What is the issue?
- Despite strong strategic government to government ties, India-Japan economic relationship remains far below the expected levels.
- While the are ample avenues to expand cooperation, cultural perceptions and are related incompatibilities have hindered progress.
What are the condition that are ideal for enhancing Indo - Japan ties?
- India is a fast-growing economy and has a big young population, while Japan is economically rich and has an aging demography and declining population.
- India needs technical expertise and investments to develop its infrastructure, while Japan has capital to spare and know-how to share.
- They have a common strategic objective in countering Chinese hegemony in Asia, a goal that can be best met in collaboration.
- Also, both countries share cultural and religious ties, and are also sufficiently close for trade but far enough to avoid broder and other neighbourhood issues.
- Technically, these factors provide for the establishment of strong and robust economic ties, but this hasn’t happened.
What is the current status of economic ties?
- PM Narendra Modi and his Japanese counterpart Shinzo Abe have worked hard to upgrade ties, through high-profile visits and sealing multiple deals.
- Notably, Japanese has emereged as a prolific investor in India’s infrastructure sector - Japnses investments totalled $4.7 billion in 2016-17.
- Japan currently ranks as the third largest investor in India and there are 1,369 Japanese companies and over 4,800 Japanese corporate offices active in India.
- Yet, the India-Japan economic relationship remains underwhelming both in relation to its potential, and to the ties that each nation shares with China.
- Notably, China received about five times more Japanese investment between 1996-2015 ($116 billion) than India ($24 billion).
- Japan-India two-way trade was merely $13.48 billion in 2016-17, which is dwarfed in comparison to China-Japan trade ($350 billion) 0r even India-China trade ($84.44 billion).
- Additionally, the share of India-Japan trade in Japan’s total trade basket is barely 1% and it is a little over 2% of India’s trade with the rest of the world.
- Beyond the common issues like - poor infrastrure, and complex tax structures, there are other issues that plague Indo-japan business ventures.
What are the main reasons for this?
- The major problem is that it takes Japanese companies longer time to learn to localise their products for the Indian market.
- Pricing - Japanese tend to think that the most important element is the quality, so that there is minimal requirement for repairs and replacements.
- They fails to recognize that reapirs aren’t really a major concern for the Indian consumer as it is cheap due to abundant availability of technicians.
- Hence, cost at purchase is the critical factor than durability, which calls for companies to reduce manufacturing costs even if quality is lowered.
- Cultural bias - Japanese also tend to have a strong cultural bias against India and Japnsese employees perceive an Indian posting as a de-promotion.
- While larger corporations have realised India’s potential, small and medium enterprises continue to carry a biased attitude, which impedes business.
- Also, punctuality is akin to religion in Japan, whereas in India, time is more lax and this is has immense implications for business.
- Risk - Japanese corporations are strongly risk averse which makes it difficult for them to cope in the freewheeling, jugglering environment of India.
- Flexibility and impromptu decision making are necessary skills to operate in India and Japanese businesses need to co-opt these to sustain in India.
What are the hopes ahead?
- Recently, collaboration between Japan’s Panasonic and India’s Tata Elxsi to develop smart solutions and products for the south Asian market was sealed.
- This is only possible because India has the capacity and skills for engineering designs that can match Japanese requirements.
- Hence, there are avenues to rope in more Indian companies to develop and design Japanese products, which could help in deepening business ties.
- But despite all these, “government to government ties” is far ahead of the “business to business ties” and closing this distance remains a tough ask.
Source: The Hindu
