of variables

like population, FDI, etc. whereas India’s GDP growth is moving alongside the growth of
other variables like FDI, Exchange rate changes, Trade balance, etc. India is moving
very fast to become 3rd largest economy in the world.

References:

Arora, R. (2017). "India-Japan Brief". retrieved from Centre for Policy Research, on 20
August 2021
Foundation, O. R. (2016). "Challenges and Prospects of Japan’s Diplomacy – in the
context of India-Japan Relationship". retrieved fromhttps://orf.org/ on 20 August
2021
Mathew, J. &. Bera, S. (2012). India-Japan and Investment Relations and Their Future
Prospects. New Delhi: Fore School of Management, etrieved from Researchgate on 22
August 2021

Helpman, E. (1984). “Increasing Returns, Imperfect Markets and Trade Theory.” .

Amsterdam: North Holland: Handbook of International Economics, retrieved from
Chapter 07 inHandbook of International Economics, 1984, vol. 1 on 22
August 2021

Jayachandra, Reddy. (2014). India-Japan Relations: Economic, Strategic and Security

Co-operation. Hyderabad: D&Dee Publications, retrieved from Researchgate on 22
August 2021

World Bank Database accessible on https://data.worldbank.org/country

Economic data of Japan and India from Nationmaster

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 51
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 India
Trade FDI
Export Import balanc GDP Inflows Currenc
Yea s($ s($ e ($ Growt , ($ y 1 USD
r bn) bn) Population bn) GDP h bn) to INR
201 1,366,417,75 2,870.5 70.39
529.02 601.58 72.57 4.04% 50.61
9 4 0
201 1,352,642,28 2,701.1 70.09
538.64 639.01 100.38 6.53% 42.12
8 0 1
201 1,338,676,78 2,651.4 67.79
498.26 582.02 83.76 6.80% 39.97
7 5 7
201 1,324,517,24 2,294.8 66.46
439.64 480.17 40.53 8.26% 44.46
6 9 0
201 1,310,152,40 2,103.5 62.97
416.79 465.1 48.31 8.00% 44.01
5 3 9
Annexure:

Annexure table 1, Source- TradingEconomics

JAPAN
Trade
Export Import balanc GDP FDI Currenc
Yea s ($ s ($ e ($ Grow Inflows y 1 USD
r bn) bn) Population bn) GDP th ($ bn) to JPN
201 5,064.8 0.27 109.01
888.89 880.23 126,860,301 8.66 39.93
9 7 %
201 4,954.8 0.32 110.34
917.87 906.31 127,202,192 11.56 25.29
8 1 %
201 2.17 112.15
863.96 818.68 127,502,725 45.27 4866.86 18.8
7 %
201 4,922.5 0.52 108.69
800.72 751.94 127,763,265 48.78 40.95
6 4 %
201 4,389.4 1.22 121.05
773.03 791.42 127,985,133 18.39 5.25
5 8 %
Annexure table 2, Source- TradingEconomics

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 INDIA
Sector Count of Global Clients Name
Communications 13
Consumer discretionary products 83
Consumer staples 38
Energy 9
Financials 37
Health Care 29
Industrials 73
Materials 88
Real Estate 7
Technology 27
Utilities 14
Annexure table 3, Source- Author’s Calculations based on data from India Fortune 500

JAPAN
Sector Count of Global Clients Name
Communication 11
Consumer Discretionary 39
Consumer Staple 26
Energy 3
Financial 16
Health Care 17
Industrial 55
Material 38
Real Estate 5
Technology 29
Utilities 5
Annexure table 4, Source- Author’s Calculations based on data from Japan Fortune 500

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 INDIA (2019-20)
Top Exports By Value ($ Bn) Top Exports By Category Value
Country ($
bn)
United States 49.32 Mineral fuels, oils, distillation products 27.63
China 19.01 Pearls, precious stones, metals, coins 24.46
United Arab Emirates 17.95 Pharmaceutical products 18.43
Hong Kong 9.54 Machinery, nuclear reactors, boilers 17.97
Singapore 8.3 Organic chemicals 17.43
Bangladesh 7.91 Electrical, electronic equipment 13.46
United Kingdom 7.77 Vehicles other than railway, tramway 13
Germany 7.66 Iron and steel 10.63
Netherlands 6.26 Cereals 8.67
Malaysia 6.19 Plastics 6.6
Annexure table 5, Source- TradingEconomics

JAPAN (2019-20)
Top Exports By Value ($bn) Top Exports By Category Value
Country ($ bn)
China 141.4 Vehicles other than railway, 122.54
tramway
United States 118.7 Machinery, nuclear reactors, boilers 121.73
South Korea 44.69 Electrical, electronic equipment 102.55
Other Asia 44.43 Commodities not specified 41.06
according to kind
Hong Kong 32.01 Optical, photo, technical, medical 37.44
apparatus
Thailand 25.53 Plastics 25.57
Singapore 17.7 Iron and steel 22.8
Germany 17.58 Organic chemicals 14.91
Vietnam 17.12 Pearls, precious stones, metals, 13.33
coins
Malaysia 12.6 Miscellaneous chemical products 12.08
Annexure table 6, Source- TradingEconomics

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 INDIA (2019-20)
Top Imports By Value ($ Top Imports By Category Value
Country bn) ($bn)
China 58.8 Mineral fuels, oils, distillation products 104.36
United States 26.62 Electrical, electronic equipment 42.94
United Arab 23.9 Pearls, precious stones, metals, coins 41.05
Emirates
Saudi Arabia 17.72 Machinery, nuclear reactors, boilers 35.2
Iraq 16.17 Organic chemicals 18.15
Hong Kong 14.58 Plastics 11.97
Singapore 12.31 Animal, vegetable fats and oils, cleavage 10.6
products
South Korea 12.17 Optical, photo, technical, medical 8.22
apparatus
Indonesia 12.02 Iron and steel 7.55
Switzerland 11.31 Fertilizers 7.18
Annexure table 7, Source- TradingEconomics

JAPAN (2019-20)
Top Imports By Value Top Imports By Category Value
Country
China 163.85 Vehicles other than railway, tramway 122.5
4
United States 71.77 Machinery, nuclear reactors, boilers 121.7
3
Australia 35.79 Electrical, electronic equipment 102.5
5
Other Asia 26.78 Commodities not specified according to 41.06
kind
South Korea 26.6 Optical, photo, technical, medical 37.44
apparatus
Thailand 23.78 Plastics 25.57
Vietnam 22.05 Iron and steel 22.8
Germany 21.22 Organic chemicals 14.91
Saudi Arabia 18.45 Pearls, precious stones, metals, coins 13.33
United Arab 16.4 Miscellaneous chemical products 12.08
Emirates
Annexure table 8, Source- TradingEconomics

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Ramesh C. Paudel
(2014)concluded that the
improving export performance is
main
objectives of developing
countries by way of
liberalizations reforms.Michele
Ruta(2012),found that the various
factorsadded to expansion of
trade, industrialization,
taxes, cost of production, selling
and distribution cost for
international trade growth.Anjani

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Kumar (2010),results showed that
the economic liberalization and
policy reforms are key
for universal market
opportunities. Purva Yadav
(2012), suggested thatthe
economic
reforms and political environments
during past decades contributed a
fair amount of global
market place.Rajesh K Pillanina
(2008),found that the India
international trade highly
improved during last decade.
Michael F.Martin et

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al(2014),found that theIndia
business
situations has a positive
Shubhada sabade(2014),found that
the various factors affecting
balance of payment failure
and foreign exchange reserve
position of India.Suresh D.
Tendulkar (2000), results showed
that the global trading option
help as an influential factor for
high rate of economic
growth.Pravakar Shaoo et al
(2009) studied that India’s wide
ranges of economic policies

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reforms and found that steady
economic growth in the last
decades.Nagesh Kumer(2001),
results showed that the foreign
trade to GDP rising positively
fourteen percent in 1980 and
around twenty percent during
1990.Nalini Rajan Kumaret al
(2005)suggested thatthe
increasing foreign trade demand
by way of reducing cost of
production goods and
services.(Manoj Kumar Sinha
2016) concluded that the economic
reforms haveinfluenced

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Applied Econometrics and
International Development
Vol. 20-2 (202
exceptional growth of Indian
economy.Aurjun kafle
(2017)found that the foreign
trade
created employment and increases
foreign exchange earnings. Murat
Seker (2011), results
indicated that the various Asian
nations had sustained high e

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