MSMEs at the heart of Indo-Japan ties

India's solid network of skill development institutions and Japan's emphasis on quality and precision make them ideal partners in this grassroots transformation

- GEETANJALI KIRLOSKAR

AS INDIA and Japan seek to future-proof their bilateral relationship, one critical yet unexplored frontier is the role of small and medium enterprises (SMEs). These enterprises form the backbone of both economies—driving innovation, generating employment, and enabling inclusive growth. In Japan, SMEs account for over 99% of all companies and employ around 70% of the workforce. India too has over 5.70 crore micro, small, and medium enterprises (MSMEs) that contribute around 30% to its GDP and 46% to its exports. Thus, India-Japan economic conversations must focus on MSMEs.

The evolving global scenario, marked by heightened trade frictions, rising protectionism, and volatility in international commodity and financial markets, has created considerable uncertainty and weighed heavily on economic prospects. Amid this challenging environment, India has continued to demonstrate resilience, underpinned by strong macroeconomic fundamentals, robust domestic demand, and a stable policy framework, reaffirming its position as a reliable and attractive partner in the global economic landscape.

The India-Japan economic relationship has demonstrated strength, with bilateral trade and investment recording significant growth. Bilateral trade has expanded by nearly 48% from $16.95 billion in FY20 to $25.17 billion in FY25. Foreign direct investment (FDI) from Japan has also been significant, totaling $44.40 billion over the past two decades.