Mobilising capital for the EU-India economic corridor
The EU-India FTA could accelerate cross-border growth, but success will depend on how effectively capital is mobilised.
This article was originally featured in Reuters.
The EU-India Free Trade Agreement may begin as a tariff story, but its real impact can be significantly amplified depending on how effectively capital is mobilised to support investment across this important trade corridor.
Disappearing tariffs make for good headlines in a turbulent global economy. But the EU-India Free Trade Agreement (FTA) is not just a “tariff story”. Its long-term success will depend on whether capital can be mobilised to help businesses invest, expand and operate across the EU-India economic corridor.
Negotiations on the FTA concluded in January 2026, and in September the European Commission put forward proposals to the Council for its signature and conclusion. The agreement is now progressing through the necessary approval processes. Once in force, the agreement would deepen ties between two major economic blocs whose combined markets represent more than 2 billion consumers. It would also gradually reduce and eliminate tariffs on more than 96 per cent of EU goods exports to India by value, opening the door to stronger trade and investment flows across a wide range of sectors.
Trade momentum is already visible. EU-India trade in goods reached EUR118 billion in 2025, while trade in services reached EUR67 billion. As the FTA lowers barriers to trade further, the practical question is whether businesses have the capacity to scale – operationally and financially – at the same pace.
The potential opportunity for creation of value is significant. According to analysis by the Kiel Institute for the World Economy, the FTA could increase bilateral trade by up to 65 per cent over time. Trade agreements create a framework for growth, but translating that into economic activity depends on how effectively businesses can invest and expand within it.
It is also important to recognise that the agreement has yet to enter into force and remains subject to the necessary EU and Indian approval processes. Its ultimate impact will also depend on implementation, including across parts of the broader regulatory and services framework.
Integrated solutions matter
For companies expanding across the EU-India economic corridor, access to lower tariffs is only one part of the equation. As supply chains stretch across borders and investment plans become more ambitious, businesses need more than a single financial product. They require integrated financial support – spanning working capital financing, cash management, trade financing, foreign exchange and risk management, and long-term investment financing – to operate at scale.
On the European side alone, the European Commission estimates that, once implemented, the agreement could save European exporters up to EUR4 billion annually in duties, creating scope for firms to reinvest. Doing so at scale requires structured financing and treasury solutions, particularly as companies expand production, localise supply chains and deploy capital across multiple jurisdictions.
Sustainability is also becoming more relevant to how this corridor develops. As climate and carbon related requirements increasingly shape global trade, companies exporting into the European market may face stronger incentives to reduce carbon intensity of production.
European initiatives such as the Carbon Border Adjustment Mechanism (CBAM), in force since 1 January 2026, illustrate how regulatory developments can reshape supply chains and investment decisions. To meet CBAM requirements and support competitiveness in carbon‑intensive sectors, companies will need advisory and financing structures that support green capex, verified carbon data and supply‑chain redesign.
Two-way opportunities
With a population of around 1.45 billion people, India is the world’s most populous country. This scale, combined with sustained economic growth, is expanding opportunities in both directions – for European companies investing into India, and for Indian firms increasing their presence in Europe. The European Commission estimates that the agreement could double EU goods exports to India by 20324.
For Indian companies, Europe is an increasingly important market for trade, investment and international expansion. EU goods imports from India stood at EUR71 billion in 2024, with imports concentrated in sectors including chemicals, machinery and appliances, mineral products, textiles and base metals, while EU imports of services from India reached EUR37.8 billion in 2025. India’s FDI stock in the EU stood at EUR13.7 billion in 2024. The FTA could strengthen these flows further, with greater market access for Indian exporters in sectors including fisheries, chemicals, textiles, footwear and pharmaceuticals, and tariffs set to be eliminated on more than 90 per cent of EU tariff lines.
For European companies, India’s scale, growth, outlook and investment needs create openings across sectors such as infrastructure, manufacturing, digital services, mobility and energy.. Investment is already increasing, even ahead of implementation. According to the European Commission, EU foreign direct investment stock in India rose from EUR105.1 billion in 2021 to EUR132.8 billion in 2024, an increase of around 26 per cent in three years, while around 6,000 EU‑based companies already operate in India. The FTA should deepen that trajectory, provided firms can finance expansion and manage cross‑border risk effectively.
The automotive sector illustrates how tariff reform quickly becomes an investment and financing question. India is the world’s third‑largest automobile market by production and exported more than 5.3 million vehicles in FY2025, a 19 per cent year‑on‑year increase. Once the agreement enters into force, tariffs on eligible European cars will gradually fall from 110 per cent to as low as 10 per cent under agreed quotas, while tariffs on car parts will be eliminated over five to ten years4. While that shift can accelerate decisions around distribution, local assembly and EV‑component supply chains, the binding constraint is often financing: funding capex, managing supplier ecosystems and hedging currency and commodity exposure as operations scale across markets.
Execution determines outcomes
Expanding manufacturing capacity and infrastructure across both regions will require substantial long-term investment – and the ability to deploy capital effectively across markets. Financial institutions therefore play a role not only in providing capital, but in helping businesses structure growth and make informed cross-border investment decisions.
The agreement also recognises financial services as part of the enabling infrastructure for deeper economic ties, with commitments aimed at improving market access and supporting greater cooperation in areas including electronic payments. In parallel, initiatives to strengthen links between India’s and Europe’s payment infrastructure have the potential to make cross-border transactions faster and more efficient.
Ultimately, the success of the EU-India economic corridor will depend on execution: trade agreements can lower barriers and create momentum, but the real test is whether businesses have the tools to invest, build and grow across both markets.
That is why the EU-India FTA should be seen not only as a trade story, but as a capital mobilisation story. Tariff reductions may open the door, but access to finance will determine how fully businesses are able to walk through it.
Institutions with deep expertise in both markets, strong structuring capabilities and the ability to mobilise capital across them, will play a key role in turning the EU-India corridor from policy ambition into sustained economic growth.
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