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Japanese companies are preparing to deepen their presence in India, but the next wave of investment is likely to look markedly different from the one that brought automobiles, industrial plants and infrastructure projects to the country.
Artificial intelligence, semiconductors, digital infrastructure, clean energy, critical minerals, advanced manufacturing and engineering-led research are emerging as the new frontiers of the India-Japan investment relationship, as companies in both countries reposition themselves for an economy increasingly shaped by technological competition, supply-chain disruption and the search for resilient global production networks.
The shift is already visible in the numbers.
The number of Japanese-owned businesses operating in India has reached a record 1,463 in 2026, employing more than 459,000 people, while Japanese Global Capability Centres have increased to 75, according to Grant Thornton Bharat’s latest report, Indo he Yokoso: Shaping the Future of Japanese Investments in India.
Technology now accounts for 13 percent of Japanese companies in India, underscoring a gradual diversification beyond the manufacturing sectors that have traditionally defined Japan’s corporate footprint in the country.
The larger significance, however, lies in the changing purpose of investment.
Japanese companies are increasingly looking at India not merely as a large market or a relatively competitive manufacturing location, but as a base for engineering, research and development, digital operations and global business services. That could place India deeper inside the global operating structures of Japanese corporations rather than at the periphery of their overseas expansion strategies.
“Through our work with Japanese companies and stakeholders across the corridor, we are witnessing a clear evolution in the India-Japan business relationship,” said Alok Saigal, Partner, International Business, Grant Thornton Bharat.
“Organizations are increasingly looking beyond individual investments and transactions towards building long-term capabilities, strategic partnerships and sustainable growth platforms,” Saigal said, adding that India’s expanding role in global value chains could create stronger opportunities for collaboration across manufacturing, technology, services and innovation.
That transition could define the next decade of the bilateral economic relationship.
SEMICONDUCTORS AND ADVANCED MANUFACTURING
Semiconductors are likely to be among the most closely watched areas.
India’s ambition to build a domestic semiconductor ecosystem coincides with Japan’s long-standing strengths in semiconductor materials, specialized equipment, manufacturing technologies and advanced components. As global companies seek to reduce excessive concentration in electronics supply chains, India offers Japanese companies an opportunity to participate in the development of a new manufacturing ecosystem while gaining access to a rapidly expanding market.
The opportunity extends beyond semiconductor fabrication.
Japanese companies could find growing roles in specialized machinery, industrial automation, chemicals, electronic components and precision manufacturing — areas where Japan has traditionally maintained a technological advantage.
For India, the challenge will be to ensure that investment creates a wider ecosystem of suppliers, engineers and component manufacturers rather than isolated facilities dependent on imported technology and inputs.
AI, DIGITAL INFRASTRUCTURE AND GCCs
Artificial intelligence and digital infrastructure could become another major pillar of Japanese investment.
The expansion of Japanese GCCs in India to 75 reflects an important shift in corporate strategy. India is increasingly being used to support technology, engineering, research, digital and business operations serving not only the domestic market but also global businesses.
That could prove particularly significant for Japanese corporations confronting demographic pressures and labour shortages at home.
India’s large pool of technology professionals provides Japanese companies with access to software engineers, data specialists and digital talent at a scale that Japan itself is unlikely to replicate. The question now is whether Japanese companies will move beyond traditional back-office and support functions and increasingly locate higher-value research, product development and artificial intelligence capabilities in India.
The answer will determine whether India becomes merely a service provider or an innovation partner.
CLEAN ENERGY AND CRITICAL MINERALS
Clean energy is another sector where strategic interests and commercial opportunities increasingly overlap.
India’s rapidly rising energy demand, coupled with its transition towards renewable power, electric mobility and cleaner industrial processes, will require massive investments in new technologies and infrastructure.
Japanese companies possess expertise in energy-efficient technologies, batteries, hydrogen, industrial systems and advanced manufacturing. India, meanwhile, offers scale and a potentially enormous market.
Collaboration could therefore expand across green hydrogen, battery technologies, energy storage, electric mobility and renewable-energy equipment.
Critical minerals will also assume greater importance.
As countries compete to secure access to materials needed for semiconductors, batteries and clean-energy technologies, India and Japan have a shared interest in developing more secure and diversified supply chains. Investment partnerships could increasingly extend from mining and processing to recycling, materials technology and strategic stockpiling.
FROM TRANSACTIONS TO LONG-TERM CAPABILITIES
The broader investment relationship is already substantial.
Japanese cumulative foreign direct investment in India has reached $48.14 billion, including $3.75 billion during fiscal year 2025-26. Bilateral merchandise trade has roughly doubled over the past decade to $27.48 billion.
Meanwhile, the India-Japan corridor recorded 51 deals worth $12.17 billion between 2021 and 2025, with 2025 accounting for nearly two-thirds of the total deal value.
Yet the figures also reveal the potential for a much larger relationship.
For two major Asian economies with complementary industrial strengths and strategic interests, bilateral trade remains relatively modest. The next stage will therefore depend on whether companies can move beyond individual investments and develop deeper supply chains, technology partnerships and cross-border production networks.
“India and Japan bring highly complementary strengths to the global economy,” said Mitsuhiro Takemura, Partner at Grant Thornton Taiyo Advisors Co., Ltd.
“Japan’s leadership in advanced manufacturing, technology and quality excellence, combined with India’s scale, talent and digital capabilities, creates significant opportunities for innovation-led growth,” Takemura said.
As businesses navigate an increasingly volatile global environment, collaboration between the two countries could unlock new avenues for investment, capability development and cross-border value creation, he added.
That complementarity could become increasingly important as global companies reassess their dependence on concentrated supply chains.
THE NEXT TEST
The investment story, however, will not be measured simply by the number of Japanese companies entering India.
The more important test will be whether Japan begins locating strategically significant capabilities in the country — including advanced engineering, research and development, semiconductor supply chains, artificial intelligence and clean-energy technologies.
India will have to address persistent concerns over regulatory predictability, infrastructure, logistics and the availability of specialized skills. Japanese companies, traditionally known for their cautious and long-term investment approach, will also need greater confidence that India’s policy environment can support projects with long gestation periods.
But the strategic logic is becoming increasingly difficult to ignore.
Japan needs new markets, diversified supply chains and access to global technology talent. India needs capital, advanced technology, manufacturing expertise and stronger integration into global value chains.
Those requirements are pushing the relationship beyond its traditional foundation.
The record 1,463 Japanese companies and the growing network of GCCs suggest that the transformation is already under way. The next wave of investment is likely to concentrate less on simply building factories and more on building capabilities.
If artificial intelligence, semiconductors, digital infrastructure, clean energy, critical minerals and advanced manufacturing become the new anchors of Japanese investment, the India-Japan corridor could evolve into one of Asia’s most consequential technology and industrial partnerships.
The opportunity is no longer merely to increase investment.
It is to build an economic relationship capable of shaping the supply chains, technologies and industries that will define the next phase of global growth.
