India-Japan trade ‘past’: Expert identifies opportunities in rare earths, technology | Exclusive | Today’s news

India and Japan need to deepen trade, technology partnerships and investments to strengthen supply chains as their economic ties remain small despite growing strategic cooperation, Prachi Mishra, professor of economics and policy researcher at Ashoka University, told LiveMint.

Despite their complementary economic strengths, the two countries remain poorly integrated in trade, with significant untapped potential in semiconductors, rare earths, institutional investment and skilled labor, said Mishra, dean of the Rakesh Jhunjhunwala School of Economics and Finance and director and head of the Isaac Center for Public Policy at Ashoka University.

In an exclusive interview with LiveMint on the release of Ashoka University’s India-Japan Economic Corridor report, Mishra said closer cooperation could help both countries diversify their supply chains and strengthen economic resilience amid geopolitical uncertainty and increasing fragmentation of the global economy.

“In the 1980s, Japan’s share of India’s exports and imports was on the order of 10% or more. Now they are in the 1-2% range,” she said, adding that Japan gets less than 1% of its imports from India.

“In any case, if you look at the relationship, the trade relationship, the importance of Japan to India and the importance of India to Japan is minuscule,” Mishra said.

Developed through Ashoka University’s Iron Pillar Initiative in Global Learning, the report explores opportunities across manufacturing, technology, financial services and infrastructure.

The announcement comes amid a broader bilateral partnership that includes infrastructure financing, an investment target of ¥10 trillion (about US$68 billion) and agreements announced at the 16th annual India-Japan summit in July 2026.

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India-Japan Economic Corridor: Why it matters

Mishra described the global economy as a “tightrope walk”, with conflict in West Asia and a surge in Asian technology exports shaping the economic outlook.

“However, the global economy has adjusted and we’ve seen lower flows that have actually been offset by supplier switching and destocking,” she said.

India’s ambition to become a developed economy in the next two decades will require sustained economic growth, Mishra said.

“India wants to become a Viksit Bharat, a developed economy, in the next 20 years. Basically, that means growing at an average of 8% over the next 20 years,” Mishra said.

Deeper economic integration with Japan could help India diversify its partnerships and reduce vulnerabilities in critical supply chains, she added.

“Resilience means building buffers in good times and minimizing losses in bad times. And that’s the concept of resilience. And that’s where I think the India-Japan relationship has particular significance,” Mishra said.

Referring to remarks made by India’s External Affairs Minister at the Kautilya Economic Conclave in New Delhi, Mishra described Japan as a “transparent and mature market” that India is opening up to.

Japanese investments offer scope for technology transfer

India’s share of Japan’s outward foreign direct investment (FDI) has increased from almost zero to around 4%, Mishra said. However, the composition of these investments points to opportunities for deeper manufacturing and technology partnerships.

“Most of it is outside of manufacturing, which is where the real technology transfer and productivity improvements can happen. So there’s a huge opportunity to take advantage,” she said.

Japanese institutional capital could provide another avenue for investment expansion in India.

Japan’s government pension investment fund has assets of around $2 trillion, Mishra said, while India’s share of the fund’s investments remains below 1%. Even a modest redistribution could benefit India while giving Japanese investors greater exposure to the country’s long-term growth, she added.

Semiconductors and rare earths offer supply chain opportunities

Semiconductors and rare earths are among the sectors where Japanese technological expertise could complement India’s efforts to expand domestic production and diversify critical supply chains.

Rare earths in particular offer room for cooperation as the country seeks to reduce its reliance on concentrated processing capacity in China.

One potential model would involve Japanese firms refining rare earths in India, using the country’s engineering talent and exporting the resulting magnets, the discussion in the interview pointed out.

“Building resilience does not mean a single point of failure. And here India and Japan can be each other’s second resource and strive to be first,” Mishra said.

Skilled workmanship and execution remain critical

Labor mobility could be another pillar of the corridor given Japan’s aging population and India’s demographic dividend.

“Japan has an aging population, India still has a demographic dividend,” Mishra said, adding that India’s dependency ratio is expected to decline for at least another decade.

“Both of these countries really have an opportunity to let trade and capital and people move freely and build real resilience. And that moment is actually right now,” Mishra said.

“Our leaders have committed to deepening these ties. And now the task is to carry them out,” she added.