EU-India Trade Talks Seen Boosting Long-Term Investor Confidence

Ongoing trade negotiations between the European Union (EU) and India are reinforcing confidence in long-term cooperation, signaling significant opportunities for investors, according to a top official at the European Investment Bank (EIB). Despite current geopolitical uncertainties in South Asia, India stands out as a country of remarkable resilience and opportunity.

Nicola Beer, Vice President of the EIB, emphasized India's attractiveness as an investment destination, particularly in sectors aligning with both India's and Europe's priorities. The EIB has committed over 5.6 billion euros to India in the last 20 years, with more than 90% dedicated to climate action. Beer called for accelerated approvals and a level playing field for global investors to further boost investment flows.

Sustainable transport is a leading area of EIB investment in India. The EIB has signed 3.6 billion euros in loans for metro projects across the country, making India the largest recipient of EIB urban mobility financing outside the EU. These projects span cities such as Agra, Bengaluru, Pune, Nagpur, Lucknow, Bhopal, and Kanpur.

Energy transition, particularly renewables, energy efficiency, and grid infrastructure, is another key priority sector for the EIB. These sectors not only address India's development needs but also create opportunities for technology and investment flows between India and the EU. Beer cited the $60 million commitment to the India Energy Transition Fund, managed by EAAA Alternatives, as an example of engaging with the private sector. This fund is designed to channel equity and "last mile" financing into greenfield infrastructure and growth-stage companies, accelerating projects in renewables, energy efficiency, and clean mobility. The fund is expected to mobilize significant additional private capital, including from leading European institutional investors, and foster innovation in areas like battery storage and the circular economy.

While opportunities are significant, some barriers remain to greater European investment in India. Both India and the EU are working to deliver a commercially meaningful trade deal that will open markets for goods and services to businesses from both sides. The goal is to conclude a Free Trade Agreement (FTA) by the end of 2025. India and EU started negotiations on FTA in June 2022 and have held 10 rounds of talks. The 11th round of talks is scheduled to happen in New Delhi. Both sides are also willing to consider concluding their FTA in tranches so that the deadline is met.

The EIB is one of the world's largest multilateral banks. The bank's investments in India reflect a broader trend of increased economic deal-making as countries seek to secure their exports and supply chains amidst global economic uncertainty.