The Japanese economy is highly advanced, with the services sector accounting for 68% of the GDP n 2007. The industrial sector, once the engine of Japan’s growth, now contributes only 30 percent of the GDP while the agricultural sector accounts for one percent. Similarly the service sector is the largest contributor to India’s GDP, accounting for 52% while agriculture and industry contribute 18% and 30% respectively.
The two countries, therefore, share a similar structure especially with regard to their reliance on service sector. In recent years, India and Japan have strengthened bilateral ties through new initiatives and programmes ranging from economic and cultural linkages to defense and security. The year 2007 was celebrated as the year of Friendship between the two countries. Japan gives 30 percent of its overseas development assistance to India and remained committed even during the period of the global economic slowdown. For example, Japan has granted almost $ 4 billion for the Delhi- Mumbai Industrial Corridor (DMIC).
Potential areas for cooperation between India and Japan
India and Japan are poised to emerge as the two major pillars of the new Asia. The economic partnership between India and Japan has grown in the economic field. There are immense opportunities provided by the complementarities between the two economies to expand the flow of trade, technology, investment and people to people contact between the two nations. The flow of trade and investments between the two countries has been unspectacular because Japanese companies have focused on business with China and Southeast Asia.
- Several industries in Japan are now in sunset phase because the current international economic environment has rendered them non-competitive. Exports from manufacturing sector in Japan have declined in the recent years. One of the possibilities could be the relocation of these industries in India where skilled labor is available at reasonable cost.
- Japan acts as a bridging nation between India and the world. India should forge stronger ties with Japan which would help it to establish its presence in East Asia and get market access for its exports through Japan’s bilateral agreements with countries in the region.
- Japan and India could collaborate in the following areas :
- Biotechnology
- Nano-technology
- Information technology
- Automobile
- Aerospace
- Textiles
- Leather
- Marine products and many more
Trend in Foreign Direct Investments in India from Japan
FDI equity inflows from Japan (Financial year wise)
Amount Rupees in Crores (US$ in million)
Source: Department of Industrial Policy & Promotion
As per financial estimates for 2010-11, Japan is the 5th largest investor in India. For the past 3 years, Japan’s share as investor in Indian market is consistently rising and stands at 11.07% for the April-November 2011-12.
Top sectors that attracted FDI equity inflows from Japan (from April 2000 to January 2011) from Japan are: 
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