Eye on Trade -- A Rupee for Your Thoughts

By Sarah Noorbakhsh

An interview with Dalel Singh, resident director of the India Trade Promotion Organization.

J@PAN INC: How did trade between Japan and India begin?
Dalel Singh: India came into the game of industrialization and capitalization very recently—only in 1991—and we’re still very young. Before that, our industrialization had been repeatedly stifled, first by the British, then by our own government itself. But since being forced to open in the early ’90s, we have liberalized our economy, and everything has changed. Things have become infinitely more competitive, both domestically and abroad.

Indian businesses in Japan have been primarily restricted to trading companies that arrived at around 1870, importing textiles, handicrafts, diamond jewelry and food products. Up until recently, India was known here only for its culture—primarily food—and I would estimate that there are over 1500 Indian restaurants in the country today.

Traditionally, India perceived Japan as a country of high technology, with little interest in importing these types of consumer goods from abroad. At the same time in India, trade was highly restricted, and even though everyone wanted these Japanese products, they were expensive and difficult to get. Therefore not much trade occurred between the two countries.

JI: When did things change?
DS: The first major breakthrough was when Suzuki went to India in 1982. That began a significant new business relationship between the two countries. Their first cars were manufactured for about 45,000 rupees, but on the market, could be sold for 110,000 rupees. That was the premium. Japanese products have great acceptability in India, and companies have garnered a high level of trust from Indian consumers. It’s a huge market and they are very receptive to Japan.

Japanese companies have a growing interest in the Indian market now. We get a number of requests from companies asking to market their products in India, inquiries about manufacturing, joint venturing and investment. JETRO also said their recent seminar on India was heavily attended.

JI: What about Indian companies?
DS: There’s been a lot of change within the last three or four years. We do two trade shows, the Indian Home Furnishing Fair and India Garment Fair, 19 and 28 years running, respectively. Recently we’ve been seeing a lot of new faces; one exhibitor new this year said he participated about 15 years ago, but went to the US because the orders were bigger and the technical and language barriers [here] made it difficult to do business. But he’s returned because the economic climate in America right now doesn’t breed trust between businesses. In Japan he never faces problems with payment. I find that businesses have problems initially, but if they work things out they definitely enjoy it here.

A new face for India is arriving here as well. IT is definitely a very strong base [for Indian companies in Japan] since the US market has slowed down. All the major IT companies, like TCS, Wipro and Infosys, have their offices and staff here. Japanese Language Proficiency Test takers have skyrocketed in number; last year we had over 2000 participants in Bangalore, when only a few years back, numbers were negligible.

JI: Is India benefitting from the US economic downfall?
DS: It’s a very interesting situation. After participating in an auto parts tradeshow in Las Vegas, my counterpart in New York commented that, although he initially wasn’t expecting much business because of the slowdown, Indian companies were flooded with business. When I spoke to a journalist in India and commented on how we cannot compete technologically with Japan in the auto parts industry, he told me, “Times have changed! Many Indian products now have better technology, with a far more competitive price.” The head of a Japanese construction company that serves the Saudi oil industry commented that their largest competitors are now coming out of India. In certain sectors, Indian technology is better than Japanese.

American companies invested a lot in IT in the early ’90s. There are many Indians in Silicon Valley, and I think more than 60 percent of our foreign exchange in the IT industry is from the US. Now they want to diversify, and India itself is emerging as a huge market. The Indian government recently gave a huge data-consulting contract to TCS for managing the passport system. India is growing, and IT systems are an increasing necessity. "You can stay snobbish when you have money, but you have to look for the cheaper and better alternatives once that money runs out."In the auto parts industry, Indian companies are coming back with huge business from the US. You can stay snobbish when you have money, but you have to look for the cheaper and better alternatives once that money runs out.

The world is changing so fast. India opened only in 1991, and we had very little foreign exchange. When our economy opened up, our entrepreneurial skills were also unleashed. Young people who used to want to enter the civil service now want to enter the private sector. And now Indian companies are looking to Japan.

JI: Does India see China as a big competitor?
DS: I wouldn’t say that. We have not been able to compete with China up ‘til now because prices of everything were so cheap. Indian companies had niche markets; mass production was China, high fashion was India. Prices have been such an issue, but recently we’ve had inquiries saying that in China, wages have gone up while quality has decreased. Companies, who before were making $300 million purchases from Chinese companies, are now visiting Indian trade fairs for the first time.

China has also jumped on the IT bandwagon, but India has already scaled up. We are focusing on knowledge-based outsourcing, and I think it’s difficult for China to compete. The issue is that although we know the US well, in Japan, China is still ahead because of language and cultural differences. Things will pick up from here, however. The IT industry, until last year, had been growing at a rate of 30 percent a year; no industrial segment anywhere in the world grew systematically and regularly so fast. And I think it will take a lot of time for China to catch up.

JI: Can you mention anything about the Economic Partnership Agreement between India and Japan?
DS: I can’t say much because this is still under negotiation. There will be advantageous cuts on duties for both sides; costwise, some products might become more competitive. It’s a detailed exercise on competitive advantage. These small price cuts may be slightly at India’s disadvantage, but more so than small changes in price, marketing will decide who is the winner. It’s all about marketing and branding, especially here in Japan. Competition on price alone is not good.

Marketing is especially important in these times; some Indian companies produce products that are far superior to the competition, but nobody knows of them. One Indian company featured in the Japan Times in early November has developed a product which is a system placed in mobile phones to track the location and retrieve the data if the handset gets lost. It’s a great product and they’ve launched in the US, but they unfortunately don’t have very strong marketing muscle. It’s all about marketing.

Recently some venture capitalists are going to India and investing in smart technologies. This could prove to be a good win-win situation because these ventures are importing with them the marketing know-how to make a product successful.

These are interesting times, and everything that was tried and true doesn’t work any more.