I spent last week racing between corporate headquarters in Japan, setting a personal record of 22 separate appointments in a week. One of these was a half-day conference, hosted by Standard Chartered, at which I launched a report I wrote on the opportunities facing Japanese companies in India. The event was oversubscribed; StanChart had expected around 70 attendees but over 100 of their clients, from Japan’s biggest companies, turned up.
Why is India attracting so much attention? One reason is its inescapably appealing demographics, of which the most salient feature is rapid urbanisation. Currently only around 30% of Indians live in cities, compared to 55% in China and a majority globally. By 2030 the urban population in India will have risen to over 40% and by 2050 to over 50%, according to UN projections. This is exciting since cities account for a far larger proportion of economic activity than rural regions. But unless India plans for this urban explosion it will risk, in the words of one conference attendee, turning into a giant slum.
Urban planning requires capital, long-term investment horizons, and expertise in building out infrastructure. These are qualities that Japan and its companies have in spades. In particular India’s plans to connect major urban centres with “industrial corridors” has attracted the attention of Japanese conglomerates such as Hitachi, Mitsubishi, Sojitz, Toshiba and numerous others. Long-term financing from institutions such as the Japan Bank for International Cooperation and the Japan International Cooperation Agency makes putting the pieces of the infrastructure puzzle together much easier.
(Parenthetically, it is interesting to note that a feasibility study on building shinkansen, or bullet trains, between Indian cities is underway. Having spent seven hours in a jolting taxi traveling the 261km between Jaipur and Delhi—part of the much-heralded Delhi-Mumbai Industrial corridor route—last December, and then just two-and-a-bit hours last week on a perfectly smooth Nozomi shinkansen train for the 508km between Tokyo and Osaka I really hope this comes off, for India’s sake. Of course, Japanese high-speed trains are not as unique as they used to be, and competition from China for the bidding is likely to be intense.)
Like this, but with the Himalayas in the background?
Of course much has been said about the theoretical appeal of India in the past, but only a handful of intrepid Japanese companies in certain sectors (such as Suzuki, in partnership with local auto manufacturer Maruti, and Honda, in a joint venture—since disbanded—with India’s Hero) have succeeded in what could politely be referred to as a “challenging” investment environment. The World Bank puts India 134th of 189 economies in its “Doing Business” rankings. Red tape, unpredictable taxation, maddening bureaucracy and other problems remain offputting to would-be investors.
The difference this time is Narendra Modi, the new(ish) prime minister. Mr Modi aims to make things much easier for foreign investors in a host of sectors. At the conference, a government representative in charge of the DMIC rattled off a whole string of achievements on this score. The ultimate aim is to turn India into a manufacturing powerhouse—raising the share of GDP of the secondary sector from 15% to 25%-30%, thereby effecting a China-style economic transformation.
Turning Mr Modi’s much touted slogan “Make In India” into a reality means attracting global manufacturers of the kind that still abound in Japan. Some have jumped in: Toto, Nidec, Daikin and many others have set up factories in India’s special industrial zones, and many more have pledged to expand their presence there. Others have bought Indian assets in the hope of turning it into a hub from which to export to Europe, Africa and the Middle East—and further afield. Ichiro Iino, chief executive for the Asia-Pacific region at Hitachi, says the company is making India a “global hub for productisation”.
At the conference, India’s ambassador to Japan, Deepa Gopalan Wadhwa, noted that it was nice to be able to speak of realities rather than just India’s potential. Japanese firms recognise that they can’t stay put where they are, given the declining demand in their own country. As such, and assuming much of what Mr Modi is proposing comes off, India is an exciting prospect.
You can read the full report here: http://www.economistinsights.com/countries-trade-investment/analysis/ind...
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