Japan Surpasses Singapore as India's Largest FDI Source

The relationship between India and Japan has been marked by significant developments in recent years. According to data released by the Department for Promotion of Industry and Internal Trade (DPIIT), Japan became India's largest single source of Foreign Direct Investment (FDI) in the first quarter of Financial Year 2026-27, contributing $5.71 billion.

This marks a significant shift from previous years, when Japanese FDI was largely driven by concessional development finance. The Japan International Cooperation Agency (JICA) has been a major player in India's urban infrastructure development, financing and providing technology for projects like the Delhi Metro.

However, there is now a growing trend of direct equity investment from Japan, with significant investments in sectors such as manufacturing and technology. This shift was articulated at the 15th India-Japan Annual Summit in August 2025, where both prime ministers committed to a 10-year target of JPY 10 trillion ($67 billion) in Japanese private investment.

The Indo-Japanese economic collaboration is now more elevated than metro rail financing, with a focus on strategic sectors such as semiconductors, clean energy, and critical minerals. The two countries have also committed to promoting local-currency transactions and payment-system cooperation.