Japanese Capital Set To Expand Into India’s Financial Services, Broader Services Sectors
Japanese capital is poised to expand beyond manufacturing into India’s financial services and broader services sectors as economic ties between the two countries deepen, according to Sundeep Sikka, MD and CEO of Nippon Life India Asset Management. He said India’s growing domestic capital markets, improving policy environment and strengthening bilateral relations are creating new opportunities for long-term Japanese investors.
Speaking at IIMBue 2026 event in Bengaluru, Sikka said Japan’s investment strategy towards India is evolving from its traditional manufacturing focus to a wider play across finance, services and digital innovation. He added that while manufacturing will remain important, the next phase of Japanese investments will increasingly target sectors supported by India’s expanding domestic economy and capital markets.
Financial Services Emerge As The Next Investment Frontier
“The financial sector has started recently,” Sikka said, attributing the shift to closer engagement between the governments of India and Japan. Referring to the bilateral vision to facilitate greater Japanese investment, he said Japan possesses one of the world’s largest pools of savings but is seeking stronger growth opportunities overseas.
“The political relationship with India and Japan… I see a large amount of Japanese capital coming to India. This time it will come beyond manufacturing, will come into financial sector and service sector and the trend has already started,” he said.
Sikka noted that Nippon Life’s investment in India marked one of the country’s largest foreign direct investments in the financial services sector. Since then, he said, Japanese banks and financial institutions have shown growing interest in the Indian market, with enquiries extending beyond finance into healthcare, engineering and other emerging sectors.
Long-term Capital, Not Short-term Returns
According to Sikka, Japanese investment philosophy differs fundamentally from many global markets because it prioritises long-term sustainability over near-term gains.
“Many companies… think of a quarter or a year, but Japanese companies think of generations,” he said, explaining that long-term planning, organisational discipline and consistency have been central to Nippon’s operations in India. He added that Indian businesses, in turn, contribute agility and flexibility, making the combination effective in the local market.
He cautioned against transplanting business models from overseas without adapting them to local conditions, saying several foreign companies struggled in India because they attempted to “plug-and-play” practices from their home markets rather than tailoring them for Indian consumers.
Digital Fund Aims To Deepen India-Japan Collaboration
Highlighting another area of engagement, Sikka spoke about the Nippon India Digital Innovation Fund, launched alongside the G20 Summit, saying it was designed to provide Japanese institutions exposure to India’s startup ecosystem rather than serve purely as a financial investment vehicle.
“The thought process was… this fund is more than returns,” he said.
According to Sikka, the fund has invested across hundreds of Indian digital startups, with more than half based in southern India. Several Japanese investors have subsequently increased their stakes in portfolio companies after identifying strategic opportunities, particularly in technology-driven businesses. He added that the initiative is intended to strengthen the broader economic relationship between India and Japan alongside generating investment returns.
Domestic Flows Offer Resilience, But Foreign Capital Remains Vital
Sikka also mentioned the growing role of domestic investors in India’s capital markets, particularly through systematic investment plans (SIPs), saying local inflows have increasingly helped absorb periods of foreign institutional selling.
“Domestic SIPs are good enough to take care of almost foreign capital,” he said, while cautioning that India should not view domestic and foreign investments as substitutes. Sikka said that sustained economic growth and currency stability require balanced participation from both investor groups.
Education, Trust And Partnerships Remain Critical
Looking ahead, Sikka said India’s digital public infrastructure, including Aadhaar, UPI and broader digitalisation initiatives, has significantly improved financial access and efficiency, creating conditions for stronger long-term growth. However, he identified financial education as an area requiring greater attention to deepen household participation in long-term investing.
For smaller Indian enterprises seeking Japanese investment, Sikka said access to capital depends less on funding availability and more on building credibility. “They need strategic partners… people who are more transparent,” he said, adding that industry associations and institutional platforms can play an important role in connecting Indian businesses with Japanese investors.
Source: www.businessworld.in