Far short of the potential

Far short of the potential

Context

Indo-Japan ties:The India-Japan economic relationship remains underwhelming in relation to strategic ties

The bright side

• Japan currently ranks as the third largest investor in India
• Japanese investment in India totalled $4.7 billion in 2016-17, up from $2.6 billion the previous year
• Japanese investment in India’s first bullet train
• Regular high-profile bilateral visits between both sides
• Have a common strategic objective in countering Chinese hegemony in Asia

Challenges on the economic front

• According to Japan External Trade Organization (JETRO) data, China received about five times more Japanese investment between 1996-2015 ($116 billion) than India did ($24 billion).
• Japan-India two-way trade — $13.48 billion in 2016-17 — is also a fraction of the $350 billion China-Japan trade relationship or even India-China trade ($84.44 billion in 2017

Reasons:  It takes Japanese companies in India longer than their Korean or Chinese counterparts to learn how best to localise their products for the Indian market

Example:Air conditioners

• The Japanese tend to think that the most important element is the quality of the air conditioner so that it is able to last without the need for repairs.
• But in India it is cheap to have an air conditioner repaired and technicians are abundant
• The consumer is therefore more focussed on cost than durability

Solution: Switching from importing expensive parts from Japan to sourcing them locally as done by Japanese manufacturer, Daikin

The greatest challenge: Cultural

• An outdated and negative image of India.
• The larger corporations may realise India’s potential, but small and medium enterprises are the worst culprits of this attitude.

Punctuality

In Japan, being on time is akin to religion, whereas in India, time is fungible (replaceable by another identical item)

Inflexible Japanese corporations

Ultimately, Japanese corporations are strongly risk averse which makes it difficult for them to cope in the freewheeling, jugaad-proud environment of India, where flexibility and impromptu decision making are necessary skills in the business arsenal

Ray of optimism

• Roping in more Indian companies to develop and design Japanese products for the South Asian market

It could be one major way forward in deepening the bilateral engagement

Example: Collaboration between Japan’s Panasonic and India’s Tata Elxsi to develop smart solutions and products for Panasonic customers in India and the neighbouring region.

• India as a Manufacturing base for markets in Africa

Existing examples include Hitachi Construction Machinery’s joint venture with Tata whose Kharagpur plant is a hub for exports to developing countries, as well as auto major Nissan, which exports the India-made Datsun ‘GO+’ to South Africa.