India Now – Why India is so enormously important for the German and European economies

For Germany, the export nation and still a leading technology and industrial location, India offers numerous opportunities along the entire value chain of German economic output: from the sale of goods and services to procurement, production and joint innovations.

India is one of the fastest growing economies in the world and is already an important sales, sourcing and production location for German companies. India’s relations with the European Union have been continuously expanded in recent years, and the EU is now one of the most important trading partners and investors for India. According to estimates, around 6,000 European companies are currently operating in India, with the most important flows of goods comprising machinery and equipment, transport equipment and chemical products. Within the EU, Germany is India’s most important trading partner, with a bilateral trade volume of EUR 25 to 28 billion in 2024/25. German companies are present in all key Indian sectors and are increasingly intensifying their activities against the backdrop of ongoing free trade negotiations between India and the EU.

Negotiations for such a Free Trade Agreement (FTA) between India and the EU were resumed in June 2022 after a break of several years and have since been advanced in several rounds. In November 2025, both sides reported “substantial progress” and at the beginning of 2026, a ministerial meeting took place in Brussels to clarify open points and accelerate the conclusion of the FTA. The talks between the Indian Minister of Trade and Industry, Piyush Goyal, and the Executive Vice‑President and EU Trade Commissioner, Maroš Šefčovič, served the purpose of political management, were intended to address differences in chapters such as automobiles, steel and CBAM, and to rapidly advance the negotiations, which are described by all parties involved as being in the “decisive phase.” Although the outcome of these talks was still pending at the time of going to press, it is generally expected that the negotiations between India and the EU for the conclusion of an FTA will soon come to a positive end. According to media reports, an India-EU summit with an FTA agenda is already scheduled to take place on January 27, 2026.

In any case, the EU cannot ignore India as one of its most important strategic economic partners for the coming years. India’s favorable demographics and advanced digitalization are shaping demand for consumer and industrial goods and services. The EU views India as a large, rapidly growing market with considerable potential, particularly for machinery, transport equipment and chemicals. German companies are leveraging India’s IT expertise, shared service capabilities and expanding local centers for research and development as well as digitalization and process optimization, so-called Global Capabilities Centers (GCC), to support production and sales. Infrastructure and energy are also key growth areas. Joint initiatives of the EU and India, such as the Connectivity Partnership and Global Gateway, aim at a long-term, strategic partnership and are intended to provide financing leverage for digital, transport and energy projects and promote sustainable, rules-based connectivity.

Even though India’s great potential for the German and European economies is undisputed and India has already very successfully implemented numerous reform projects in the country and its economy in recent years, there are still some challenges to be considered in the Indian business environment, especially for the German Mittelstand companies. For example, companies continue to report lengthy and inefficient approval and administrative procedures, infrastructure bottlenecks and, in some cases, lengthy conformity processes. Early compliance planning, local due diligence and support from partner networks should therefore always be an integral part of a practical investment plan for India.

The prospects for German companies are likely to remain positive in the coming years, especially against the background of the following aspects:

Market access – An FTA between India and the EU would reduce tariffs on machinery, vehicles and chemicals, clarify rules of origin and enshrine investment protection. Smaller and medium-sized enterprises would have more predictable access to public tenders and sectoral approvals, a particularly important aspect for the highly qualified and internationally competitive German Mittelstand companies, whose entrepreneurial resources are regularly significantly limited.

Supply chain resilience – European companies are increasingly using India not only as a sales market, but also and especially for procurement, component manufacturing and dual sourcing. EU initiatives offer flanking financing mechanisms, especially for green and digital infrastructure projects.

Certification and standards – The Indian certification regimes BIS and OTR require structured technical documentation, lab-based testing and centrally regulated audits. With early preparation of their product certification(s), German and European suppliers can secure decisive advantages in terms of market access. A postponement of the enforcement of BIS-Scheme X to September 2026 gives the companies concerned additional lead time.

In summary, the current and currently negotiated European-Indian economic relations allow for an all-round positive outlook. The conclusion of a comprehensive EU-India FTA finally seems within reach and decisive talks between Brussels and New Delhi are already scheduled for the coming weeks, aimed at resolving remaining differences and specifying market access for key sectors. At the same time, the EFTA agreement (TEPA) between India and the EFTA states (Iceland, Liechtenstein, Norway, Switzerland), which already came into force in 2025, provides initial reliable practical experience on tariff reductions, service commitments and investment mechanisms that are likely to be compatible in the EU context.

Strategically, the EU primarily assesses the expansion of supply chains and sustainable infrastructure within the framework of Global Gateway as part of its broader economic agenda, while Germany within the EU remains a central player for mechanical engineering, automotive, chemicals and technical standardization – all economic segments that are directly in demand in India. India is also positioning itself as a strategic partner of the EU and Germany in order to continue to stimulate its economic growth and diversify geopolitical dependencies through better access to the internal market. If the political actors on both sides succeed in ensuring the necessary political and regulatory stability for the coming years, both the German Mittelstand companies and the increasingly internationally active Indian Mittelstand companies should benefit significantly from the excellent bilateral relations and the emerging Indian economic environment.