Sanae Takaichi’s visit: What India and Japan can do to boost their business ties 

Why in the News?

Japanese Prime Minister Sanae Takaichi’s visit has renewed attention on India-Japan business ties. The visit exposes a gap between the two countries’ strong strategic partnership and a narrow, underperforming business relationship. Only 1,500 Japanese companies operate in India against 6,000 in Thailand; 1% of them generate over half the business.

Why does India-Japan’s business relationship underperform despite a flourishing strategic partnership?

1. Company presence gap: India hosts about 1,500 Japanese companies. Thailand hosts 6,000.
2. Business concentration: Just 1% of Japan’s firms in India generate over half of all India-Japan business.
3. Sectoral narrowness: Most of this business comes from one sector, automobiles. Suzuki Motor Corporation’s early entry in the 1980s built this base.
4. Partnership-business mismatch: The bilateral strategic partnership is strong. The business relationship remains narrow and concentrated.

What does the contrast between Japanese and Western MNC practices in India reveal about the real barrier to attracting Indian talent?

1. Leadership exclusion: Indians almost never head the India operations of Japanese multinationals. Global leadership roles remain closed to them.
2. Western contrast: Western multinationals have recruited top Indian talent for decades. They offer the same career opportunities as any other employee.
3. Merit-based promotion: Western firms promote Indian staff using globally-benchmarked merit. They deploy this talent worldwide.
4. Compliance over capability: Japanese firms base local hiring decisions on a compliant attitude. They prioritise this over the capability needed to win in a competitive market.
5. Talent attraction failure: This practice causes Japanese companies to rarely attract quality Indian talent. Reform within Japanese corporations is the stated solution.

Why is Japanese corporate engagement with India changing now?

1. Rising commitment volume: More Japanese companies than ever are now working to do business in India.
2. Stability driver: Indian economic growth remains steady amid global challenges. India offers relative stability in an uncertain world.
3. Staff quality shift: A small number of top Japanese corporations now send their most capable staff to explore Indian opportunities. This marks a shift from earlier practice.
4. Sectoral diversification: New investment has moved into real estate, technology startups and steelmaking, beyond the traditional automobile base.
5. Political momentum: Prime Minister Sanae Takaichi has brought support to Indo-Japanese clean energy partnerships. Results from these efforts will show in the coming years.

What must Japanese firms do differently to succeed in India?

1. Localise offerings: Success in India requires products and services suited to Indian conditions, priced competitively and produced at scale. Maruti Suzuki and Reliance’s Jio telecom service illustrate this approach.
2. Avoid rigid transplantation: Firms that insist on traditional Japanese methods for product design or customer response speed lose out to more nimble competitors, including Indian ones.
3. Build Indo-Japanese teams: Perseverance and resilience remain necessary but insufficient. Firms need adaptability and strong joint Indo-Japanese teams.
4. Move beyond the China playbook: Many Japanese corporations expect India to ‘package’ inputs the way China does, ready industrial plots, contractors, trained workers, vendor bases and seamless logistics. India does not yet offer this readiness.
5. Reform local hiring: Local hiring decisions should target the capability needed to win in a competitive market, not a compliant attitude.
6. Empower local management: Success requires challenging entrenched cost structures, fixing inefficient business processes, and pushing Tokyo-based mid-level managers outside their comfort zone.

What must Indian companies and institutions do to deepen ties with Japan?

1. Deepen investor support: Governments and industry bodies already market India to Japan. Deeper, more active support for first-time Japanese investors in select sectors is needed.
2. Build support structures: Partnerships using all available capabilities, not government agencies alone, should create structures that deliver results on the ground.
3. Establish Japan presence: Corporate India rarely maintains an office or even a part-time local advisor in Tokyo, even among its biggest firms.
4. Close the understanding gap: This absence creates a lack of understanding of the Japanese mindset and of how business can be developed in Japan.
5. Move beyond old models: Indian companies still seek old-fashioned collaborations or technology transfers in exchange for market access through bureaucratic navigation.
6. Reframe India’s value: This transactional approach undersells India’s image, achievements and potential.

What ultimately earns Japanese trust and investment beyond profit calculations?

1. Behaviour over profit: Japanese firms weigh the people they will work with more heavily than the prospect of high profit or growth.
2. Trust markers: Listening, developing shared understanding, honouring commitments, and letting achievements speak are the behaviours Japanese firms respect.
3. Reciprocal opportunity: Indian corporations can bring their products and services to Japan, or jointly to third countries.
4. R&D partnership potential: Partnerships with Japanese firms can strengthen Indian firms’ research and development and other capabilities.
5. R&D spend gap: Japanese firms spend over 4% of revenue on research and development on average. Indian firms spend under 1%.
6. Structural implication: This gap explains why Japan remains a top global economy despite a smaller population and fewer natural resources than India.

Conclusion

India-Japan business ties remain shallow relative to a strong strategic partnership. Japanese corporations rarely give Indian staff global leadership roles. Indian firms still seek market access through old-style technology transfers rather than sustained engagement. Closing this gap needs talent reform inside Japanese corporations and trust-based strategic engagement from Indian firms in Japan.

PYQ Relevance

[UPSC 2019] The time has come for India and Japan to build a strong contemporary relationship, one involving global and strategic partnership that will have a great significance for Asia and the world as a whole.’ Comment.

Linkage: The PYQ tests India’s bilateral relations with Japan, focusing on the strategic, economic and Indo-Pacific dimensions of the partnership. The article argues that the next phase of the India-Japan partnership should be driven by stronger business, investment, technology and private-sector collaboration, complementing the existing strategic relationship.