INDIA – JAPAN ECONOMIC RELATION

India and Japan share a Special Strategic and Global Partnership, underpinned by strong political trust, expanding economic ties, shared democratic values and a common vision for a free, open, inclusive, and rules-based Indo-Pacific. Economic cooperation remains one of the most dynamic pillars of the bilateral relationship, supported by sustained political engagement at the highest levels, growing trade and investment flows, robust development cooperation, and expanding collaboration in strategic and emerging sectors.

The entry into force of the India–Japan Comprehensive Economic Partnership Agreement (CEPA) in August 2011 provided a strong institutional framework for enhancing bilateral trade, investment, and economic cooperation. During Prime Minister Narendra Modi’s visit to Japan in September 2014, Prime Minister Shinzo Abe announced a commitment of USD 35 billion in public and private investment and financing to India over five years, a target that was subsequently achieved. Building on this success, during Prime Minister Fumio Kishida’s visit to India in March 2022, both countries announced a new target of JPY 5 trillion in public and private investment and financing from Japan to India during the period 2022–2027. Subsequently, during Prime Minister Narendra Modi’s visit to Japan on 29–30 August 2025, the two leaders adopted the India–Japan Joint Vision for the Next Decade (2025–2035) and agreed to facilitate JPY 10 trillion in private investment from Japan to India over the next decade, representing the most ambitious investment target ever agreed between the two countries.

Japan remains one of India’s most important economic partners and the fifth-largest source of foreign direct investment (FDI). Cumulative Japanese FDI into India from April 2000 to December 2025 exceeded USD 47.59 billion, accounting for approximately 6.69% of total FDI inflows into India. According to the Japan Bank for International Cooperation (JBIC) Survey Report 2025, India re-emerged as the most promising destination for overseas business expansion by Japanese manufacturing companies, surpassing China after three years. Japanese investments span a broad range of sectors including automobiles, financial services, electrical equipment, machinery, chemicals, pharmaceuticals, logistics, infrastructure, retail, and emerging technologies.

The India–Japan Fund (IJF), jointly established by the National Investment and Infrastructure Fund (NIIF) and JBIC, has emerged as a flagship platform for bilateral investment cooperation in climate technologies, sustainability, and next-generation mobility. With a corpus of approximately INR 49 billion (USD 600 million), the Fund has already invested in leading electric mobility companies including Mahindra Last Mile Mobility, Ather Energy, and Eka Mobility. The Fund is also exploring opportunities in battery materials, recycling, solar energy, critical minerals, and clean technologies, while facilitating strategic partnerships with major Japanese corporations.

Japan continues to be India’s largest bilateral development partner. Since 1958, Japanese Official Development Assistance (ODA) has played a transformative role in India’s infrastructure and economic development. Cumulative ODA commitments exceed JPY 6.978 trillion, supporting projects across transportation, urban development, energy, water supply, environment, healthcare, and human resource development. Japan’s flagship development projects in India include the Mumbai–Ahmedabad High-Speed Rail (MAHSR) project, Dedicated Freight Corridors, metro rail systems, industrial corridors, and infrastructure projects in India’s North-Eastern Region. On 28 March 2025, the two Governments signed six ODA loan agreements amounting to JPY 191.736 billion.

ODA Commitments and Disbursements

 (JPY Billion)

Source: JICA / Department of Economic Affairs

Financial cooperation has emerged as a major pillar of the bilateral relationship. The India–Japan Finance Dialogue, upgraded to the Secretary/Vice-Minister level, serves as the principal platform for cooperation on macroeconomic policy, financial markets, sustainable finance, digital finance, investment promotion, and international financial architecture. India and Japan also maintain a USD 75 billion bilateral currency swap arrangement, which contributes to financial stability and strengthens economic resilience. Cooperation has expanded further through increasing engagement between regulators, financial institutions, stock exchanges, asset managers, and pension funds.

The Gujarat International Finance Tec-City (GIFT City) and the International Financial Services Centres Authority (IFSCA) have become important drivers of India–Japan financial cooperation. Leading Japanese banks, insurers, asset managers, shipping companies, and leasing firms have established operations or expressed interest in expanding their presence in GIFT City. High-level engagements with the Japan Financial Services Agency (JFSA), Bank of Japan (BoJ), Japan Exchange Group (JPX), MUFG, SMBC, Mizuho, Nippon Life, and other major institutions have strengthened awareness of opportunities available within India’s international financial services ecosystem.

Industrial and infrastructure cooperation remains a central element of the bilateral partnership. Through the National Industrial Corridor Development Programme (NICDP), India is developing industrial corridors and smart industrial cities across the country to strengthen manufacturing competitiveness and attract global investments. Japan continues to play an important role in supporting India’s infrastructure modernization through financing, technology transfer, and industrial partnerships. In April 2026, the Government of India launched the BHAVYA (Bharat Audyogik Vikas Yojana) scheme, with an outlay of INR 33,660 crore, to develop 100 investment-ready industrial parks across India and further strengthen the country’s manufacturing ecosystem.

Cooperation in economic security and resilient supply chains has gained increasing prominence. Under the India–Japan Economic Security Initiative, both countries are strengthening collaboration in semiconductors, critical minerals, clean energy, telecommunications, advanced manufacturing, pharmaceuticals, and digital technologies. These efforts support supply-chain diversification, technological cooperation, and industrial resilience while contributing to broader regional and global economic stability.

Engagement with Japanese institutional investors has intensified significantly in recent years. Major Japanese asset managers have launched India-focused investment products, including ETFs tracking Indian equity markets. Interest among Japanese retail and institutional investors has increased following the expansion of the Nippon Individual Savings Account (NISA) programme. The Embassy of India and Invest India have actively engaged Japanese investors, sovereign funds, pension funds, and corporations to promote opportunities in infrastructure, manufacturing, technology, clean energy, semiconductors, and digital sectors.

The year 2025–26 witnessed several landmark financial sector transactions that further strengthened India–Japan economic ties. These include MUFG’s acquisition of a 20% stake in Shriram Finance, SMBC’s acquisition of a 20% stake in YES Bank, Mizuho Securities’ acquisition of a stake in Avendus Capital, the Development Bank of Japan’s investment in HDFC Capital’s H-DREAM Fund, the launch of a dedicated MUFG venture capital fund for Indian start-ups, and the signing of a Strategic Partnership Agreement between MUFG Bank and the State Bank of India.

Overall, India–Japan economic relations have entered a new phase characterized by stronger investment commitments, expanding financial cooperation, resilient supply-chain partnerships, strategic technology collaboration, and growing people-to-people linkages. The adoption of the Joint Vision for the Next Decade (2025–2035) and the commitment to facilitate JPY 10 trillion in private investment provide a strong framework for advancing bilateral economic cooperation and further strengthening one of the most important strategic partnerships in the Indo-Pacific region.