Foreign direct investment (FDI) from Japan in India has been rising, and Japanese investments in foreign equities (as of end-2022) showed India at the top of the list for developing countries, underscoring Mumbai’s increasing importance to investors in Tokyo seeking durable returns on investments.
Japanese individual investors are also investing more aggressively in Indian stocks by way of investment trusts, with India now at the top of the list among emerging market economies, the report said. China, a traditional beneficiary of Japanese investments over the years, has slid in the preference rankings.
“In the ranking of countries seen as promising for the medium term in the Japan Bank for International Cooperation (JBIC)’s FY23 Survey on Overseas Business Operations by Japanese Manufacturing Companies, India took the top spot for a second consecutive year, even as China fell to number three,” said the Nomura report, a collaborative effort by Indian and Japanese economists and equity strategists.
Manufacturing sectors have been the main driver of Japanese direct investment in India to date, with transport equipment accounting for 35.1% of direct investment in the country, machinery equipment for 10.5%, and chemicals and pharmaceutical for 6.5% as of end-2022.
Significantly, Japanese financial institutions have been increasingly moving into India, and have maintained a certain presence in India even while the balance of international loans in India has been falling, Nomura said.