Companies
Japanese companies looking for policy stability in India: Sumitomo chairman
Summary
- Takuro Horikoshi says he is confident the number of Japanese firms in India will increase after years of stagnation
Abrupt policy changes pose difficulties in doing business, and Japanese firms are looking for policy stability in India, Takuro Horikoshi, the chairman and managing director of Sumitomo Corp. India Pvt. Ltd, said, in the backdrop of India restricting laptop and tablets recently. In an interview, Horikoshi, who also heads the Japan Chamber of Commerce and Industry in India (JCCII), said the 2019 crisis in the Indian automotive industry and the ensuing covid pandemic resulted in the number of Japanese firms in the country staying flat. He said JCCII is witnessing a surge of interest from Japanese firms in various fields, including packaged consumer goods and semiconductors. Horikoshi said he was confident that the number of Japanese firms in India will increase after years of stagnation, and JCCII will set up two new committees to advocate the interests of firms in packaged consumer goods and semiconductor sectors. Edited excerpts:
India has been trying to encourage domestic manufacturing. As part of that strategy, we have been lowering the import customs duty on raw materials while increasing the customs duty on finished products, whether it is mobile phones or laptops. There is criticism that India is becoming more protectionist, with tariffs going up. Your views?
Of course, this was a sudden policy change, like you mentioned about computers. So, I understand there are many intentions from the Indian government’s side. But such a sudden change is one of the difficulties we face. So, more stability is required. Otherwise, we face many difficulties in continuing business and investment in India.
The number of Japanese firms in India has remained fairly flat over the last few years. What are the problems that Japanese companies are facing in India?
So, this is my personal observation. One of the reasons is that there was a financial problem in 2019 because of the issues in automotive production numbers. These numbers suddenly decreased, and that was far below what everyone expected. Also, after that came the covid-19 pandemic, so some of the Japanese companies had a tough time making a profit. Some of the companies had to restructure. So, it was difficult to get into India in such a situation. We observed that in India, there are big opportunities, and there is so much tough competition. It takes a long time to make a profit in India. There are also many hurdles in the Indian market. But, at the same time, I myself think that there have been many workplace improvements in India. For example, introducing GST (goods and services tax) was a very big change and the double tax issue was also solved. I think there are still many hurdles, but the ease of business has improved. So, I think India is changing. Since 2019-20, there have been crises, and the number of Japanese firms didn’t increase. But I am relatively positive that it will start increasing from now.
Prime Minister Fumio Kishida announced that Japan would invest $42 billion in India over five years. Are there any particular sectors that will attract Japanese investment?
So, my understanding regarding the Prime Minister’s commitment includes investment and finance from both the government sector and the private sector. So, of course, things like the Shinkansen project will be an area, and many investments will be made in the automotive-related sector, steel sector or maybe renewable energy can also be a part. Hopefully, some kind of new sectors will be coming up in semiconductor-related areas. What we see is that Japanese companies are also getting more focused on fast-moving consumer goods (FMCG). There are around 20 committees in JCCII that are actively having a discussion about particular sectors. Recently, we have been thinking about creating a new committee for semiconductors and FMCG. On semiconductor firms, I don’t have any specific names, but we see more focus. This is in semiconductor-related materials or some related equipment. The Japanese government and industry organizations are also trying to support these firms. We see the mood drastically changing.
Japan has been trying to construct a new industrial value chain centred around Bangladesh and India’s north-east. Do you think that this concept will be successful? Is there interest among Japanese firms?
We went to Bangladesh this week, and several JCCII members visited Bangladesh and visited Matabari Port and also joined a seminar organized by the Japanese embassy in Bangladesh. This is a continuous initiative, and we think if connectivity improves, it may lead to improved opportunities for Japanese firms, but still, it’s relatively a little bit early for each Japanese company to say anything about their north-east investments.
Are Japanese firms looking at India to manufacture for exports to other parts of the world?
In general, European and US companies are looking at accelerating investment in India, not only for Indian markets but also as a manufacturing hub for Africa, Southeast Asia and other parts of the world. Now, some Japanese companies are thinking about India as a base to export and access markets like Africa, the Middle East and Southeast Asia. That has also been in our view. JCCII also established an export committee last year to start studies into exports to Africa from India.
