Japanese Firms Investing More in India Amid Rapid Economic Growth; Domestic Demand Gives Companies Confidence

By Takashi Itoda / Yomiuri Shimbun Correspondent

6:00 JST, July 15, 2025

BANGKOK — Japanese manufacturing companies are accelerating their investment in India, with its rapidly growing economy and domestic demand that is expected to remain strong.

With a population of over 1.4 billion, the largest in the world, the presence of India’s economy is growing amid concerns about a global trade slowdown due to the U.S. tariff policies.

Impact of U.S. tariff policy

Sumitomo Mitsui Banking Corp. on July 7 in Bangkok held a seminar on business in India. The seminar was held because the Thai economy is expected to slow down due to U.S. tariff measures and an increasing number of companies are considering a shift in production to India.

“India’s exports are not large, so the impact of tariff measures is relatively small,” said Hiroyuki Mesaki, head of SMBC’s business in India. About 130 people, including Japanese corporate executives, attended the seminar.

According to Japan Research Institute, Ltd., India’s exports accounted for 21.2% of the country’s gross domestic product in 2024 – the second lowest percentage among major Asian countries and regions after China’s 20%. Therefore, it is viewed that the United States raising tariffs on imports from the country would have only a limited impact on the Indian economy.

Honda Motor Co. plans to add a production line at its motorcycle plant in Vithalapur, southwestern India, through an investment of about ¥16.1 billion. Honda has three other factories in India, and it plans to increase its production capacity in India to 7 million units per year by 2027, up more than 10% from the current level.

Suzuki Motor Corp., meanwhile, began operations at its fourth vehicle assembly plant in India in February. Daikin Industries, Ltd. plans to start operations at a new air conditioner factory by 2030.

Daifuku Co., a manufacturer of factory conveyors, began operations at a new factory in Hyderabad, southern India, in April. “India’s domestic demand is expanding, so we can expect stable orders and make bold investments,” said Daifuku President Hiroshi Geshiro.

Overseas firms see opportunity

The International Monetary Fund forecasts that India’s economic growth rate will exceed 6% annually from 2025 to 2030.

Companies from Europe, the United States, South Korea and elsewhere are also accelerating their expansion into India. According to the Indian Commerce and Industry Ministry, foreign direct investment into India increased by 28% year-on-year to $53.1 billion (about ¥7.8 trillion) in 2024. Indian research institute GTRI expressed expectations for India’s economy, saying, “the U.S. tariff policy will enhance India’s position in manufacturing.”

However, in U.S.-India tariff negotiations, India has said it is prepared to lower tariffs on U.S. products, which could lead to changes in the business environment. “India has promoted its domestic manufacturing sector by imposing high tariffs on imports and providing subsidies to foreign companies building factories, but it may be forced to change its policies,” said Toru Nishihama, a chief economist at Dai-ichi Life Research Institute Inc.