India has emerged as a significantly more attractive investment destination for European companies than China, according to an analysis published in Euractiv and authored by Alicia Garcia Herrero. The piece argues that structural overcapacity in China — marked by price wars, weak domestic demand, and collapsing profit margins — is pushing European capital toward India, which offers the consumer market depth and manufacturing headroom that China no longer can.

Why China Is Losing Its Edge

Profits have crashed across the board in China, affecting not just foreign multinationals but domestic Chinese firms as well. The root cause, the analysis contends, is a persistent glut driven by weak local demand. Excessive competition has triggered price wars that have eroded returns across sectors. For European investors who entered China seeking scale, the arithmetic no longer works.

What India Offers That China Does Not

Garcia Herrero's article frames India's appeal in direct contrast to China's saturation. 'India offers what Europe needs and what China increasingly does not — a vast and fast-growing consumer market, rising household demand, and, crucially, a manufacturing base so underdeveloped that there is room to build rather than a saturated field to fight over,' the article states. Returns on European investment in India already exceed those in the US and UK markets, which absorb the bulk of EU capital. Notably, the European Union is already India's largest genuine foreign investor by some measures.

The Paradox: High Returns, Low Engagement

Despite the favourable return profile, India ranks only eighth among destinations for European firms, and European manufacturing capital in particular has 'barely moved' toward India, the article notes. This gap between potential and actual investment flows is identified as a structural anomaly — and, the analysis argues, an opportunity Europe is not fully exploiting.

The Industrial Accelerator Act as Leverage

The article points to Brussels' Industrial Accelerator Act — designed to rebuild strategic industrial capacity and reduce dependence on China — as a source of untapped leverage. Because the Act will increasingly steer public money and procurement toward suppliers within the WTO Government Procurement Agreement, and because India is not currently a party to that agreement, Europe holds a concrete bargaining chip. 'India wants European factories, technology and supply-chain integration. Europe wants legal certainty and reciprocal market access,' the article states. Accommodating Europe on investor protection and procurement access, the analysis argues, would secure India's place in supply chains that Europe is actively rerouting away from China.

A Strategic Window That May Not Stay Open

The analysis concludes that the current moment is defined by economics rather than geopolitics: 'profitability, not politics, is pushing European capital out of China,' and 'India is the logical destination for it.' The implication is that the window is open now — but that it will require deliberate policy moves on both sides to convert the logic into actual capital flows. How quickly India and the EU act on this alignment could determine whether the shift becomes structural or remains aspirational.