I am not too sure about that...I think there's gotta be a better explanation. India and Japan have similar population density levels, but I doubt if the Tamaguchi would've done well in India at all.
However, you are right to the extent that there's something in Japanese society/culture that made it work. It'd be interesting to figure out what that is.
Personally, my guess would be the individual relationship capital, rather than the population density per se. In Indian society, high population density tends to results in a very rich and complex web of relationships, so people are much less likely to want to feel wanted by an artificial entity. In any case, this is a very interesting part of Umair's Simulation Economy.