95% of EU Firms in India Plan Major Expansion, Eye Manufacturing & AI

The EU businesses cited domestic sales and latent market demand as the main reasons for their expansion intention.

The amounts being earmarked for investment in India are significant at the company level, the survey revealed.

Around 35 per cent of EU companies intend to invest Euro 50 million or more each in the next five years, suggesting a broad base of intended investments rather than a few large companies.

India is becoming increasingly important to European businesses.

90 per cent of EU businesses see India as being a key driver of their overall growth, as a sales market, as a centre for Research & Development (R&D) and as a hub for production, both for India and for exports to third countries, the FEBI survey found.

At a broader level, the survey's key results show that European companies are deepening and broadening their commitment to India, that India and the EU are increasingly important to each other, and that the FTA is being anticipated with enthusiasm.

Further, European businesses are excited by the opportunities that India offers across sectors, combining 'traditional' sectors such as manufacturing with new and cutting-edge sectors such as Artificial Intelligence (AI) and digital technology.

75 per cent of respondents see increasing opportunities in manufacturing and supply chain, 38 per cent see scope for market expansion into and from India, 42 per cent want to invest in AI and digital innovation, 51 per cent in sustainability, an area in which European companies are undisputed global leaders and 45 per cent in R&D.

Additionally, 40 per cent of European companies have funds earmarked for investments in Global Capability Centres (GCCs), signifying strong growth in this sector in India. 35 per cent are also looking to India for strengthening supply chains and sourcing.

A number of positive factors are increasingly in India's favour.

As per the survey, 64 per cent of respondents cite political stability, 54 per cent name India's skilled manpower, 70 per cent its cost-competitive manufacturing, underscoring the increasing shift to manufacturing in India, and 40 per cent refer euphemistically to 'changes in geopolitics'.

The survey highlighted that state governments that are proactive stand the best chance in terms of attracting additional European FDI.

The EU businesses in India suggested a few things which India should work on.

"India continues to have its challenges and attention to these by the Central and State governments will go a long way towards further increasing investments by EU businesses in India," it said.

71 per cent of businesses find regulatory approvals and compliance a drain on doing business, 54 per cent still find Customs and Import regulations too cumbersome, 41 per cent cite difficult or opaque taxation rules, 39 per cent the increasing Local Content Requirements and 37 per cent Quality Control Orders.

"European businesses seem to want to invest more in manufacturing facilities in India, but struggle with what they perceive as ill-timed local content requirements," it said.

India and the EU successfully concluded negotiations of the landmark India-EU Free Trade Agreement (FTA) on Tuesday. The documents on the FTA conclusion were exchanged between EU Trade Commissioner Maros Sefcovic and Union Commerce Minister Piyush Goyal. This announcement marks a historic milestone in India-EU economic relations and trade engagement with key global partners.

According to the joint statement, this historic deal is a milestone in the India-EU Strategic Partnership that will significantly enhance bilateral trade and investment ties, drive shared prosperity, strengthen resilient and diversified supply chains, and support sustainable and inclusive growth.

The FTA comes after intense negotiations since the re-launch of negotiations in 2022.

The European Union is India's one of the largest trading partner, with bilateral trade in goods and services growing steadily over the years. In 2024-25, India's bilateral trade in goods with the EU stood at Rs 11.5 Lakh Crore (USD 136.54 billion) with exports worth Rs 6.4 Lakh Crore (USD 75.85 billion) and imports amounting to Rs 5.1 Lakh Crore (USD 60.68 billion). India-EU trade in services reached Rs 7.2 Lakh Crore (USD 83.10 billion) in 2024.

- ANI