Japan to create special cell to push FDI into India

This Centre will assist Japanese companies to handle a variety of state-level regulations, a lack of transparency in the application of the law, and a complex tax system in India, according to persons familiar with the developments.

The new centre in the Japanese Foreign Ministry will also assist cooperation in sectors of artificial intelligence, startups and critical minerals, ET has learnt.

At the last annual Summit held in August 2025, New Delhi and Tokyo had set a goal of achieving 10 trillion yen ($62.6 billion) in private-sector investment in India over the next decade.

Japanese companies have been relatively slow in expanding into India. There were 1,434 Japanese companies here in 2024, notwithstanding the depth of political ties. In comparison as many as 6,000 Japanese companies operate in Thailand, and nearly 4,500 in Singapore, according to the Japanese Foreign Ministry.

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Japanese FDI in India has increased in recent years but it remains small compared to Japan’s overall total outward FDI. Japanese outward FDI to India in 2022-23 and 2023-24 stood at USD 1.79 billion and USD 3.1 billion respectively, with USD 1.36 billion in 2024-25 (Up to December 2024), according to a note by the Indian Embassy in Japan. Cumulatively, from 2000 until December 2024, the investments to India have been around US$ 43.2 billion ranking Japan fifth among source countries for FDI. Japanese FDI into India has mainly been in automobile, electrical equipment, telecommunications, chemical, financial (insurance) and pharmaceutical sectors, according to the Embassy.

In 2024, over 60% of Japanese companies in India reported an increase in market share for their main products and services, among the highest in Southwest AsiaSurveys by the Japan Bank for International Cooperation show that Japanese manufacturers have viewed India as the most promising overseas location for four straight years. But the number of companies actually operating there has not grown, with many pointing to a business environment filled with issues difficult for businesses to address on their own, according to a report in Nikkei Asia published on Tuesday.

The Japanese Foreign Ministry is prioritizing economic cooperation with India for two main reasons. “First, India has the world’s largest population and maintains a high economic growth rate, meaning that it has significant potential as a market. Some forecasts suggest that India’s nominal gross domestic product could surpass Japan’s as early as 2026, making India the world’s fourth-largest economy, according to the Nikkei Asia report.

India’s strategic importance is Japan’s second reason for prioritizing cooperation. The two countries share core values, such as democracy and the rule of law and are part of Quad, the Nikkei Asia report mentioned.