India tops European investment radar as China profits slump: Euractiv
Synopsis
Profitability — not geopolitics — is driving European capital out of China, according to a Euractiv analysis by Alicia Garcia Herrero. India ranks only eighth among European investment destinations despite delivering returns that already beat the US and UK. The EU's own Industrial Accelerator Act may be the lever that finally closes that gap.
Key Takeaways
A Euractiv analysis by Alicia Garcia Herrero argues India is a superior investment destination for European firms compared to China.
Overcapacity, price wars, and weak domestic demand have crashed profits in China for both foreign and domestic companies.
Returns on European investment in India already exceed those in the US and UK , yet India ranks only eighth among European investment destinations.
The EU is already India's largest genuine foreign investor, but European manufacturing capital has 'barely moved' toward India.
The Industrial Accelerator Act gives Brussels leverage: India's access to EU supply chains could hinge on concessions on investor protection and procurement.
The analysis concludes that profitability, not politics , is the primary driver pushing European capital out of China toward India.
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.
Point of View
Yet India sits eighth on the European destination list. That gap is not a perception problem — it is a policy problem, on both sides. The Industrial Accelerator Act framing is the most consequential element here: it converts a vague 'derisking from China' narrative into a transactional offer India can either accept or miss. The risk is that New Delhi treats this as validation rather than a conditional invitation. Investor protection frameworks and procurement reciprocity are precisely the areas where India has historically moved slowly. If the strategic window is indeed open because of economics and not politics, it can close the same way.
NationPress
23 Jul 2026
Frequently Asked Questions
Why is India considered a better investment destination than China for European companies?
According to a Euractiv analysis, China's economy is suffering from overcapacity, excessive competition, and weak domestic demand that have triggered price wars and crashed profits — for both foreign and domestic firms. India, by contrast, offers a fast-growing consumer market and an underdeveloped manufacturing base with room to build, making it a more attractive proposition for European capital.
How do returns on investment in India compare to other markets for European firms?
Returns on European investment in India already exceed those in the US and UK markets, which currently absorb the majority of EU capital, according to the Euractiv article. Despite this, India ranks only eighth among destinations for European firms, pointing to a significant gap between potential and actual capital deployment.
What is the EU's Industrial Accelerator Act and how does it affect India?
The Industrial Accelerator Act is Brussels' initiative to rebuild strategic industrial capacity and reduce dependence on China. It steers public money and procurement toward suppliers within the WTO Government Procurement Agreement — an agreement India has not signed. This gives the EU leverage to negotiate investor protection and market access concessions from India in exchange for supply-chain integration.
Is the EU already investing significantly in India?
Yes. According to the Euractiv analysis, the European Union is already India's largest genuine foreign investor. However, European manufacturing investment in India specifically has barely moved, suggesting that broader FDI flows have not yet translated into the industrial partnerships both sides are reportedly seeking.
What would India need to do to attract more European manufacturing investment?
The Euractiv article argues that India would need to accommodate Europe on investor protection frameworks and procurement access. In return, India would secure a place in the supply chains that Europe is actively rerouting away from China — a trade the analysis describes as mutually beneficial and time-sensitive.
