Not Just Toyota and Suzuki — Why Japanese Investment Money is Heading to India

The Reality of Japanese Companies "Rushing to India" —— After China +1, the Next is the "Core of Growth"

In recent years, India's presence in the overseas strategies of Japanese companies has significantly increased. The initial trigger was "China +1 (decentralization)," but what's happening now is more than just that.With a young population, growing domestic demand, and policies promoting foreign investment, India is being upgraded from an "alternative base" to the "core of long-term growth."

There are multiple factors supporting this shift. For example, in terms of Japan's foreign investment flow, Japan's inward direct investment to China (BOP basis) shrank from about $13 billion in 2012 to about $3 billion in 2023, while investment in India increased to about $6 billion in 2023, surpassing China, according to reports.ETGovernment.com

Moreover, the number of Japanese companies operating in India is on the rise, with 1,441 registered companies and 5,102 offices (business locations) being reported.The Economic Times

Why India: Japan's "Internal Factors" Pushing Forward

India's appeal is not just its market size and growth rate. Changes in Japan's domestic demographics (aging population and labor shortages) and the delay in corporate digitalization are pushing companies to seek opportunities abroad.

In fact, event reports summarizing the activities of Japanese companies in India indicate that about 1,400 Japanese companies are operating in India, with approximately 4,900 offices, and further mention that about 70% of these companies are profitable, and over 75% plan to expand. An interesting point is that the focus is shifting from wage levels to **turnover rates (personnel fluidity)** as a concern.Ministry of Economy, Trade and Industry

"It's easy to hire, but hard to retain" —— this "typical India experience" is becoming the next competitive axis.

Not Just Manufacturing: Real Estate, Finance, and GCC (Development Bases) Simultaneously Emerging

The current characteristic is the wide "scope" of expansion. In addition to factory investments (manufacturing bases), movements are overlapping in areas such as the following:

1) Real Estate: High Returns and Rising Rents

Reuters highlights that Japanese real estate giants are deepening their investments in India due to rising rents, relatively low construction costs, and high growth expectations. Specific examples include Mitsui Fudosan's project in Bengaluru and Sumitomo's large-scale commitments. Additionally, India's development returns (6–7%) surpass those in Japan (2–4%), although challenges such as land acquisition and construction delays are also noted.Reuters

2) GCC: The "Quiet Favorite" of Japanese Companies is "Talent x DX"

Accelerating in India are GCCs (Global Capability Centers: global business and development bases). Reports indicate that there are about 85 Japanese GCCs in India, employing around 180,000 people, with predictions of expanding to 150 centers, employing about 350,000 people, and investing $2.5 billion annually by 2028.The Times of India
The ability to secure not only labor costs but also 24-hour development, AI/cloud, and business reform "execution teams" is significant.

3) Automotive: Making India an Export Hub (Including EV/Hybrid)

Industry stories circulated on LinkedIn summarize that Toyota, Honda, and Suzuki are planning investments totaling $11 billion, positioning India as a new production and export base.LinkedIn

(On social media, the narrative of "India as the next hub" is strong, with the context of investment shifting from "instead of China" to "the center of a growing market.")

Tailwinds from India: Policies, Systems, and "Make in India"

India's government initiatives to strengthen manufacturing are also a tailwind. For example, regarding the PLI (Production Linked Incentive), a framework offering incentives of 4-6% on incremental sales in 14 sectors, along with progress in beneficiary companies, investments, and employment, is being reported.The Economic Times

Furthermore, in the joint statement of the "Japan-India Business Leaders Forum" by Keidanren, a target of 5 trillion yen in public-private investment and loans agreed upon between the leaders, as well as the expansion of human resource exchanges (improving mutual acceptance environments), are clearly stated.Keidanren

In the semiconductor field, Japan's stance of strengthening involvement in building India's ecosystem and nurturing human resources has been reported.The Economic Times

However, it's not just about enthusiasm: The "Challenges of India" Japanese Companies Face

While there are many positive reactions on social media, such as "Japan is seriously betting on India," calm points of discussion are repeatedly mentioned.

• Project Delays: In the context of real estate development, risks related to land acquisition, procedures, and construction periods are pointed out.Reuters

• Retention of Personnel: The issue of turnover rates being more critical than wages is particularly significant in the context of GCC expansion.Ministry of Economy, Trade and Industry

• The Pitfall of "Expansion for Its Own Sake": As systems and markets grow, careless partner selection, compliance, and supplier management can lead to the scale of accidents increasing directly.

Ultimately, conquering India is more about "retention" than "entry." Now, with the tailwinds of infrastructure and policy, the difference will be made in the local operation practices (recruitment, training, quality, governance).

Social Media Reactions: The Focus is on "Automotive," "Human Resources," and "FOMO"

Regarding this theme, the prominent reactions on social media (mainly LinkedIn) can be broadly categorized into three.

1. The View that "Automotive Leads"
   There are many posts and shares about "Toyota, Honda, and Suzuki making India an export base," emphasizing investment amounts and the transformation into an export hub.LinkedIn

2. The Complementary Relationship of "Labor-Short Japan x Young India"
   Posts evaluating India's talent pool against the backdrop of Japan's labor constraints are spreading. Many patterns involve discussing the numbers of GCCs and employment scale.LinkedIn

3. The Atmosphere of "Fear of Missing Out (FOMO)"
   There is an increase in narratives like "Japanese company inspection teams are now C-suite level" and "If we don't go now, we'll miss opportunities" (caution against the depletion of investment destinations and quality partners).The Economic Times

These reactions indicate that India is no longer just "one of the options," but is becoming a mandatory subject in corporate strategy.

Next Focus: Commonalities of Companies Winning in India

Finally, I would like to highlight key points for Japanese companies to "grow big and not crumble" in India.

• Make Local Partners "Co-Designers" Rather Than "Sales Agents" (incorporating realities of regulations, procurement, and human resources)

• Incorporate Personnel Retention into Investment Plans (the cost of leaving is heavier than the cost of hiring)Ministry of Economy, Trade and Industry

• Build "Quality, Audit, and Traceability" with Third-Country Exports in Mind (in the context of "Make in India for the World")Keidanren

India is both a "growing market" and a "difficult market because it is growing." Therefore, the current "rush of Japanese companies" is just the beginning. The next question is who can bring it to the point of a long-term profit-generating operational design.