Economic ties between India and Japan while growing in the recent years are still far below their potential. Elucidate the policy constraints which are inhibiting this growth.

Introduction

India and Japan share a Special Strategic and Global Partnership and a Comprehensive Economic Partnership Agreement (CEPA, 2011), yet bilateral trade of roughly $23 billion remains far below potential for two of Asia's largest economies — and a fraction of India-China trade. The gap is rooted in policy constraints on both sides.

India-side constraints

• Infrastructure and land-acquisition delays raise project costs — visible in the Mumbai-Ahmedabad High Speed Rail timeline.
• A legacy of regulatory unpredictability, including retrospective taxation (repealed only in 2021), dented Japanese investor confidence.
• Relatively high tariffs on automobiles and components, and complex compliance burdens for Japanese SMEs.
• India's exit from RCEP (2019) kept it outside the regional value-chain framework that Japan anchors.

Japan-side constraints

• Non-tariff barriers: slow regulatory approvals for Indian pharmaceuticals and stringent standards blunt CEPA's market-access gains.
• Agricultural protectionism restricts Indian farm and marine exports.
• Risk-averse corporate decision-making and language and ecosystem gaps deter entry beyond large conglomerates.

Structural weaknesses

• Low utilisation of CEPA preferences, thin services trade and limited mobility of Indian professionals despite complementarity.

Correctives underway

• Japan's ¥5 trillion investment target (2022–27), Japan Industrial Townships, JICA-funded freight corridor and DMIC investments.
• New anchors: semiconductor cooperation, the Clean Energy Partnership and the Supply Chain Resilience Initiative with Australia.

Conclusion

Strategic convergence in the Indo-Pacific gives both sides every reason to fix these frictions; converting strategic warmth into economic depth requires regulatory certainty from India and genuine market openness from Japan.