On the India–Japan Strategic Partnership

India, with a population exceeding 1.4 billion and having recently surpassed China as the world's most populous country, is projected to overtake Japan in nominal GDP this year according to the estimation by International Monetary Fund (IMF). India's presence in Japanese industry is also growing rapidly. According to the latest survey titled JBIC Survey (36th) Report on Overseas Business Operations by Japanese Manufacturing Companies released in December 2024, India has ranked number one for three consecutive years as the most promising country for medium-term (approximately three years) prospects for approximately 500 Japanese manufacturing companies. Japanese companies have accelerated their shift of manufacturing bases from China to India, driven by the need to strengthen supply chains and ensure economic security, underscoring India's significance as a key partner of Japan.

India is a traditional friend of Japan, and the two nations share a Special Strategic and Global Partnership transcending conventional bilateral relations. Our partnership plays a crucial role in promoting stability and prosperity both regionally and globally. In recent years, the collaboration in the field of security has deepened significantly, highlighted by the Annual Malabar Joint Naval Exercises involving Japan, the United States, and India, as well as the signing of the India–Japan Acquisition and Cross-Servicing Agreement (ACSA).

On 20 March 2023, former Japanese Prime Minister Fumio Kishida delivered a policy speech in New Delhi, India, titled 'The Future of the Indo-Pacific: Japan's New Plan for a 'Free and Open Indo-Pacific—Together with India, as an Indispensable Partner'. In this speech, he unveiled a new plan for achieving a 'Free and Open Indo-Pacific' (FOIP). The plan emphasizes enhancing the connectivity of the Indo-Pacific region, foster the region into a place that values freedom, the rule of law, free from force or coercion, and make it prosperous. The FOIP initiative aims to be a shared goal among India, Japan, the United States, and Australia under the Quadrilateral Security Dialogue (QUAD), advancing regional security and economic cooperation. Through alignment between India's Act East Policy and Japan's focus on high-quality infrastructure partnerships, the development of India's north–eastern region and the enhancement of economic connectivity across South Asia are progressing steadily.

The strategic relationship between two nations has also led to collaboration in the renewable energy sector. The Indian government has set an ambitious goal of expanding non-fossil fuel-based power generation capacity to 500 gigawatt (GW) by 2030, with 50% of the total electricity generation coming from renewable sources. To achieve this, India is implementing a series of government-led initiatives, including large-scale renewable energy auctions, grid enhancement projects, and the introduction of large battery energy storage systems (BESS) to stabilize the power system. Measures such as waivers for inter-state transmission system (ISTS) charges, regulatory relaxation for corporate purchase power parity (PPP), and mandates for renewable energy procurement by distribution companies are further optimizing supply and demand.

In addition to these policy efforts, India's abundant solar potential, especially in the western regions, and its competitive construction costs have positioned solar power as a cost-effective energy source, now cheaper than coal-fired power. Leveraging this vast renewable resource, India is prioritizing the development of a green hydrogen industry. In January 2023, the Indian government approved the National Green Hydrogen Mission to promote the domestic production of electrolyzers and hydrogen, aiming to achieve an annual production capacity of 5 million tonnes of green hydrogen by 2030.

Green hydrogen, once produced, is expected to be utilized domestically for fertilizer plants, refineries, and hard-to-electrify sectors such as steel manufacturing and heavy transportation. At the same time, India sees the export of green hydrogen as a key strategy to address its trade deficit. Japan, targeting the supply of 3 million tonnes of hydrogen annually by 2030 domestically, presents a significant market for India, offering competitive export potential due to lower transport costs compared to other producers. Several projects involving Japanese firms in partnership with Indian companies aim to produce and export green ammonia in eastern India. With strong governmental support under the India–Japan Clean Energy Partnership, enhanced collaboration in the hydrogen value chain is highly anticipated.

In transmission, high-voltage direct current (HVDC) projects involving Japanese companies are drawing attention. These initiatives enable stable renewable energy supply and efficient power transmission from remote areas to urban centres, significantly improving India's energy mix. Additionally, innovative technologies such as perovskite solar cells, developed with Japanese expertise, hold great potential in India's decarbonization efforts. Lightweight, flexible, and semi-transparent, these cells can be used for novel applications, including vehicle-mounted systems and building-integrated photovoltaics, driving urban energy efficiency and renewable energy adoption in transportation.

Diversified Approaches for Sustainable Development

As Asia's economies grow, electricity demand is expected to rise, while fossil fuel dependence persists. Each country faces unique circumstances, and transition pathways vary. Achieving decarbonization, economic growth, and energy security requires a realistic approach that includes nuclear and natural gas options.

In the automotive sector, India's reliance on coal-fired power, which accounts for over 70% of its energy mix, limits the emission reduction benefits of electric vehicles (EVs). In addition, greenhouse gas (GHG) emissions from EV production, particularly from the energy-intensive battery-manufacturing processes, need to be considered. Life Cycle Assessment (LCA) studies reveal the carbon footprint at each stage of a vehicle's life cycle, including raw material extraction, manufacturing, operational emissions and end-of-life disposal. For example, while EVs may offer lower operational emissions, their production often involves certain amount of carbon footprints due to the mining of critical minerals and battery manufacturing. As a result, a diversified approach that includes compressed natural gas (CNG) vehicles and hybrids vehicles is emerging as a practical and sustainable solution, while hybrids and CNG vehicles may offer a more balanced trade-off in terms of overall emissions and resource use. By using LCA as a guiding framework, policymakers, and industry can identify solutions that optimize environmental benefits while taking into account India's energy realities and supply chain constraints. LCA-based financial incentives are also gaining attention in the financial sector.

India–Japan relations are poised for further development across economic, energy, and environmental domains. As Japan's policy-based financial institution, JBIC will remains committed to supporting climate change initiatives through financial measures, fostering business opportunities for Japanese companies, and contributing to the deepening and advancement of India–Japan economic ties.#