Between Promise and Prudence: Takuro Takeuchi Explains the Missing Link in India-Japan Business Relations in IJBC Kolkata

Takeuchi's presentation pondered: How can India give Japanese SMEs the confidence to enter a market they already recognise as full of opportunity? The answer lies not only in policy reforms but also in building institutions and partnerships that reduce uncertainty. As JICA connects governments, universities, industry and financial institutions, it is helping create an ecosystem where smaller businesses can invest with greater confidence.

Every business summit and diplomatic communiqué celebrates India's potential. But one recurring question continues to linger: If the opportunity is indeed so compelling, why do so many entrepreneurs still hesitate to bet on it?

Ask any economist, and they will explain why India should be an ideal investment destination. The numbers are persuasive. India boasts a young workforce, a vast consumer base, steady economic growth and a capable manufacturing sector, which together paint the picture of a country whose moment has arrived. Yet ask the owner of a small manufacturing company in Osaka or Nagoya whether they are ready to establish operations in India, and the conversation quickly becomes more complicated. Potential is reassuring. Risk, however, is personal.

That contradiction was widely deliberated during the 5th India-Japan Business Conference held in Kolkata on 10 July 2026. Organised by The Bengal Chamber of Commerce and Industry in association with the Consulate General of Japan in Kolkata, the conference gathered policymakers, diplomats, entrepreneurs and industry leaders under the theme, Scaling Indo-Japan SME Partnerships: Trade, Technology, and Eastern Corridors. But amid discussions about trade, technology and regional connectivity, one question cut through the diplomatic optimism with unusual honesty.

"Why are there still so few Japanese MSMEs operating in India?"

It was Takuro Takeuchi, Chief Representative of the JICA India Office, who posed it. The question sounded deceptively simple but was potent enough to challenge one of the biggest assumptions underpinning the India-Japan economic relationship. If decades of political trust, tactical cooperation and expanding commercial ties have already laid such a strong foundation, why has the country's most innovative business segment remained largely hesitant?

What made Takeuchi's intervention particularly compelling was its tone. He spoke less like a development official presenting another success story and more like someone trying to understand the calculations inside the mind of a cautious entrepreneur. That subtle shift changed the direction of the conversation. Instead of asking why India deserved investment, he asked why investment decisions still failed to materialise despite all the reasons suggesting they should. It was a more pragmatic conversation, and perhaps a more necessary one.

Beyond Concrete, Steel and Metro Rails

For many Indians, the Japan International Cooperation Agency, or JICA, is almost synonymous with infrastructure. Metro rail systems, highways, freight corridors and urban transport projects have become visible symbols of Japan's long-standing development partnership with India. They are impressive achievements, but they tell only part of the story.

Takeuchi outlined an institution that is gradually redefining its own purpose. Nearly seven decades after Japan extended its first Official Development Assistance loan to India, the relationship has matured into one of the country's most significant development partnerships. India today stands as the largest recipient of Japanese international cooperation, with cumulative ODA commitments exceeding INR 5.2 trillion, or approximately JPY 8.9 trillion. More than 120 projects continue to operate across sectors ranging from transportation and energy to urban development and environmental management. However, JICA sees these projects not as destinations but as foundations.

Its ambitions now extend well beyond financing physical infrastructure and delve into technical cooperation, institutional capacity building, human resource development, innovation partnerships and carefully structured private-sector investments. These domains are emerging as crucial pillars of engagement. The organisation is gradually positioning itself as an ecosystem builder that connects governments, universities, startups, financial institutions and businesses capable of transforming diplomatic goodwill into long-term commercial partnerships.

The Numbers Refuse to Tell the Story Everyone Wants to Hear

On paper, India is impossible to ignore. The country combines demographic scale with economic momentum in ways that few nations can currently match. It possesses the world's largest population, a rapidly expanding middle class, growing manufacturing capabilities and sustained economic growth. More than eighty percent of Japanese companies already operating in India expect to expand their businesses over the next one or two years. Confidence among existing investors remains remarkably high.

Despite such lofty prospects, another statistic stubbornly refuses to follow that optimism. For nearly seven years, the number of Japanese companies operating in India has remained largely unchanged at around 1,400.

The comparison with Southeast Asia is difficult to overlook. Thailand hosts more than 6,000 Japanese companies. Vietnam accommodates over 2,200. Indonesia has close to 1,500, despite offering a considerably smaller domestic market than India. The world's fastest-growing major economy continues to attract admiration from boardrooms across Japan. Admiration, however, has not translated into a corresponding wave of new entrants.

That gap becomes all the more striking when viewed through the lens of small and medium-sized enterprises. Large Japanese corporations have largely settled the India question. Many already see the country as one of their most promising overseas markets. SMEs, however, operate under entirely different constraints. Limited financial resources, thinner operating margins and greater exposure to uncertainty mean that every overseas investment carries consequences that multinational corporations can often absorb more comfortably.

Only around fifteen percent of Japanese companies operating in India are MSMEs. In Thailand, that figure approaches a whopping fifty percent. The contrast points to a deeper issue involving confidence, familiarity and the strength of institutional support available to businesses entering India. Large corporations can afford prolonged experimentation. Smaller companies rarely enjoy that luxury. For them, entering a foreign market is rarely an act of optimism alone, but an exercise in carefully calculated risk.

The future of India-Japan economic cooperation will depend on whether thousands of smaller companies, many of them family-owned and technologically specialised, begin to believe that India is not merely a market full of promise but a place where they can succeed without navigating uncertainty entirely on their own.

Acknowledging Reality Without Transgressing Into Utopian Claims

For years, conversations around attracting investment have followed a familiar script. India has long been held up as one of the world's most promising investment destinations, thanks to its demographic dividend, expanding consumer market and sustained economic growth. Yet, as Takeuchi argued, those familiar strengths are no longer enough to persuade the very companies India is trying hardest to attract.

The obstacles facing Japanese SMEs are not limited to regulations or paperwork alone. Drawing on JETRO surveys, he pointed to recurring concerns over tax uncertainty, administrative delays, rising labour costs and infrastructure gaps. Alongside these are challenges that rarely feature in investment brochures but frequently shape business decisions, including land acquisition, payment collection, local business practices, limited Japanese business networks and quality-of-life considerations such as pollution, food and social infrastructure.

Large corporations often possess the financial resilience and organisational depth to navigate such complexities. Smaller firms seldom do. Their overseas ventures are built on tighter margins, shorter planning horizons and far less room for error. What appears manageable to a multinational can easily become a deciding factor for an SME weighing its first investment abroad and eventually opting out.

Rather than asking India to conceal these realities, Takeuchi proposed something refreshingly counterintuitive. The country should present its challenges more openly. This is difficult to comprehend without understanding the character of Japanese SMEs.

Many of these Japanese SMEs have earned global reputations not by chasing the largest markets, but by solving difficult industrial and social problems. Their expertise spans precision manufacturing, water purification, waste management, medical technology, agricultural innovation and energy efficiency. They specialise in addressing precisely the kinds of challenges that developing economies continue to grapple with.

Viewed through that lens, India's developmental challenges cease to be liabilities and instead emerge as opportunities for collaboration. Rather than marketing India merely as a market of 1.4 billion consumers, investment promotion can highlight where Japanese technologies are uniquely positioned to solve real-world problems while building commercially sustainable businesses. It is a subtle yet significant shift in perspective. The conversation moves beyond selling scale and begins to showcase purpose.

The Talent Bridge Before the Investment Bridge

One of the most thought-provoking ideas to emerge from Takeuchi's presentation had little to do with factories, incentives or industrial corridors. It centred on people. For decades, overseas expansion has often followed a hackneyed sequence where companies identify a market, establish operations and then begin recruiting local talent. JICA believes that sequence can be reversed.

Several Japanese prefectures are already experimenting with an approach that begins by hiring skilled Indian professionals before making significant investments in India itself. Engineers, researchers, software developers and business managers are being viewed not merely as employees but as partners capable of guiding Japanese firms through an unfamiliar commercial landscape.

Professionals who understand India's business culture while being familiar with Japanese working practices can reduce many of the uncertainties that discourage first-time investors. Matching programmes connecting Indian talent with Japanese companies are already helping cultivate future business leaders who can bridge both markets with greater confidence.

This reflects a broader shift in how Japan is beginning to view India, as it is no longer seen only as an investment destination, but as a source of talent capable of shaping Japan's own international expansion. For a country confronting demographic decline and labour shortages, such realisation carries significance well beyond bilateral trade.

Institutions That Make Risk Feel Manageable

If confidence is the missing ingredient for Japanese SMEs, institutions can establish trust through transparency. Based on consultations with Japanese local governments, financial institutions and industry organisations, JICA outlined three priorities for the next phase of SME cooperation. The first is to communicate India's opportunities more effectively by identifying sectors where Japanese technologies can address real-world challenges. The second is to deepen talent partnerships by leveraging India's highly skilled workforce. The third is to strengthen institutional support that helps businesses identify trustworthy local partners, understand regulations and navigate operational risks with greater certainty.

The underlying philosophy points out that SMEs should not be expected to overcome every obstacle on their own. Governments, universities, financial institutions and industry associations all have a role to play in lowering the barriers that discourage otherwise promising investments.

In many ways, this marks an evolution in JICA's own role, as the organisation is swiftly becoming a facilitator of business ecosystems, helping connect the institutions that make cross-border entrepreneurship possible.

That approach is already taking shape on the ground. JICA's collaboration with the Government of Telangana is helping Japanese companies, including SMEs, identify investment opportunities and reliable local partners. Partnerships with IIT Hyderabad are supporting research collaboration, talent recruitment and technology localisation. Across sectors such as healthcare, agriculture, forestry and water management, Japanese technologies are being adapted to address India's development priorities while creating commercially viable business models. Development cooperation and private investment need not exist in separate worlds, as each can strengthen the other when supported by the right ecosystem.

Looking Beyond Automobiles

For decades, the India-Japan economic story has been defined by automobiles, manufacturing and infrastructure. Those sectors will remain important, but Takeuchi's presentation suggested that the partnership is entering a more diversified phase.

JICA highlighted emerging opportunities in semiconductor ecosystems supported by human resource development, medical technologies, wooden construction systems, matcha cultivation and processing, organic fertiliser and biogas ecosystems, Japanese-style horticulture services, and the rapidly growing Animation, Visual Effects, Gaming and Comics (AVGC) industry. Together, these sectors reflect a partnership driven largely by innovation, sustainability and specialised expertise, expanding the relationship beyond its traditional industrial foundations.

Why Kolkata Mattered

The conference's focus on Eastern Corridors was no coincidence. As connectivity improves under India's Act East Policy, eastern and northeastern India are emerging as attractive destinations for manufacturing, logistics, agriculture, renewable energy and digital industries.

For Japanese SMEs seeking diversified supply chains and new markets, the region offers both a vital location and growing economic potential. Hosting the conference in Kolkata carried significance beyond logistics. The city has long served as India's gateway to the East, making it a fitting venue for a conversation about the next chapter of India-Japan economic cooperation.

Diplomatic Vision to Entrepreneurial Action

Takeuchi's presentation pondered: How can India give Japanese SMEs the confidence to enter a market they already recognise as full of opportunity? The answer lies not only in policy reforms but also in building institutions and partnerships that reduce uncertainty. As JICA connects governments, universities, industry and financial institutions, it is helping create an ecosystem where smaller businesses can invest with greater confidence.

Business summits can define ambition. Diplomatic agreements can set the direction. But only entrepreneurs, supported by institutions that reduce risk and unlock opportunity, can transform that ambition into reality. If the first chapter of the India-Japan partnership was written by governments and large corporations, the next may well be authored by thousands of SMEs whose innovations quietly strengthen one of Asia's most important strategic relationships.