Overview: Japan became India’s largest source of FDI equity inflows in April-June 2026, attracting approximately $5.71 billion. A major financial-sector transaction contributed significantly to this increase, so the figure should not be treated as a recurring trend. India and Japan have also set a target of ¥10 trillion (US$63.26 billion) in Japanese private investment over the following decade, creating potential opportunities for Indian businesses seeking capital, technology and international partnerships.
Japanese investment is creating opportunities for Indian businesses beyond direct funding. Companies may find opportunities through joint ventures, manufacturing partnerships and supply contracts with Japanese firms.
However, securing these opportunities requires preparation. Businesses need suitable corporate structures, reliable financial records and a clear understanding of the foreign investment rules that apply to their transactions.
Why Is Japanese Investment Increasing in India?
Three developments explain the growing interest.
- Large financial-sector investment: Japan contributed approximately $5.71 billion in FDI equity inflows during Q1 FY27. MUFG Bank’s $4.4 billion investment for a 20% stake in Shriram Finance contributed significantly to the increase. The transaction was completed in April 2026.
- Expansion plans: JETRO’s FY2025 survey found that 81.5% of Japanese-affiliated companies surveyed in India intended to expand their local operations. India ranked first on this measure, marking the second consecutive year of strong expansion intent.
- Supply-chain diversification: Under the China Plus One strategy, companies consider sourcing and manufacturing options beyond China. Indian manufacturers and suppliers may benefit if they meet Japanese buyers’ quality, pricing and delivery requirements.
India and Japan have also set a target of mobilising ¥10 trillion (US$63.26 billion) in Japanese private investment over the decade following their August 2025 summit. This is a future target, not a guarantee that the entire amount will be invested.
How Can Indian Businesses Prepare?
Automotive components, electronics, chemicals, pharmaceuticals, clean energy and industrial manufacturing offer potential opportunities. Micro, Small and Medium Enterprises (MSMEs) may also secure supplier contracts or enter joint ventures, depending on their capabilities and buyers’ requirements.
Check FDI Eligibility
Before accepting foreign investment, businesses should check whether their sector permits overseas investment, the applicable ownership limit and the relevant entry route. Some sectors permit investment under the automatic route, while others require government approval or impose additional conditions.
Businesses should review the applicable Foreign Direct Investment (FDI) rules before finalising an investment.
Choose the Right Business Structure
A Japanese investor may invest in an existing Indian company, establish a wholly owned subsidiary or enter a joint venture with an Indian partner. The choice depends on ownership, funding, management control and long-term business plans.
Joint-venture partners should agree on board representation, decision-making powers, future funding, share transfers and exit arrangements. These terms should be documented in a properly drafted shareholders’ agreement.
Meet FDI and RBI Reporting Requirements
Foreign investment must comply with the Foreign Exchange Management Act (FEMA), the applicable Non-Debt Instruments Rules and relevant Reserve Bank of India (RBI) directions.
Key requirements include:
- Pricing and valuation: The transaction must follow the applicable FEMA pricing rules. For unlisted companies, the prescribed valuation methodology and certification requirements must be met.
- Form FC-GPR: An Indian company issuing equity instruments to a non-resident under the FDI framework generally needs to report the issue to the RBI within 30 days of issue.
- Form FC-TRS: Specified transfers of equity instruments between residents and non-residents must be reported under the applicable rules. The reporting responsibility and deadline depend on the transaction.
Businesses should identify the applicable requirements before completing the investment, as obligations differ between fresh issues and transfers of existing shares.
Prepare for Due Diligence
Japanese investors and buyers may review financial statements, tax records, corporate governance, production capacity and intellectual property arrangements before entering a partnership.
MSMEs seeking supplier contracts should assess whether they can meet technical specifications, quality standards, delivery schedules and documentation requirements. Well-maintained records and clear internal processes can make commercial discussions more straightforward.
Setindiabiz Support
Setindiabiz supports foreign investors and Indian businesses with India-entry planning, subsidiary incorporation, joint-venture documentation and FDI-related compliance. Its professionals assist with corporate documentation and applicable regulatory filings, helping businesses establish suitable structures and maintain compliance as their operations develop.
FAQ
India and Japan have set a target of ¥10 trillion (US$63.26 billion) in Japanese private investment in India over the decade following their August 2025 summit.
Automotive-component manufacturers, electronics businesses, pharmaceutical companies, chemical manufacturers, clean-energy enterprises and industrial suppliers may find opportunities. MSMEs can participate through supplier contracts, manufacturing partnerships and joint ventures.
No. The applicable route depends on the sector and proposed investment. Investments permitted under the automatic route do not require prior government approval, subject to applicable conditions. Investments under the government route require the relevant approval. Businesses must also meet the applicable pricing, documentation and reporting requirements.
Japanese investment presents opportunities for Indian businesses to access capital, develop partnerships and enter international supply chains. Companies that prepare their corporate structures, financial records and regulatory documentation will be better placed to pursue these opportunities.
