Japan Inc cautious on India despite premiers' love-in

Even as the friendship between Shinzo Abe and Narendra Modi blossomed during the new Indian leader's first foreign trip, Japan Inc refused to get misty-eyed, wary of the pitfalls of doing business on the sub-continent.
A five-day tour that began with a bear hug and a day of sightseeing in the ancient Japanese capital of Kyoto worked itself up through a crescendo of mutual compliments that culminated in Tokyo's pledge to spend USD 34 billion in India over the next five years.
Companies love the idea of India, with its huge untapped market and its vast, cheap workforce. But they know there are potential problems; Japanese suitors have stumbled more than once before.

"India's very weak infrastructure adds to the cost of making and moving things there," said Takashi Kodama, head of Asian economic research at Daiwa Institute of Research.
"Unless you resolve that, the current hopes for India that the world has cannot spark an investment boom," he said.
On top of dodgy roads, ramshackle railways and other weak infrastructure, there are complex local customs for multi-national firms looking for somewhere other than China to set up shop.

Unexpected taxes and economic policy changes in India have also discouraged investors, who want lower costs, high growth and predictability.
Despite its broadly comparable population, India is home to just over 1,000 Japanese firms, about five percent of the total operating in China.

To be sure, Japanese businesses agree that India has enormous potential as the populous democracy enjoys steady growth, an expanding middle class and modernisation that is boosting demand for infrastructure, such as trains, sewerage and electricity.
Japanese firms can also use India as a hub to export to regions west of the Indian Ocean, such as Africa and the Middle East.
Economic liberal Modi knows this and was in Tokyo to pitch for investment.
"Businesses and industries need stability and a growth environment. India has become a country that provides both," Modi told businesses in Japan last week on his first tour since coming to power.

"Tell me what you need for the business environment. India will deliver it," he said.
A string of Japanese firms have recently committed to fresh Indian investments, including major electronics parts maker Nidec, which has decided to spend roughly USD 1 billion in India in the next seven to eight years.