Two months after U.S. President Donald Trump described India as a “dead economy” with which the U.S. does “very little business,” the Indian economy has received a strong vote of confidence from Japan.
During Indian Prime Minister Narendra Modi’s visit to Japan on August 29 and 30, Japan announced $68 billion of private investments in India over the next decade.
The large investment that the Japanese have promised India is an important takeaway from Modi’s visit, Srabani Roy Choudhury, professor of Japanese Studies at Jawaharlal Nehru University in New Delhi, told The Diplomat. However, “it comes with the caveat that it is private investment,” she said, pointing out that “since it is a private investment, Japanese companies, while in principle may have agreed, will conduct due diligence on India’s capacity to absorb technology, possess the required skill set, and have an overall ecosystem to actually invest.”
During Modi’s visit, India and Japan announced a Joint Vision for the Next Decade, which prioritizes cooperation in economic partnership, economic security, mobility, ecological sustainability, technology and innovation, health, people-to-people, and state-prefecture engagement. This is not only “pragmatic” but also “opens new avenues for cooperation,” Choudhury said.
Another positive outcome of Modi’s visit was the launch of a separate State-Prefecture Partnership Initiative that envisages engagement between Indian states and Japan’s prefectures. The initiative will push India-Japanese engagement beyond the traditional bilateral focus i.e., away from Delhi and Tokyo toward state-prefecture or subnational engagement. This will “help embed projects faster,” Choudhury said.
But for a short period following India’s nuclear tests in 1998, which Japan strongly condemned, India-Japan relations have generally been free of irritants. Both are democracies. India is the largest recipient of Japanese overseas development assistance. Cumulative FDI from Japan to India since 2000 stands at $44.4 billion, and bilateral trade is worth around $22.85 billion annually.
The bilateral relationship has grown from a “Global Partnership” in 2000 to a Strategic and Global Partnership in 2006, and a Special Strategic and Global Partnership in 2014. India and Japan are part of the Group of four countries, which are campaigning jointly for U.N. Security Council reform. Together with the U.S. and Australia, India and Japan are part of the Quad grouping.
Modi traveled to Japan last week to attend the 15th India-Japan Annual Summit. This year’s summit meeting with Prime Minister Ishiba Shigeru was of particular importance as it came amid global economic turbulence due to President Donald Trump’s imposition of tariffs on Washington’s trade partners. While the Trump administration has imposed a 15 percent tariff on Japanese goods, Indian goods have been slammed with 50 percent tariffs, the highest globally. Understandably, India and Japan are viewing their bilateral ties with Washington and the future of Quad with considerable anxiety.
Under the Economic Security Cooperation Initiative, the two sides will work together in artificial intelligence and a digital partnership program, as well as in strategic sectors like semiconductors, clean energy, telecom, pharmaceuticals, critical minerals, and new and emerging technologies. “This is aimed at enhancing supply chain resilience that will in turn improve their economic and regional security,” an official in India’s Ministry of External Affairs (MEA) said.
In addition, India and Japan have launched an AI Cooperation Initiative to deepen bilateral and multilateral cooperation on artificial intelligence, which will, among other things, establish platforms for exchange between industry and academia, support joint research projects, and facilitate the development and operation of data centers in India.
India-Japan defense cooperation has deepened over the past two decades, especially in the context of a rising China. Although the Joint Statement issued at the end of Modi’s visit made no mention of China, it is evident that the “serious concern” expressed by the two sides “over the situation in the East China Sea and the South China Sea” and the “strong opposition” to “any unilateral actions” endangering freedom of navigation, is aimed at Beijing.
A Joint Declaration on Security Cooperation outlines specific activities whereby India and Japan can contribute to each other’s defense capabilities, including more complex and sophisticated bilateral exercises, collaboration between special operations units, and enhancing the use of the India-Japan Agreement Concerning Reciprocal Provision of Supplies and Services. It updates the 2008 joint declaration to include collaboration in such fields as the cyber and space domains, and joint development of defense equipment. It provides for an institutionalized dialogue between the national security advisors of the two countries.
India and Japan have long described their relationship as a mutually beneficial one. “We need to take advantage of each other’s strengths,” Ishiba said during Modi’s visit. While Delhi views the growing Japanese investment as key to advancing Modi’s ‘Make in India’ economic agenda, the Japanese perceive India’s rapidly growing economy as an important market for Japanese funds and products, especially as Japan seeks to diversify its trade amid ongoing tensions with the U.S.
Our “strengths are complementary,” the MEA official said. While India possesses critical mineral reserves, Japan has the technical expertise to extract these minerals. Cooperation in this area will benefit both countries, he pointed out.
Likewise, the Japanese action plan to promote two-way exchange of 500,000 people between India and Japan, particularly 50,000 skilled and semi-skilled personnel from India to Japan in the next five years, while providing employment to Indians will help ease labor shortage woes of a rapidly greying Japan. The plan also includes Indian students going to Japan for education, Choudhury said, adding that Suzuki Corporation has big plans in this regard.
India and Japan are both “determined to accelerate cooperation, as evident from their implementation of investment targets,” the MEA official said. He pointed out that the two countries had set an investment target of $34 billion by 2026, but were successful in achieving the target a year ahead. “This prompted them to double the investment amount to $68 billion over the coming decade,”
While India and Japan may see mutual benefit in cooperation, action to make plans a reality is lagging. Project implementation is slow.
During Modi’s visit, the two sides announced that Japan would introduce its latest E10 series Shinkansen bullet trains to India by 2030. Japan is providing technical and financial assistance for the Mumbai-Ahmedabad high-speed rail project. However, the project is marred by delays – land acquisition problems in Maharashtra are among the main obstacles – and consequent cost overruns. Will the latest deadline turn out to be another mirage?
There is also the question of “whether the Indian economy can absorb the technology or be ‘Japan-ready’ in areas like semiconductors, where India is at the lower end of the value chain,” Choudhury pointed out. “Digitalization is probably the only area where we have more strength than the Japanese,” she added.