India remains solidly on track for growth, forming new partnerships and alliances

India’s economy continues to grow at a rapid pace. Nearing 1.5 billion people, the world’s most populous country’s economy is expected to outperform the rest of Asia this year. The International Monetary Fund (IMF) recently raised its growth forecast for India to 6.5 per cent for this year and next, while growth for Asia as a whole is expected to top out at 4.4 per cent in 2026. With a gross domestic product of around USD 4tn, India is currently the fifth or sixth-largest economy, depending on the data source. However, according to many experts, it could move up to fourth or even third place in the medium term.

The country benefits from its young population and its booming IT sector, but has also recently been placing greater emphasis on international partnerships, positioning itself as a reliable partner at a time when many countries want to reduce their dependence on the United States and China, which are increasingly perceived as unreliable trading partners.

Historic Trade Agreement with the EU clears the way into the Indian market

In January, after nearly two decades of negotiations, the EU and India agreed a comprehensive trade deal. Together, the two sides account for nearly a quarter of global GDP and the world’s population. The agreement paves the way for opening up the previously heavily protected Indian market to companies from the European Union, which is already the country’s largest trading partner.

India currently protects its economy with high tariffs, but this is set to change with the new free trade agreement between the EU and India. Under the agreement, the EU will abolish tariffs on over 90 per cent of products, while India will liberalise around 86 per cent of its tariff lines. The EU expects the agreement to lead to a doubling of EU exports to India by 2032.

The Vienna Institute for International Economic Studies (wiiw) expects Austrian exports to increase by about 75 per cent in the coming years. Austrian imports from India are also likely to roughly double thanks to the agreement. In light of the US’s aggressive trade policy and China’s growing power ambitions, the agreement is also seen as a geopolitically significant step.7

Data as at 20.4.2026

Several heads of state are seeking closer ties to India

Individual EU countries are also currently strengthening their cooperation with India. In April, Austrian Chancellor Christian Stocker signed several bilateral agreements during a state visit where he was received by Indian Prime Minister Narendra Modi. In January, during a tour of Asia, German Chancellor Friedrich Merz visited Modi, putting increased emphasis on India as a trading partner and an attractive location for German companies.

However, India is also seeking new partnerships in other regions. South Korean President Lee Jae Myung paid a state visit to Modi in April, the first visit by a South Korean president in eight years. The two heads of state agreed enhanced economic cooperation, in areas such as shipbuilding.

IT Hub Bengaluru booming as research location for global enterprises

India is not only attractive as a partner for trade and cooperation, but also increasingly as a location for companies to set up operations, offering numerous opportunities for research funding for foreign companies, particularly when they collaborate with local partners. The funding focuses primarily on sectors such as technology, biotechnology, renewable energies and material research.

What makes India particularly interesting is its booming IT sector, with India’s largest IT hub located in Bengaluru. The city, with a population of 13 million, is currently home to around 25,000 IT companies. Given the high concentration of IT engineers in the country, numerous international corporations have established research centres in the city. The German Bosch Group is developing new hydrogen technologies for lorries in Bengalaru, software giant SAP employs 15,000 people across all of India.

The city of Berlin recently opened a foreign office in the Indian IT metropolis, it’s third worldwide following New York and Beijing. The “Berlin Business Office India” is intended to serve as a central point of contact for Berlin-based companies and start-ups wishing to tap into the Indian market, while also supporting Indian companies looking to establish themselves in Berlin. India is a leading centre of innovation in the fields of artificial intelligence, biotechnology and digitalisation, and as the world’s fifth-largest economy, it is an important trading partner for Germany and Berlin, explained Berlin’s Senator for Economic Affairs, Franziska Giffey: “That is why our internationalisation strategy places a clear focus on India.”

India’s Government Plans to Boost Exports Further

There is still plenty of room for growth in India, and the government has recently approved new export incentives to expand the country’s industry with the intention of tripling exports by 2035. The goal is to boost production in 15 sectors, including semiconductors, metals and the labour-intensive leather industry.

To this end, the government plans to spend around USD 1bn on establishing the infrastructure for some 30 production centres. In addition, grants totalling USD 218m are earmarked for future technologies such as chips and energy storage. Despite its strong IT sector, India still has some way to go on its path towards an economy driven primarily by industry and services. 42 per cent of the workforce is, as yet, employed in agriculture –compared to around 3 per cent in Austria.

 

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