KUALA LUMPUR - Interest among Japanese companies in expanding business in India is growing, driven by the country’s population of about 1.4 billion and its expanding market, according to the Japan External Trade Organization (JETRO).

As of October 2024, the number of Japanese companies operating in India stood at 1,434. While this represented an increase of 35 companies from 2023, the figure has remained largely flat since 2018, after peaking at 1,455 in 2020.

The number of business locations has been gradually increasing due to expansion by companies already operating in the country, but overall growth has remained modest.

According to a survey by Japan’s Ministry of Foreign Affairs, Japanese corporate presence in India is still considered to be in a developing stage, given the country’s population size and economic scale.

In comparison with other countries, the scale of Japanese corporate expansion in India remains smaller. 

The number of Japanese business locations is significantly higher in the United States (9,639 locations) and China (32,364 locations). 

Within Asia, countries such as South Korea (3,003 companies) and major ASEAN economies, including Thailand (6,083 companies), Singapore (4,558 companies), Vietnam (2,543 companies), and Malaysia (1,643 companies), host larger numbers of Japanese firms than India.

Looking at industry composition, manufacturing accounts for nearly half of Japanese companies operating in India, representing 49.4% of the total. 

Within manufacturing, major sectors include transportation equipment such as automobiles, electrical and electronic machinery, and metal processing.

In contrast, Thailand, the country with the largest concentration of Japanese companies in ASEAN, has a more diversified industrial structure. 

Manufacturing accounts for around 40% of Japanese firms in Thailand, while sectors such as wholesale and retail, services, and real estate have expanded significantly.

Japanese companies initially entered Thailand mainly through manufacturing, particularly in the automotive and electronics industries.

Over time, however, business activities diversified into areas such as retail, services, finance, and real estate.

A similar pattern can be observed in investment trends. Japanese direct investment in Thailand remains centered on manufacturing, but its share declined from 64.2% in 2014 to 57.8% in 2024, indicating gradual diversification of investment sectors.

Japanese investment in India, meanwhile, totaled approximately 5.8 trillion yen as of 2024, smaller than Thailand's but approaching the level Thailand had a decade earlier. 

Manufacturing continues to dominate Japanese investment in India, accounting for 61.9%, with transportation equipment, particularly the automotive sector, representing a large share.

Based on Thailand’s development trajectory, analysts suggest that Japanese business activities in India may also gradually expand beyond manufacturing into a wider range of industries.

However, India’s conditions differ significantly from those of Thailand. 

The country’s land area is about six times larger, and industrial clusters are spread across multiple regions rather than concentrated around a single metropolitan area. 

As a result, companies aiming to operate nationwide may need to establish multiple business locations.

India’s economy is also strongly driven by domestic demand due to its large population. Many Japanese companies operating in India focus primarily on the domestic market rather than exports.

At the same time, the Indian government has been actively pursuing free trade agreements (FTA) with other countries. 

As these policies progress, India may increasingly emerge as a manufacturing base for exports to regions west of Asia, including Europe, the Middle East, and Africa.