Why India Better Destination for European Investors

July 24, 2026

As investments in China become less attractive due to overcapacity, intense competition and weak domestic demand, India is emerging as a more promising destination for European companies. A slowdown in consumer demand in China has squeezed profits for both foreign and domestic firms, making investors look for alternative growth markets.

India offers several advantages, including a large and expanding consumer base, rising household demand and significant scope for manufacturing expansion. Unlike China’s relatively saturated industrial landscape, India’s manufacturing sector still has ample room for new investments and capacity building.

European investments in India are already generating higher returns than those in several mature markets, including the United States and the United Kingdom. The European Union is also India’s largest source of genuine foreign investment, though India currently ranks only eighth among destinations for European businesses, indicating substantial untapped potential.

The European Union’s proposed Industrial Accelerator Act, aimed at strengthening strategic industries and reducing dependence on China, is expected to encourage companies to diversify their supply chains. This creates an opportunity for India to attract greater European investment in manufacturing and technology.

At the same time, Europe is seeking stronger legal protections for investors and improved market access. For India, addressing these concerns could help secure a larger role in the global supply chains that European companies are increasingly shifting away from China, strengthening long-term economic cooperation between the two regions.