Against a backdrop of rising Japan-China geopolitical tensions and structural changes in the market, Japanese companies are stepping up investment in India. As investment in China declines, capital inflows into India and the expansion of local operations are accelerating.
As Japan-China geopolitical tensions rise and economic structures change, Japanese companies are expanding their investment in India. Meanwhile, Japan's investment in China is reportedly on a declining trend.
Japanese retail brands have entered major Indian cities, with UNIQLO, MUJI, Onitsuka Tiger and Nitori among those expanding there. Japanese financial institutions are also entering the Indian market. MUFG Bank acquired a 20% stake in Shriram Finance for $4.4 billion, while SMBC became YES BANK's largest shareholder and holds a 24.22% stake.
Japanese companies currently account for the largest share of India's GCC ecosystem, with more than 100 Japanese companies having already established GCCs. The factors behind their expansion into India include the shrinking domestic market and the diversification of overseas operations.
Following stronger ties since Prime Minister Modi took office, the investment boom among Japanese companies is continuing. During the prime minister's official visit in July, Japanese companies announced approximately $12.5 billion in investment in India through around 120 agreements. To secure sustained long-term capital inflows, India faces the challenge of improving the business environment and ensuring contractual stability.