Bridging worlds: navigating the promising Europe-India trade corridor

By Nicolo Salsano, Chief Executive Officer, Europe

India’s journey has been a tale of 60, 16 and 6. It took India 60 years after independence to become a USD1 trillion GDP economy in 2007, 16 years to more than triple to reach USD3.5 trillion, and now in 6 years it is expected to almost double to circa USD6.2 trillion.

The scale of the opportunity is striking as the Indian economy is set to double in size by the end of the decade. This growth will be driven by shifts in global supply chains, a young population, robust consumer demand and government policy.

Given these dynamics, European corporations and financial institutions (FIs) are increasingly seeking to do business in India, enhancing economic resilience and creating new trade diversification opportunities. But what opportunities are there to be captured?

A strong foundation

The EU is India’s largest trading partner in goods, accounting for EUR124 billion in 2023, while India ranks as the EU’s ninth-largest trading partner. Approximately 6,000 European companies now operate in India, providing 1.7 million direct and 5 million indirect jobs in a broad range of sectors.

While negotiations for an EU-India Free Trade Agreement (FTA) are underway, albeit with still slow progress, India signed a significant FTA with the European Free Trade Association (EFTA) – comprising of non-EU members Switzerland, Iceland, Norway and Liechtenstein. This landmark agreement will ease market access and simplify customs procedures, paving the way for EUR91 billion in investments across a range of industries, including pharmaceuticals, machinery and manufacturing, bringing more prosperity and mutual growth.

A myriad of opportunities

Bolstered by strategic government policies and a global shift towards supply chain diversification, the Europe-India trade corridor presents a plethora of opportunities for companies in both geographies eager to expand their global footprints.

Particular industries stand out. India’s ambition to become a global semiconductor supply chain leader has attracted major European players like STMicroelectronics, which, alongside Taiwan’s Foxconn, has set up a semiconductor plant in India. This venture, supported by the Indian government’s recent Production Linked Incentive (PLI) scheme – which promotes sectoral growth in industries such as automotive, telecommunications and renewable energy – marks a significant step towards enhancing India’s semiconductor capabilities, providing a critical link in the global tech supply chain.

India is also the world’s second-largest telecom market, drawing substantial foreign direct investment (FDI) inflows, with companies like Nokia expanding their manufacturing operations in the country. The upcoming partnership between Bharat 6G Alliance and Europe’s 6G Smart Networks further underscores the potential for collaborative innovation in next-generation telecom technologies.

Renewable energy too has come to the forefront, with India targeting 500 GW of renewable energy capacity by 2030. European firms such as Engie and TotalEnergies are making strides in this market, capitalising on the growing demand for clean energy. Similarly, India’s Vision Pharma 2047, which aims to make the country a global leader in affordable and innovative pharmaceuticals, has attracted investments from companies like Philips, which has established a healthcare innovation centre in Pune.

Solidifying growing partnerships

European companies have recognised this opportunity, with France and the UK leading the way. The UK’s “Alive with Opportunity” campaign has bolstered India-UK trade relations, with significant investments in sectors such as telecommunications and manufacturing. Meanwhile, last year’s “Choose France Summit” highlighted India’s importance to Europe, with over 10 Indian CEOs engaging with French president Emmanuel Macron on potential investments, particularly in sectors like renewable energy and pharmaceuticals.

The recent Asia-Pacific Conference of German Business (APK), which took place in New Delhi in October 2024, was also an important platform that strengthened economic and trade relations between India and Europe, particularly Germany. Such forums allow Indian and European companies to explore growth opportunities, innovation, and shared goals, contributing to more balanced and sustainable economic relations between the two regions.

Indian companies are also looking to Europe as a strategic location for expansion, with the UK emerging as a key destination. India was the second-largest investor in the UK in 2022-2023, with 118 FDI projects originating from Indian companies, including Tata Group’s EUR4.6 billion commitment to building a battery gigafactory, crucial for the automotive sector’s transition to electric vehicles.

Beyond the UK, Indian firms are actively investing in European SMEs, particularly in sectors like IT, manufacturing and automotive. Notably, Infosys’s acquisitions in Europe, including its recent purchase of Germany’s R&D services provider, in-tech, illustrates the strategic importance of the region for Indian corporates looking to enhance their technological capabilities and expand their global reach.

Banks: pillars of Europe-India trade

While the opportunities are abundant, local dynamics must be taken into account. For any company entering a new market, adapting to local dynamics is essential for success. European firms in India encounter a different regulatory landscape, with its specific approval processes, investment policies, and local business practices. Similarly, Indian companies expanding into Europe must adapt to a different tax system and higher labour costs. These considerations clearly are not unique to Indian-European collaborations but reflect the broader need for businesses to understand and adjust to the specific dynamics of any new market they enter.

These considerations can be best addressed by banking partners with on-the ground expertise in both markets, and that offer the financial know-how and support necessary for success. Financial institutions (FIs), and in particular international cross-border banks, are pivotal in bridging opportunities and mitigating challenges. Their extensive networks, expertise and deep understanding of both regions position them as indispensable partners, guiding clients through intricate regulatory landscapes, and assisting in “de-risking” strategies and counterparty risk management.

Banks can support businesses by providing tailored solutions, such as financing, risk management, bank guarantees, and specialised expertise in transaction banking, working capital financing and cash management operations. For instance, in 2023, Standard Chartered provided critical bank guarantees to a German industrial group for a transportation infrastructure project. Likewise, acting as the primary bank for a major European sportswear and apparel company in India, Standard Chartered delivers comprehensive services in cash management, along with transaction banking and infrastructure support. In-depth knowledge of the Indian market also allows a bank to arrange bespoke financing solutions such as when Standard Chartered provided project finance to India’s GreenCell for a new fleet of e-buses in Gujarat in 2023.

Special economic zones that have been established in India are also playing a key role in fostering regional treasury centres, offering a host of benefits to businesses operating within its boundaries, including tax incentives, simplified regulations and streamlined processes. One example is Gujarat International Finance Tec-City (GIFT City), where Standard Chartered is one of the few international banks to have secured a licence to operate and advise clients on capitalising on tax incentives and infrastructural benefits. GIFT City has its own regulatory framework implemented by the International Financial Services Centres Authority (IFSCA), which regulates and governs all financial activities in the district, providing a favourable business environment.

Beyond funding and advisory services, their typically global client base and global expertise allow banks to engage with governments and regulatory bodies to help shape policies and create a more favourable environments for investment and cross-border business activities.

Through these multifaceted roles, banks not only facilitate the Europe-India trade corridor but also drive its evolution.

As India continues its trajectory towards becoming a major global economy, the Europe-India relationship will continue to strengthen, driven by mutual economic interests and strategic collaboration. By aligning economic, geopolitical and infrastructural interests, this corridor not only promises to boost trade but also to deepen ties between two of the world’s largest markets. For this corridor’s potential to be realised, Banks will play a central role in facilitating growth and development in this very promising trade corridor.

This article has also been published on The Economist. Read more global insights to help you grow across borders.