European companies operating in India are preparing for a major expansion phase, with 95% planning to scale up their operations over the next five years and three in four expecting to increase investments after the EU–India Free Trade Agreement (FTA) comes into force, according to the Federation of European Business in India’s (FEBI) Business Sentiment Survey 2026.
The survey was released in New Delhi on January 27 at the EU–India Business Forum, on the sidelines of the leaders’ summit, and is based on responses from 120 European companies across manufacturing, automotive, energy, aerospace, services, pharmaceuticals, digital technologies and consumer sectors.
Nearly 90% of respondents reported profitability in their India operations, reinforcing the country’s position as a core market rather than merely a future growth opportunity for European firms.
FTA seen as “mother of all deals” for trade and investment
The long-negotiated EU–India FTA has emerged as the central catalyst for business confidence.
In the survey’s foreword, EU Ambassador to India and Bhutan Hervé Delphin described the agreement as transformational: “Trade, investment, industrial partnerships and economic cooperation are key components of the renewed EU-India partnership. First of all, the conclusion of the EU-India FTA represents a landmark achievement, one of the most consequential trade deals in the world. The ‘mother of all deals’ will provide a stable and long-term frame for two-way trade, tapping into a combined market of 2 billion people, representing almost a quarter of global GDP,” he said.
The survey shows 90% of EU firms expect the FTA to positively impact their businesses, 78% anticipate higher employment in India, and 75% intend to raise investments once the pact is implemented.
Companies primarily expect gains in market access, supply-chain integration, compliance simplification and investment protection.
India’s demand and stability driving investment decisions
India’s domestic market has become the primary driver of European corporate strategy.
The survey found:
- 70% cite domestic demand and market potential as the main investment driver
- 64% point to political stability
- 57% to improving ease of doing business
- 54% to availability of skilled manpower
Manufacturing is emerging as the backbone of future engagement. About 75% of respondents see rising opportunities in manufacturing and supply chains, while sizeable shares plan investments in sustainability, artificial intelligence, digital innovation, and research and development.
In addition, 40% of companies have earmarked funds for Global Capability Centres (GCCs), signalling strong growth in engineering, analytics and digital services in India, while 35% are expanding sourcing and supply-chain activities.
A notable 35% of firms plan to invest €50 million or more each in India over the next five years, indicating that the investment wave is broad-based and not limited to a handful of multinational giants.
Trade and investment ties already deep
The survey situates corporate optimism within a rapidly expanding bilateral relationship.
The European Union is currently India’s largest trading partner, with bilateral trade in goods and services reaching €190 billion in 2024–25. The EU also remains a leading investor, with €140 billion in FDI stock, while around 6,000 European companies operate in India, employing millions directly and indirectly across manufacturing, services and innovation ecosystems.
India’s macroeconomic outlook further strengthens the case. The report notes that GDP growth is projected at over 7.3% in 2026, and the country is expected to become the world’s third-largest economy by 2030, creating sustained opportunities for European firms in advanced manufacturing, machinery, chemicals, clean energy and green technologies.
Manufacturing and supply chains top collaboration agenda
Asked about future cooperation priorities, EU companies ranked:
- Manufacturing and supply chains (75%)
- Sustainability and green transition (51%)
- R&D and talent development (45%)
- Technology and digital innovation (42%)
- Market expansion and trade (38%)
This indicates a shift toward a deeper, production-centred partnership, supported by technology and sustainability rather than driven solely by trade volumes.
Regulatory hurdles remain key concern
Despite the upbeat outlook, firms flagged persistent operational challenges:
- Regulatory approvals and compliance – 71%
- Customs and import regulations – 54%
- Policy uncertainty – 47%
- Taxation complexity – 41%
- Local content requirements and quality-control orders – around 37–39%
At the state level, investment decisions are driven primarily by skilled labour availability (76%), infrastructure quality (64%), ease of approvals (61%) and government responsiveness (54%).
These issues are reflected in strong demand for institutional support. Ninety percent of respondents said they want FEBI to focus on policy advocacy and regulatory guidance, followed by engagement with India’s central government and EU stakeholders.
Business leaders stress predictability and execution
Jürgen Westermeier, President of FEBI and President of Airbus India & South Asia, said that confidence in India is long-term but conditional on policy stability: “EU companies operating in India continue to demonstrate a strong long-term commitment to the market. These partnerships are built over time and anchored in mutual confidence – confidence in India’s growth trajectory and confidence in the value of deepening cooperation between the EU and India. At the same time, business decisions are shaped by day-to-day operating realities. Predictability in the policy environment, transparent regulatory processes, efficient logistics and ease of compliance are essential for sustained investment and engagement.”
Deepak Sharma, Vice-President of FEBI and CEO of Schneider Electric India, highlighted India’s strategic role in global production networks: “India is becoming a critical anchor in global production and innovation networks. EU companies are responding by expanding manufacturing capacity, localising advanced technologies, and embedding sustainability into operations and supply chains. When combined with India’s scale, talent base and accelerating infrastructure development, this creates a powerful platform for building sustainable value chains that serve both domestic and global markets.”
Sonia Prashar, Secretary General of FEBI, said the survey is intended to feed directly into policy discussions: “This survey goes beyond broad optimism to examine concrete business conditions ranging from ease of operations and regulatory predictability to investment planning, localisation strategies and expectations from ongoing reforms.”
A structural shift in India–EU economic ties
Taken together, the findings suggest that the EU–India relationship is entering a more structural phase.
For India, rising European investment is increasingly linked to factory expansion, clean technologies, digital services and integration into global value chains. For the EU, India offers a rare combination of growth, political stability and industrial depth at a time when companies are actively diversifying supply chains and reducing geopolitical risk.
If implemented effectively, the FTA could serve not just as a trade facilitation tool but as the framework for a long-term industrial and investment partnership—one that businesses on both sides now appear ready to deepen.
Read the full survey here.
