India's manufacturing strategy can leverage both Japan and China

India is not required to choose between investments from Japan and China to enhance its manufacturing industry. The absence of Chinese suppliers may hinder Japanese investments from reaching the desired scale and speed. This century, Japan has significantly invested in India, with total FDI surpassing US$48 billion. In the financial year 2025-26, Japan contributed US$3.2 billion, ranking second after the US, excluding Singapore and Mauritius. However, during this timeframe, trade with Japan was merely US$27.5 billion, while trade with China, its largest trading partner, reached US$151 billion. Japanese industrial investments frequently depend on components sourced from China. FDI plays a crucial role in economic growth. China's net FDI rose from US$42 billion in 2000 to a high of US$344 billion in 2021, then fell to US$43 billion in 2024. India's net FDI inflow hit a peak of US$64 billion in 2020, declining to US$27 billion in 2024. Since 2000, India's cumulative FDI inflow has approached US$1.2 trillion, yet its FDI stock was roughly half a trillion in 2023.