JAPANESE INVESTMENT COMMITMENT OF US$ 65 BILLION IN TEN YEARS WILL MAKE INDIA HUB FOR GLOBAL SUPPLY CHAIN

Japan committed investment in India worth Yen 10 trillion (US $ 65 Billion) in the next decade. This is more than what Japan Invested in India till now. (US$ 44 Billion). The moot point for enhanced investment is to make India hub for alternative supply chain. The Joint Statement says, “We have set a target of 10 trillion Yen investment from Japan in India over the next ten years.” It further said “we are also launching the Sustainable Fuel Initiative and Battery Supply Chain Partnership”.

Hitherto, China was the promising destination for Japanese investment in Asia over one and half decade. Nonetheless, the trend underwent into a turnaround with the bursting of COVID pandemic and incentive from Japan to shift from China. India toppled China in 2023 and became the second biggest investment destination in Asia. The overturn in the investment direction was accelerated by the visit to Japan by the Prime Minister Narendra Modi on August 29 and 30 before attending SCO summit on August 31 apart from his bilateral meeting with the Chinese President Xi Jinping.

The new investment will be encouraged in energy saving and new technology, besides automobile. In this regard, India-Japan Joint Credit Mechanism (JCM) pitches for cooperation between two countries to reduce greenhouse gas emission in India. Both sides aimed to launch sustainable fuel initiative and battery supply chain partnership. , which will pose a new challenge to China.

To this end, under TDSG plan (Time Division Switching Group), India launched its first lithium – ion battery manufacture for hybrid vehicle. Japanese companies are significantly increasing investment in India’s battery sector, driven by joint strategic efforts. These include joint ventures between Toshiba Corporation, Denso and Suzuki of Japan in Gujarat.

Besides, the visit initiated a new era for exchange of human resources between the two countries. Both sides agreed to exchange 5 lakh skilled workforces in different fields. Under this, 50,000 skilled Indians will be invited to Japan.

Special ties between the two countries began with the first ever visit of Emperor Akhito and Empress  Michiko to India in 2013. In the following year, India and Japan shared a “Special strategic and Global Partnership”. These led India and Japan into a closer and strategic relation. The relation became further stronger by the visit of late Prime Minister of Japan Shinzo Abe, who became the first Japanese Prime Minster as Chief Guest to Republic Day celebration in 2014.

According to JBIC (Japan Bank for International Cooperation) survey 2024, India emerged the top investment destination in Asia.  ccording to a survey by JETRO (Japan External Trade Organization), India took lead in Japanese investor’s expansion in Asia. In contrast, business expansion intension in China hit a
record low.

Local demand became the trigger for Japanese companies profitability in India. Japanese investment in India increased five times more. It surged from US$ 1,570 million in 2020 to US$ 5341 million in 2024. In contrast, it fell in China – from US$ 11,025 million in 2020 to US$ 3,305 million in 2024.

Besides investment and exchange of human resources, Modiji’s visit expanded potential for Digital
Partnership and AI cooperation initiatives, embracing development of semiconductor device manufacturing. India does not have manufacturing facilities for semiconductor devices. Recently, three companies have decided to manufacture semiconductor devices, including a Japanese investor. It is Renesas Electronics, Japan, in partnership with Star Microtech, Thailand. The first indigenous chip will be produced in December 2025.

India’s strong economic fundamentals and progressive growth enchanted Japanese investors to tilt to India. India continued to pitch high growth with 6.5 percent in GDP in 2024- 25, over and above 9.2 percent
growth in 2023-24. S&P Global rating agency upgraded India‘s sovereign credit rating to BBB, focusing on strong economic fundamentals.

Growth led India vie for alternative supply chain manufacture. It gained a momentum growth in electronic
and electrical industries. PLI scheme (Productivity Linked Incentive) emerged a policy dynamism to spark growth in these industries. Production of electronic goods doubled to US$101 billion in 2023-24, from a mere US$48 billion in 2017-18.

Notably, USA emerged the biggest destination for India’s exports of electronics and electrical goods. Nearly one third of India’s export of electronic goods (32.0 percent) and one sixth of export of electrical goods (16.4 percent) went to USA in 2024-25. These demonstrate India’s growing challenge to China and Vietnam for supply chain.

Nonetheless, there is a bug which may hinder Japanese investment in India. Restriction on Chinese investment in India may ac disincentive to Japanese investors. Currently, Chinese investment in India is restricted due to security concern. As a result, Japanese investors are unable to shift their Chinese supply chain manufacturers to this country and produce low cost supply chain products.

The unique business practice of Japanese investment abroad is to build its own supply chain through its vendor systems. They provide financial as well as technical support to their vendors. Given the larger presence of Japanese investment in China, Japanese investors developed their own Chinese supply chain
manufacturing facilities, pouring both financial stake and technology transfer

To this end, the trilateral relationship between India-Japan- China is indispensable to make India global hub for supply chain workshop.