MENA Newswire, NEW DELHI: European companies in India are accelerating expansion plans following the conclusion of the India European Union Free Trade Agreement, with a new business survey showing broad expectations of higher investment, larger local footprints and increased hiring tied to manufacturing and services growth.
The Federation of European Business in India (FEBI) said its Business Sentiment Survey 2026 found nearly 95% of surveyed EU companies plan to expand operations in India over the next five years. Close to 90% said their India operations are already profitable, and three in four respondents said the trade agreement directly prompted plans to increase investment.
FEBI said its members represent a cross section of European investors with long term operations across multiple sectors and Indian states, and it estimates about 6,000 European Union based companies currently operate in India. In the survey, nearly 35% of respondents said they intend to invest at least 50 million euros each in India over the next five years.
The survey results land days after India and the EU announced they had concluded the free trade agreement on January 27, 2026, at a summit in New Delhi attended by Indian Prime Minister Narendra Modi, European Council President Antonio Costa and European Commission President Ursula von der Leyen. Officials said the pact aims to lower barriers across goods and services and deepen investment links between the two economies.
Trade deal sets tariff cuts across most goods
The agreement provides for eliminating or reducing tariffs on most traded goods, with officials saying 96.6% of trade by value is covered by liberalization commitments. Provisions include phased cuts on Indian duties for a wide range of EU exports and a timetable for EU tariff reductions on most Indian goods, while sensitive agricultural items remain excluded.
The deal includes staged reductions on India’s high car import tariffs, which have reached 110%, with a path toward substantially lower rates over time, alongside tariff changes affecting products such as machinery, chemicals and pharmaceuticals. The EU has said the agreement is expected to save European companies about 4 billion euros a year in duties once implemented.
FEBI said firms’ expansion plans are centered on building capacity in India rather than only using the market for sales. About 69% of surveyed companies said they plan to expand manufacturing, while 37% said they were looking to grow Global Capability Centres. Nearly 35% said they were strengthening supply chain and sourcing operations, and around 28% reported plans to increase research and development activity.
Regulation and customs remain top business hurdles
Even as the survey showed strong optimism, companies highlighted persistent operational challenges. About 71% of respondents flagged regulatory approvals and compliance requirements as a major drain on doing business, while 54% said customs and import regulations remain cumbersome and unpredictable, citing administrative complexity and uneven implementation.
The survey also pointed to a jobs and skills focus alongside investment commitments. Nearly 80% of respondents said they will prioritize corporate social responsibility spending on education and skilling, aligning workforce development with planned growth in manufacturing, services centers and technical roles.
Sustainability was another area highlighted in the responses. FEBI said 51% of surveyed companies identified sustainability and the green transition as priorities for future cooperation with India, including clean energy, energy efficiency, green technologies and climate resilient infrastructure.
The trade agreement remains subject to legal finalization and ratification procedures on both sides, but the survey indicates EU companies already operating in India are preparing for a broader operational push. FEBI said the combination of planned manufacturing expansion, services investment and skills initiatives reflects a deeper integration of European businesses into India’s production, innovation and supply chain ecosystem.