In the 1990s, Indian IT pioneers had to sell India before selling their services. In the past, the first slide was often a world map with flight routes marked for the United States and India. The pioneers sold well. Within three decades, we have surpassed $300 billion in IT services exports, and the trillion-dollar figure is within reach.
In the 1990s, Indian IT pioneers had to sell India before selling their services. In the past, the first slide was often a world map with flight routes marked for the United States and India. The pioneers sold well. Within three decades, we have surpassed $300 billion in IT services exports, and the trillion-dollar figure is within reach.
In the last three years I have worked with several Japanese clients who are setting up business in India. This engagement accelerated after the management consulting firm I co-founded became part of a Tokyo-listed (and Singapore-based) advisory and investment firm. In the past three months, I’ve met dozens of Japanese companies to understand their plans for India. What I have learned can be summed up in three statements:
In the last three years I have worked with several Japanese clients who are setting up business in India. This engagement accelerated after the management consulting firm I co-founded became part of a Tokyo-listed (and Singapore-based) advisory and investment firm. In the past three months, I’ve met dozens of Japanese companies to understand their plans for India. What I have learned can be summed up in three statements:
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One, many Japanese companies and almost all conglomerates are keen to invest in India. Secondly, many are unsure how to enter India. Third, most are afraid of the inherent ambiguity and uncertainty in the Indian market. Let me elaborate:
Firstly, nobody doubts the fundamental opportunities of the Indian market. In fact, a Japanese leader told us that India is the second most discussed topic in Japanese boardrooms after ChatGPT. Thirty years of growth and evangelization have restored Bharat as the land of milk and honey. Finding the opportunity is no longer the challenge.
Second, there is significant confusion about how to enter India. We’ve heard a lot of questions: do we buy or build organically? In the midst of the noise in the M&A market, how do we find the right targets? Can we produce in India or should we import for the domestic market? Which state has the best incentives? Are consumers willing to pay for Japanese quality? Do we hire local managers or do we send expatriates? Do we build ourselves or do we work with a local player? How do we find the right partner? These questions suggest that a standard playbook for the Japan-India corridor has yet to emerge.
Third, there is a palpable fear of the Indian market, which to the relatively orderly and disciplined Japanese seems to be the embodiment of VUCA (volatility, uncertainty, complexity and ambiguity). This perception is keeping Japanese companies from making big bets on India. The resulting smaller and more cautious bets (e.g. sending a few expat managers to scout the market) rarely result in outsized returns, and this creates a vicious circle: the lack of meaningful success stories discourages new bets.
Therefore, the Japan-India corridor needs a different kind of pioneer from the West. Evangelism needs to focus on how to access the market and how to risk sensible bets, not opportunity. There are four ways to do this:
First, industry-specific advocacy groups (like Nasscom for IT) need to be built, made up of individuals and companies with deep roots in Japan and India. The members of this group must have extensive experience and networks in both markets and they must conduct targeted campaigns with Japanese companies to find out how to enter India and de-risk investment.
While the relationship is well established in the automotive and manufacturing industries, such stakeholders are needed for IT, deep tech, consumer products, etc.
Second, these stakeholders need to create industry-specific lists of potential Indian partners. Having a body trusted by both parties that vets potential partners will help address Japanese companies’ risk perceptions towards India.
Third, there is an opportunity to build funds (both venture capital and private equity) focused on the Japan-India corridor. These funds should pool investments from Japanese companies and build a track record of successful investments in India across all sectors. This will help Japanese companies build confidence in the Indian market while avoiding direct exposure.
Finally, there is room for specialist consultants who have networks, skills and experience in both markets to act as facilitators in the Japan-India corridor. These consultants have to commit themselves to this corridor, since the cultural and language nuances require tailor-made solutions. These advisors should help create the standard playbook for Japanese investment in India.
Japan’s population (and therefore the market) is shrinking, and India is the last major market driving global growth. It’s up to us to lose billions of dollars in Japanese investment.
Abhisek Mukherjee is a partner at YCP Auctus.
