EU Firms Bet Big on India: How the FTA Is Reshaping Investment, Jobs, and Global Supply Chains
The conclusion of the long-awaited India–European Union Free Trade Agreement (FTA) has triggered a fresh wave of optimism among European companies operating in India. A new Business Sentiment Survey released in 2026 by the Federation of European Business in India (FEBI) shows an overwhelming vote of confidence in India’s growth story, with European firms preparing for a significant expansion in investment, manufacturing, and employment over the next five years.
The timing of the survey is crucial. Its release coincided with the formal sealing of the India–EU trade agreement, a landmark deal described by leaders on both sides as “the mother of all trade deals.” For European businesses, the agreement is more than a diplomatic milestone—it is a signal of long-term policy stability, deeper market integration, and new opportunities across one of the world’s largest combined economic spaces.
India: From Future Opportunity to Core Market
One of the most striking findings of the survey is that 95 per cent of European companies plan to expand their operations in India over the next five years. Even more telling is that close to 90 per cent of respondents report that their India operations are already profitable. For a large emerging economy, such high profitability levels are unusual and point to a structural shift in how India is perceived by global investors.
India is no longer seen merely as a high-potential future market. Instead, it has emerged as a core business destination—one that delivers returns today while offering scale for tomorrow. The survey, which gathered responses from 120 European firms across sectors such as automotive, energy, digital services, and pharmaceuticals, reflects a mature and diversified engagement rather than a narrow or speculative one.
FTA as a Catalyst for Expansion
The India–EU FTA is expected to provide a stable and predictable framework for trade and investment across a combined market of nearly two billion people. This predictability is a key driver of confidence. According to the survey, 90 per cent of European businesses expect the FTA to have a positive impact on their operations in India. Around 75 per cent plan to increase investments directly as a result of the agreement, while 78 per cent anticipate higher employment levels.
This optimism is grounded in strong fundamentals. The European Union is already India’s largest trading partner, with bilateral trade in goods and services reaching approximately €190 billion in 2025. EU foreign direct investment stock in India stands at around €140 billion, and nearly 6,000 European companies currently operate in the country, employing millions across manufacturing, services, and innovation ecosystems.
Manufacturing and Supply Chains Take Centre Stage
The new investment cycle is heavily skewed toward manufacturing and production. Nearly 69 per cent of surveyed companies plan to scale up manufacturing in India, underlining the country’s growing role as a global production base. About 36 per cent are focused on strengthening supply chains and sourcing, while roughly 37 per cent aim to expand Global Capability Centres (GCCs).
This shift signals a deeper structural integration of India into global value chains. Rather than using India solely as a sales market, European firms are increasingly embedding it into their global operations for engineering, digital services, analytics, and advanced manufacturing. This aligns with broader global trends that prioritise supply-chain resilience, diversification, and proximity to large growth markets.
Big Investments, Bigger Job Creation
Investment commitments outlined in the survey are substantial. Around 26 per cent of companies plan to invest more than €100 million each over the next five years, while another quarter expect to invest between €20 million and €100 million. These figures suggest long-term commitments rather than short-term bets.
Employment growth is set to follow investment. One in five companies expects to add more than 1,000 jobs, driven largely by new factories and the expansion of capability centres. Hiring plans are closely aligned with capital expenditure, indicating that job creation will be broad-based and sustained rather than cyclical.
On the revenue front, confidence is equally strong. About 93 per cent of European firms expect turnover growth in FY26, with most forecasting moderate to significant increases. This reflects not only domestic demand but also India’s rising role as an export and innovation hub within global corporate networks.
A More Strategic Partnership
Beyond the headline numbers, the survey reveals an evolution in the nature of EU–India collaboration. Three-quarters of respondents identify manufacturing and supply-chain cooperation as the top area for future engagement. Sustainability and the green transition rank next, followed by research and development, talent development, and technology-driven innovation.
This hierarchy marks a shift away from a purely market-seeking approach toward building future-ready value chains. European firms increasingly view India as a partner in decarbonisation, digital transformation, and advanced research—areas critical to long-term competitiveness.
India’s Macroeconomic Advantage
India’s macroeconomic outlook is reinforcing this confidence. As one of the fastest-growing major economies, India is projected to grow at over 7 per cent in 2026 and is on track to become the world’s third-largest economy by 2030. For European companies, this combines three powerful advantages: a vast domestic market, a competitive manufacturing ecosystem, and a deep, skilled talent pool.
These strengths make India uniquely positioned to absorb large-scale investment while supporting innovation and productivity growth.
Persistent Challenges Remain
Despite the optimism, the survey also highlights persistent challenges. Regulatory approvals and compliance remain the biggest pain point, cited by 71 per cent of respondents. Customs and import regulations, policy uncertainty, and taxation issues also feature prominently.
At the state level, companies emphasise that investment decisions depend less on incentives and more on practical enablers—availability of skilled labour, quality infrastructure, and the speed and predictability of approvals. Addressing these bottlenecks could significantly amplify the investment momentum unleashed by the FTA.
A Defining Moment for EU–India Economic Ties
Taken together, the survey paints a picture of an EU–India economic relationship entering a new phase—less tentative, more structural, and increasingly centred on India as a global production and innovation hub. European companies are not just expressing confidence; they are backing it with capital, jobs, and long-term plans.
If the FTA delivers on its promise and regulatory frictions ease, India could witness one of the largest waves of European investment in its history. For both sides, this moment represents not just a trade deal, but a strategic partnership aligned with the future of global growth.