In Japan, over 3.36 million small and medium-sized enterprises (SMEs) account for 99.7% of all companies and round 70% of complete employment, in line with a World Financial Discussion board evaluation. Specialists consider nearer collaboration between Indian and Japanese MSMEs may unlock vital alternatives, notably in electronics, laptop software program, and digital providers, the place Japanese technological experience enhances India’s scale. The chance assumes better significance as India’s electronics manufacturing and IT providers ecosystem, valued at effectively over $300 billion yearly, continues to emerge as a key pillar of financial development and one of many nation’s largest contributors to employment and exports.
In opposition to this backdrop, The Financial Instances Digital spoke to Gurmeet Singh, Government Director of the Electronics and Pc Software program Export Promotion Council (ESC India), an business physique representing electronics, IT, and software program exporters, together with quite a few MSMEs. Singh mentioned the challenges dealing with Indian exporters and the coverage measures wanted to strengthen partnerships between Indian and Japanese companies. Edited excerpts:
ET: Japanese PM Sanae Takaichi lately concluded her India go to, the place each nations reiterated their dedication to strengthening financial ties. From ESC India’s perspective, what new alternatives does this create for Indian MSMEs, notably in electronics and IT exports?
Gurmeet Singh (GS): There are a lot of sectors well-suited for partnerships between India and Japan at each the federal government and private-sector ranges. As an organisation centered on the Info and Communication Know-how (ICT) sector, I observe that the 2 nations have been collaborating in software program growth, electronics {hardware}, AI integration, cybersecurity, semiconductor manufacturing, and cloud computing.
In software program growth, India’s massive firms, comparable to Tata Consultancy Providers (TCS), Wipro, and HCL Applied sciences, have already got a major presence in Japan. Likewise, Indian firms are leveraging Japan’s strengths in precision engineering and {hardware}. Bilateral know-how commerce between the 2 nations is estimated at $27 billion yearly.
MSMEs additionally contribute meaningfully to this partnership by means of customized software program growth, AI integration, IT consulting, and enterprise course of outsourcing (BPO), though their participation is basically as distributors.
Importantly, each governments have created enabling frameworks to advertise commerce and funding within the ICT sector. These embrace the India-Japan Digital Partnership launched in 2018, semiconductor provide chain initiatives, and the lately introduced India-Japan 12 months of Know-how Programme for 2025-26.ET: The sixteenth India-Japan Annual Summit has as soon as once more introduced know-how and provide chain cooperation into focus. Which segments of India’s electronics and IT business stand to realize probably the most from collaborating with Japanese firms?
GS: Japan has all the time been a task mannequin for India’s know-how ecosystem. The connection has remained dynamic, cordial, and complete and has gained additional momentum with the formation of the Quad involving India, the US, Australia, and Japan. A number of collaborative initiatives are already underway below this framework. Nonetheless, there may be scope to increase cooperation by means of joint R&D programmes, growth of world-class {hardware} parks in India and creation of third-country ICT manufacturing hubs throughout areas, comparable to SAARC, Latin America, and Africa. Such initiatives can strengthen the financial partnership between India and Japan whereas enhancing their competitiveness in opposition to nations comparable to China.
ET: Whereas the current go to by the Japanese PM is predicted to provide contemporary momentum to bilateral financial engagement, what are the most important coverage and enterprise bottlenecks that should be addressed to allow stronger partnerships between Indian and Japanese MSMEs?
GS: In each India and Japan, MSMEs will not be simply financial contributors however the spine of business and employment. In Japan, SMEs account for over 99% of all enterprises and make use of almost 70% of the workforce. In India, round 60 million registered MSMEs contribute almost 30% to GDP and 46% to exports, whereas enjoying a important function in innovation, manufacturing, and employment.
Whereas massive Japanese firms are well-known in India, the identical can’t be stated about Japanese MSMEs. The publicity of MSMEs on either side stays restricted, notably within the ICT sector. This hole must be bridged by creating establishments that may handhold enterprises and facilitate partnerships.
In software program exports, points comparable to withholding tax on software program growth and licensing additionally pose challenges.
Human capital alternate presents one other vital alternative. The brand new talent mobility initiative, which goals to put 50,000 Indian professionals in Japan over the subsequent 5 years, can create new avenues for Indian ICT firms. Nonetheless, India might want to considerably strengthen each the capability and high quality of technical coaching to fulfill Japanese business requirements.
Pilot programmes in manufacturing hubs, comparable to Ludhiana, are already integrating Japanese precision manufacturing practices with India’s native capabilities, though such efforts should be scaled up.
Superior manufacturing and mobility additionally stay key areas of cooperation. Past the Mumbai-Ahmedabad bullet prepare undertaking, which has MSMEs built-in into its provide and upkeep chain, joint ventures comparable to Escorts-Kubota reveal how cross-border partnerships can scale in sectors like agritech and equipment. Equally, the adoption of robotics, AI, and digital applied sciences below the Digital Partnership framework helps MSMEs modernise sooner.
ET: For Indian MSMEs, how necessary are high quality certification and compliance for accessing the Japanese market?
GS: High quality certification and regulatory compliance are important for Indian MSMEs in search of to enter the Japanese market. Indian firms typically battle to fulfill Japan’s stringent high quality requirements, whereas Japanese SMEs discover India’s regulatory framework advanced. Language obstacles, mental property considerations, and prolonged certification processes additionally gradual partnerships.
Each governments and business our bodies recognise these challenges and are working in the direction of options by means of sooner approvals, shared IP frameworks, and co-funding mechanisms.
ET: How can Japanese companies assist Indian firms with know-how switch and course of self-discipline?
GS: Japanese firms are already supporting Indian companies, notably MSMEs, in bettering operational effectivity by means of waste discount, course of optimisation, AI, robotics, and automation. For sectors comparable to ICT, building, and superior manufacturing, internationally recognised certifications comparable to ISO have change into more and more necessary in attracting world clients and bettering export competitiveness.
ET: For MSMEs, what coverage help is required to transform enterprise and commerce pursuits into precise enterprise contracts?
GS: Higher consciousness of the Japanese market, its enterprise tradition, and business practices are important for Indian MSMEs. Language stays a major barrier. A number of years in the past, ESC performed Japanese language proficiency programmes for younger Indian engineering graduates, which additionally lined enterprise etiquette and cultural practices. Related initiatives, together with broader consciousness programmes, needs to be revived and expanded.
ET: Is financing nonetheless a bottleneck for constructing export-ready capabilities?
GS: Sure, financing continues to be a problem. Japanese firms may help Indian MSMEs entry funding from Japanese monetary establishments at aggressive rates of interest. There are additionally revolutionary monetary devices out there in Japan, together with swap and reverse swap preparations, that Indian firms can leverage to strengthen their export capabilities.
ET: Which areas are best suited for India-Japan partnerships in different nations?
GS: India-Japan cooperation shouldn’t stay restricted to bilateral commerce. JETRO has already proposed a framework for India and Japan to collectively goal African markets by combining Japanese know-how and capital with Indian expertise and execution capabilities. The identical mannequin will also be replicated throughout SAARC nations and Latin America.
as a Dependable and Trusted Information Supply