India Market Entry Strategy for Japanese Companies: Key Considerations & Cultural Tips

India has become a hotbed for global expansion, attracting multinational corporations and fast-growing startups from around the world. In recent years, even Japanese companies have increasingly identified India as a strategic location for overseas growth.

If your organization is considering entering the Indian market, this guide will help address common questions such as:

• What is the current state of India’s economy?

• What are the benefits of expanding into India for Japanese companies?

• What cultural differences should you be aware of when doing business in India?

In this article, we’ll provide essential insights to help Japanese businesses navigate the Indian market and prepare for a successful entry.

Essential Market Insights for Doing Business in India

Before entering the Indian market, it’s important to understand the country’s core economic and cultural profile. As one of the world’s most dynamic and rapidly growing economies, India offers vast opportunities — especially in sectors such as technology, manufacturing, and consumer goods.

Below is an overview of key facts that will help you build a foundational understanding of India’s business environment.

Reference: Ministry of Foreign Affairs of Japan

India: A Diverse and Expanding Market with Economic Potential

India, a federal republic in South Asia, is the world’s seventh-largest country by land area — nearly nine times the size of Japan. With a rapidly growing population and strong economic projections, it is a key destination for global business expansion.

India is a highly diverse, multilingual, and multi-religious nation. Each state may have its own dominant ethnic groups and languages, contributing to a complex but vibrant cultural landscape. In addition to Hindi and English as official languages, 21 other regional languages are officially recognized.

Agriculture plays a significant role in the economy, utilizing approximately 42% of India’s vast landmass. More than half of the country’s workforce is engaged in agriculture, contributing nearly 20% to the national GDP.

Manufacturing, particularly in the automotive parts sector, accounts for around 16% of GDP and remains a critical industry. Meanwhile, India’s rapidly growing IT sector now makes up approximately 8% of GDP, further positioning the country as a global tech hub.

Key Advantages of Doing Business in India

Expanding into the Indian market offers several strategic benefits for Japanese and global businesses alike. Here are some of the most compelling advantages:

India’s market is gaining attention from around the world, especially in the IT sector, where numerous unicorn companies and startups are actively expanding their operations.

In this article, we’ll take a closer look at the current state of India’s economy and the key factors that make it an attractive destination for business expansion.

1. A Growing Workforce and Demographic Dividend

India is currently experiencing a “demographic dividend,” with a rapidly increasing working-age population. According to the UN Department of Economic and Social Affairs, India overtook China in mid-2023 to become the most populous country in the world. Over 40% of its population is under the age of 25, and more than 60% falls within the working-age bracket.

Unlike aging markets such as Japan, India offers a vibrant, youthful environment with a promising future. The large young population also translates to growing demand across various products and services. Many of India’s young professionals are fluent in English and bring modern, globally minded perspectives — making them ideal for sectors like IT, development, and customer support.

2. Sustained Economic Growth

India’s consistently rising GDP is another strong reason to consider market entry. Since 1970, India has maintained steady economic growth and ranked 5th in the world by GDP in 2023. Between 2003 and 2014, India recorded an average annual growth rate of 8.3%. Looking ahead, the country is expected to maintain an average annual GDP growth rate of over 6.5% for the next decade.

In addition, household consumption rose by 7.5% from 2022 to 2023, further signaling strong domestic demand. India is projected to surpass Japan and become the world’s 3rd largest economy by 2029, with its GDP expected to exceed $10 trillion by 2035.

Source: Keidanren, Digima Dejima

3. Rapid Expansion of the IT Sector

India’s IT boom began in the 1980s when the government promoted software development and attracted foreign investment — particularly in Bangalore, now known as the “Silicon Valley of India.” Many engineers who had trained or worked in the U.S. returned and established tech companies in Bangalore.

The 12-hour time difference between India and the U.S. allowed for continuous workflow: American firms could delegate tasks to Indian teams, and receive completed deliverables by the next morning. Additionally, widespread English proficiency and minimal interference from India’s caste system in the IT sector helped the industry flourish.

IT became an accessible and desirable career path, particularly for younger generations, driving innovation and making India one of the global leaders in software development and tech services.

Key Considerations Before Expanding Your Business into India

Before entering the Indian market, it’s essential to understand a few foundational challenges and cultural nuances. Below are three critical points that every company should be aware of when planning business expansion into India.

Being aware of these points in advance — and taking proactive measures to address them — can make a critical difference in whether your expansion into India succeeds or fails.

To navigate the Indian market successfully, it’s essential to understand its challenges and adopt a flexible, adaptive approach.

1. Unique Cultural and Ethnic Diversity

One of the most important factors to grasp is the influence of the caste system on market behavior.

India is home to a wide range of languages, religions, and ethnic groups, meaning that strategies must be tailored to each region. Localized marketing that respects regional cultural and religious values is essential.

For instance, India has a historically rooted social hierarchy known as the caste system. While modern Indian society — especially among younger generations — is gradually moving away from these structures, caste-based biases and restrictions still affect aspects of daily life, such as employment and marriage.

Marketers should be mindful of these social dynamics, as they can influence consumer behavior, communication styles, and brand perception.

2. Differences in Business Etiquette and Cultural Norms

There are significant cultural gaps between Japanese and Indian business practices, including gestures, communication styles, and daily habits. These differences can easily lead to misunderstandings if not properly addressed.

It is critical to show respect for local customs and demonstrate cultural sensitivity in professional settings.

For example, in India, a common gesture to indicate agreement is tilting the head from side to side. However, in Japan, this same gesture may be interpreted as confusion or uncertainty, leading to potential communication issues.

Another important point is the cultural perception of the left hand in India. It is traditionally considered “unclean,” and using it to pass objects, shake hands, or exchange business cards is viewed as impolite. Left-handed individuals should be particularly mindful of this to avoid unintentional offense.

3. Weak Infrastructure in Certain Areas

Businesses must also consider India’s infrastructure limitations. Transport networks — such as roads and railways — as well as basic utilities like water and electricity, can be underdeveloped or unreliable in some regions.

Power shortages, in particular, are a common issue and can disrupt operations if not proactively managed.

Effective risk management strategies may include:

• Informing business partners about potential internet or power instability.

• Installing backup power solutions (e.g., generators) to mitigate the impact of outages.

Since Prime Minister Modi took office in 2014, India has made significant strides in improving its infrastructure:

• The length of paved roads has increased by 1.5x.

• The number of airports has doubled.

• Access to clean water rose from 34% to 68%, with a target of 100% by 2025.

Although challenges remain, these improvements reflect promising long-term developments for companies entering the Indian market.

Conclusion

India’s rapid economic growth makes it one of the most attractive markets for Japanese companies expanding overseas.

However, with its vast diversity of languages, ethnicities, and religions, businesses must take time to fully understand the cultural nuances and differences from Japan.

At The Digital X, we specialize in supporting global expansion through a digital marketing lens—offering strategic insights, content localization, and cross-border consulting tailored to your target market.

From language and legal compliance to market-specific strategies, we act as your reliable partner for successful overseas business development.

If you’re considering entering the Indian market, we encourage you to get in touch with us for a consultation.