To boost manufacturing, India need not choose between Japan and China

India and Japan are deepening their economic partnership, with Japan's Prime Minister leading a business delegation to New Delhi for their 16th annual summit. Building on a vision set last year, Japan has committed to potentially investing up to 10 trillion yen (US$62 billion) in India over the next decade. This follows substantial Japanese investments, such as MUFG's US$4.4 billion stake in Shriram Finance announced last December.

Japan has consistently been a key foreign investor in India. Since the turn of the century, cumulative foreign direct investment (FDI) from Japan has exceeded US$48 billion. Excluding financial hubs like Singapore and Mauritius, Japan ranks as the second-largest source of FDI into India, following the United States. In the 2025-26 financial year alone, Japan's FDI in India reached US$3.2 billion.

However, the trade figures present a different picture. India's trade with Japan amounted to a modest US$27.5 billion in the 2025-26 financial year. This stands in stark contrast to India's trade with China, which reached US$151 billion in the same period, making China India's top trading partner for goods. This disparity underscores how the two economies, while complementary, operate on different scales in terms of trade volume, with Japanese industrial investments in India often relying on components imported from China.