Ask the Ambassador:INDIA
This new serial interview features ambassadors of emerging economies including Asia and Africa posted to Japan. Main objectives of the serial interview are to learn about the advantages of investing in the respective countries and seek Ambassadors’ advice for the effective entry strategy of Japanese companies. The first instalment is on India, which has a market size as big as China, and with a population of 1.3 billion. India’s presence is rapidly growing in highly-advanced technological fields including IT. I asked Ambassador Sanjay Kumar Verma to share his views on the potential of collaboration between Japan and Indian start-ups and sought his advice on the effective entry strategy for Japanese companies hoping to enter India. Text by Hideyuki Nishio, Mainichi Asia Business Institute
Business Environment Has Achieved Great Improvement—-Let Us Create Win-Win Relationship with Long-Term Perspectives
――The Modi Administration has entered its second term after achieving a landslide victory in last year’s general election. The administration’s signature policy Make-in-India enjoys a good reputation among Japanese companies. Please share your views on Make-in-India.
Ambassador: The objective of “Make-in-India” is not only to invite foreign investment, but also to improve India’s comprehensive eco-system. Until about a decade ago, India’s manufacturing policy was basically “import-substitution,” which means to replace foreign imports with domestic production. It supported India’s economic growth, but the Make-in-India Policy aimed to achieve further rapid growth with specific goals; to replace imports with manufacturing, to expand exports and the domestic market, and utilize advanced technologies that had not existed in India before.
For five years after the enactment of Make-in-India, FDI has been increasing and trade deficit has been decreasing. Technological innovation has grown and an increasing number of startups have been established. As a result, the employment situation has improved.
Thanks to these comprehensive efforts, India’s ranking in the World Bank’s “Ease of Doing Business” went up to 63rd from 142nd in five years.
SME’s Should Also Enter India
Understanding of Muti-Layered Market is Important
――As India’s business environment is improving, Japanese companies are more interested in entering the Indian market than before. Are there any particular fields where the entries of Japanese companies are welcomed?
There are a few areas in which FDI is prohibited, such as gambling and firearms. Except for these five sectors, we welcome Japanese investment in any fields.
Japanese companies have traditionally invested in sectors such as automobile, chemicals, electricity, and design. Nowadays, new fields are emerging, especially the IT sector. Japanese companies can participate in India’s start-up ecosystem and add values to their own business. They can earn profits and also deepen their understanding of the Indian market.
I would like to create a platform for both countries to achieve win-win relationship. Japanese companies can earn sufficient profits to continue their business in India, and at the same time, contribute to India’s skill development, as well as infrastructure and technological development. Major companies are of course welcome, but I would especially like to welcome SME’s.
――Some Japanese SME’s are still hesitant about going to India, as they expect difficulty. Do you have any advice for them?
As for exports, the quality of the products must be high. At the same time, it is necessary to identify what types of products are suitable for exporting to India, and what is the appropriate price range. I would like to invite Japanese SMEs to consult with the Embassy of India, the Consulate General in Osaka and Kobe, JETRO, or the Japanese Embassy in Delhi, before making their business plan.
In order to enter India, you must understand that India is a multi-layered market. India is an enormous market with a population of 1.3 billion. However, if the break-even point is 100,000 units, you don’t have to target 1.3 billion, but have only to look at 100,000. You can also establish a joint venture if you want to reduce risks. Indian companies have a good understanding of the Indian market. It is also possible to establish a wholly-owned subsidiary.
Outsourcing may be a new field for Japan, but India has thirty years’ experience when it comes to outsourcing. If Japanese companies wish to add new values to their own business, they can consider outsourcing to India.
In order to promote the entry of foreign SMEs, the Indian government has established “Invest India,” which is a one-stop investment promotion body. Within Invest India, there is an office dedicated to Japan, where Japanese-speaking staff assist JP businesses. We can provide hand-holding to Japanese SMEs, from conceptualization to actual business operations.
Focus on Indian Startups
――How is the situation of collaboration between Indian startups and Japanese businesses?
In Japan, there is growing interest in Indian startups. One VC has invested in twenty-seven Indian startups. Some Japanese startups also have established bases in India.
As a part of the Startup India Policy, a portal called “Startup Hub” has been established. You can see what kind of startups are in India by looking at this website, wherever you live in the world.
In September, last year, twenty-six selected Indian startups came to Japan to participate in a business-matching event co-hosted by the Embassy of India and JETRO. More than 120 venture capitalists, Angels and institutes from Japan also participated in the event. Within four months, sixteen out of the twenty-six Indian startups signed partnership with Japanese businesses. Immediately after the event, we started to receive many inquiries from Japanese companies about when the next round would be held. The second round will be held on March 17-18.
――What types of Indian startups are Japanese companies most interested in?
The twenty-six Indian startups who have come last time belong to various sectors. For instance, one company developed unique technology in the field of geriatric medicine. In India, ageing is not drawing so much attention at the moment, but in Japan, it is a serious issue.
――The Japanese IT sector is suffering from the shortage of engineers. What should they do to invite talented Indian IT human resources?
India and Japan have established a framework for sending and receiving human resources. There is no systematic obstacle.
I would like that Japanese companies who will receive Indian human resources to look at them not merely as labour force, but as somebody who can add values to their operations. Those skilled Indian engineers who can come to Japan are sought after by global companies of the world. The employment conditions must be at par with international standards. They are global experts, their career paths and promotions must meet international standards.
I would like companies who would like to hire Indians to have international perspectives. Language (English) should not become a barrier. Another important thing is social infrastructure for their families, such as schools for their children.