New Delhi

More than 95 per cent of European Union (EU) companies operating in India intend to scale up their presence in the country over the next five years, reflecting strong confidence in India’s market potential, according to a survey conducted by the Federation of European Business in India (FEBI).

The survey indicates that domestic consumption and untapped market opportunities are the primary drivers behind these expansion plans. It also reveals that European firms are setting aside substantial funds for investment at the individual company level.

Around 35 per cent of the surveyed EU companies plan to invest €50 million or more each over the next five years, suggesting that investment momentum is broad-based rather than concentrated among a handful of large corporations.

India’s strategic importance for European businesses continues to grow. As many as 90 per cent of respondents view India as a major contributor to their global growth, not only as a key sales destination but also as a centre for research and development and a manufacturing hub serving both the domestic market and exports to third countries.

At a broader level, the findings point to a deepening economic relationship between India and the EU, with businesses on both sides increasingly viewing each other as critical partners. The anticipated India-EU Free Trade Agreement (FTA) has further boosted optimism among European companies.

The survey highlights strong interest across a wide range of sectors, combining traditional industries such as manufacturing with emerging areas including artificial intelligence and digital technologies. About 75 per cent of respondents see expanding opportunities in manufacturing and supply chains, while 38 per cent foresee scope for market expansion into and from India. Investments in AI and digital innovation are planned by 42 per cent of companies, while 51 per cent are targeting sustainability initiatives and 45 per cent are looking to enhance R&D capabilities.

Additionally, 40 per cent of European firms have earmarked funds for investments in Global Capability Centres (GCCs), underlining the sector’s growing significance in India. Around 35 per cent are also seeking to strengthen supply chains and sourcing operations within the country.

Several factors are working in India’s favour, the survey noted. Political stability was cited by 64 per cent of respondents, while 54 per cent highlighted the availability of skilled manpower. Nearly 70 per cent pointed to cost-competitive manufacturing, reflecting a growing shift towards production in India, and 40 per cent referred to evolving geopolitical dynamics.

The survey also observed that proactive state governments are better positioned to attract additional European foreign direct investment.

However, EU businesses flagged several challenges that need attention. Regulatory approvals and compliance processes were identified as a major concern by 71 per cent of respondents, while 54 per cent found customs and import procedures cumbersome. Issues related to taxation complexity were cited by 41 per cent, increasing local content requirements by 39 per cent, and quality control orders by 37 per cent.

The survey noted that while European companies are keen to expand manufacturing in India, many struggle with what they perceive as poorly timed local content mandates.

The findings come close on the heels of the conclusion of negotiations on the India-EU Free Trade Agreement, with documents exchanged between EU Trade Commissioner Maros Sefcovic and Union Commerce Minister Piyush Goyal. The agreement, finalised after negotiations resumed in 2022, is being described as a landmark step in strengthening the India-EU Strategic Partnership.

According to a joint statement, the FTA is expected to significantly boost bilateral trade and investment, enhance resilient supply chains, and promote sustainable and inclusive growth.

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The European Union remains one of India’s largest trading partners. In 2024–25, bilateral trade in goods stood at Rs 11.5 lakh crore (USD 136.54 billion), with Indian exports valued at Rs 6.4 lakh crore (USD 75.85 billion) and imports at Rs 5.1 lakh crore (USD 60.68 billion). Trade in services between India and the EU reached Rs 7.2 lakh crore (USD 83.10 billion) during the same period.