Japan has become the top source of foreign direct investment (FDI) into India during the first quarter of the 2026-27 fiscal year, with inflows reaching $5.71 billion. This figure surpasses the $3.74 billion India received from Japan throughout the entire 2025-26 fiscal year, highlighting a significant surge in investment. The Japanese inflows account for nearly 29% of the total equity inflows ($19.81 billion) that India received during the quarter.
The investments from Japan are part of a broader strategy, as the country had previously set a target of investing 10 trillion yen (about Rs seven lakh crore) in India over a decade. Commerce and Industry Minister Piyush Goyal recently visited Japan to strengthen bilateral trade and investment ties. According to Anil Talreja, Partner at Deloitte India, Japanese institutional investors are increasingly active, with financial institutions deepening their engagement with India. Talreja noted that Japan is diversifying its supply chains, and India is attracting Japanese capital due to its technology, manufacturing capabilities, and long-term investment potential.
The spike in Q1 FY27 was driven by major financial-sector transactions and acquisitions, rather than greenfield manufacturing investments. Banking, financial services, technology, digital infrastructure, and Global Capability Centres (GCCs) are now key areas for Japanese investment. This shift indicates that Japanese firms are viewing India not only as a manufacturing base but also as a consumer market, technology hub, and GCC. India has also established 12 Japanese industrial townships (JITs) across nine states to support this investment.
Rudra Kumar Pandey, an equity partner at Shardul Amarchand Mangaldas & Co, emphasized that the surge in FDI reflects strong confidence in India. Large strategic transactions and expansions by established Japanese companies are driving this growth, particularly in financial services, construction, logistics, automotive, batteries, and renewable energy. Notably, Japan's MUFG Bank acquired a 20% stake in Shriram Finance Ltd for Rs 39,618 crore ($4.4 billion), marking the largest cross-border investment in India's financial services sector.