Japan is the fourth largest investor in the Indian economy. During April 2000 - June 2020, India attracted cumulative FDI inflows of USD 33.9 billion from Japan. While Japan has been investing in India at the country level, the execution of various projects in India has been a hurdle. For instance, the Delhi–Mumbai Industrial Corridor Project (DMIC), an MOU for the project was signed in 2006 between Indian and Japanese government – is still a non-starter.
To understand what Japanese businesses look at while investing in India, The Free Press Journal-SIES in association with Invest India organised the ‘Financing India’ webinar series, this time with a focus on Japan. The panellists for the session were (in alphabetical order) Yadvinder Singh Guleria, Director – Sales & Marketing, HMSI; Harjot Singh Narang, President, Dentsu One; and Sanjay Panda, Managing Director, IJ Kakehashi Services. The session was moderated by R N Bhaskar, Consulting Editor, Free Press Journal and the opening remark was delivered by Vaneeta Raney, head of BMM, SIES.
Given below are edited excerpts compiled by Jescilia K:
Japanese investment in India
Yadvinder Singh Guleria, Director – Sales & Marketing, HMSI: I represent the 100 per cent subsidiary of a Japanese company and world’s number one two-wheeler manufacturer. HMSI (Honda Motorcycle and Scooter India) is already the largest scooter manufacturer in India and wants to be the largest two-wheeler company too.
India is an important market from the standpoint of Honda Motors (Japan). All activities are keenly monitored by HM Japan. The parent company regularly interacts with HSMI management. HM Japan has allocated a lot of resources in the Indian market, and its stake in India is very high.
Today, HMSI contributes the highest volume as one single company amongst all other Honda companies across the globe. Thus, India is important for Honda Motors and Japan.
Since 1999 (when Honda first entered India), Rs 11,000 crore of investment has gone into India. We started mass production in May 2001. We started selling from June 2001. We sold close to 55,000 units annually in FY 2002. Today, we are selling around 5 lakh units per month. We have come a long way since then. This year we will enter our 20th year of operations in the country. This country provides a large market and a big potential for the two-wheeler business.
Japan is very focused on its operations in India.
Harjot Narang, President, Dentsu One: Honda has become an Indian brand today. This shows that Japanese companies come into India to create a relationship which works well. From that point of view, I would cheer for any investment that comes to India from Japan.
Along with investments, Japan brings in culture, thinking and work ethics to India, which will be beneficial for India.
India-Japan partnership is not at its full potential, there is still a lot of space to grow. There is a need to strive towards achieving the potential.
Sanjay Panda, Managing Director, IJ Kakehashi Services: In 2006, India and Japan relation were named global and strategic partnership. In 2011, it moved towards comprehensive economic agreement and now in 2014, it was named a special strategic and global partnership. This is how the relationship has improved over the last 20 years.
Know the difference
Harjot Narang: There is so much commonality between both democracies along with differences. While our work ethics are different, our cultures are high-context; have a huge emphasis on beliefs and traditions; respect for individuals among others.
The locations of both countries have their own significance. There is almost a negative return in investments in Japan and India is starved for capital. Then there is an ageing population and India has a young workforce. This shows how both countries can complement each other.
Sanjay Panda: It is important to understand that both cultures are different and there is some level of alignment that is needed for the larger good.
At times, the relationship is not working out or business transactions are not smooth. Thus, there is a need to understand that there is a difference.
But political will is not enough. There is a huge willingness to welcome the prime minister of Japan to India, but later this enthusiasm fades.
In the case of DMIC, there is a clear lack of execution strategy. There is a need to put in place such a strategy, especially when you are working with a country that is working with such high precision and planning. As of now, land acquisition is done for the DFC (dedicated freight corridor) project, and the project is moving. But the land acquisition which was supposed to take place within 4 years has taken 12 years to complete.
Harjot Narang: Japanese investors and businesses come to the Indian market with a compass more than a calendar and calculator. If the direction is right, we will reach our destination — it is not about calculating each penny, even though they are very meticulous about it.
Japanese are slow in decision making. This is because they go deep and evaluate a scenario before a decision, rather than changing decisions again and again.
The hallmark of Japanese business approach is a long-term strategy. While uncertainty at policy level does hurt businesses, it is usually not the factor that may prompt an exit strategy. In some sector or industry, these companies might come out as a winner in a consolidation game.
For instance, Docomo exited the crowded Indian telecom industry but has a presence in the data space. This is because the company is looking at a long-term presence in India and has long-term planning in place.
Sanjay Panda: There is a need-based collaboration between both countries rather than capability-based. Japan will have to bring in technology that India needs and not merely import existing Japanese technology (that will not work for the Indian market).
Indians are a lot more adaptable as we live in a multicultural society, whereas the Japanese will have to be a little more adaptable when they come to India.
Skill development should continue to be on India’s agenda.
Japanese are slow at decision making but high in commitment. But in the case of India, we are quick at decision making but lag in commitment. While working with Japanese the ‘Chalta hai’ attitude does not work with them. They do not really appreciate that.
Japan looks at long-term orientation, India is weak while looking at long-term thinking.
If India wants to grow with Japan, then we need to keep politics and growth separate.
The awareness to align with Japan, commitment-level of leadership needs to be shown at the government level as well.
Yadvinder Singh Guleria: Japan has excess capital and knowhow. But it needs to transfer them to other nations so that it can multiply. So, for Japan, India can become a promising destination which has a large potential to grow and become a major economy in the world. But it will need to reduce friction for investors and investments that come to India.
Is India China-plus-one jurisdiction
Sanjay Panda: One senior Japanese person told me once that the Indian government should not feel that India is the natural destination when it is looking for China plus one. India will have to put in efforts (to meet the grade) or else people will move to other options — Thailand, Vietnam or Indonesia.
Yadvinder Singh Guleria: Today, Honda Motors management in Japan understands what Dhanteras is. They understand why in one day one million units of two-wheelers are sold in the country.
Sanjay Panda: The people-to-people exchange is low — even if you look at the abysmal level of tourists or students.
In 2016, Japan had around 1.86 lakh of Chinese students, as against around 1,050 Indian students. The cost of going to Japanese University would be as low as Rs 3 lakh per annum, compared to a US university which is Rs 20 lakh annually.
People-to-people interaction is needed to attract investments. Today, there are six sister-city-level interactions with various Indian states.
Student, academia, government and industry level exchanges are very important.
Honda Motorcycle and Scooter India case study
Yadvinder Singh Guleria: HSMI market share in India is 25 per cent whereas in other ASEAN countries — Indonesia and Thailand— the market share of Honda is somewhere between 70-80 per cent. It is the strength of Honda Motor.
In India, we have the potential to grow further. We are already the leader in the scooter segment with more than 50 per cent of market share. We have a long way to go, when it comes to motorcycles — where our market share is 13 per cent or so.
Japanese are big players globally as well when it comes to the auto sector. For HMSI, not just Japan’s love for India but India’s love for Japan has worked.