Regional spotlight

, Rapidly growing and industrialising, India is attracting new levels of international investment

While India’s economic development has been driven primarily by domestic factors, international corporates are also ramping up investment in the country. Multinationals from Europe and elsewhere are establishing a presence in the South Asian nation, both to serve its domestic market and as a manufacturing base for exporting further afield.

This trend is being facilitated by a wave of domestic investment in infrastructure that is making the country a more modern place to do business. India has embarked on a series of ambitious transport and energy infrastructure projects – including highways, ports, airports and power generation facilities. The scale of investment is impressive – an estimated 35,000 kilometres of highways are currently under construction or planned, with many projects being delivered by domestic conglomerates such as Adani, Tata and Reliance and supported by government co-investment.

As for the energy sector, India is taking steps towards the energy transition: while surplus hydropower² is being imported from Nepal, the equivalent of US$21.6million is being invested in the construction of a new power transformer factory in Maharashtra to boost the country’s manufacturing capacity and accelerate the energy transition. For European companies, this presents a clear opportunity. Europe continues to have a competitive advantage in specialised infrastructure, particularly in renewable energy, while India’s growing investment is creating increased demand for this expertise – a need that could be more easily addressed through the free trade agreement.

Beyond infrastructure, India’s strategic 50:50 public-private investment model is being applied across several sectors – particularly those identified as having strong growth potential. For example, Tata Electronics is investing an estimated US$11bn³, with support from the government, to build a facility for manufacturing semiconductors for a range of applications across automotives, AI and other key segments.

Of course, dealing with such a dynamic market also poses challenges for international corporates. Companies trading with India under the new EU agreement will be subject to the EU’s Carbon Border Adjustment Mechanism (CBAM), for which India has not received an exemption.

This is particularly challenging as India’s energy mix still remains heavily coal-dependent despite efforts to transition to greener alternatives. This will come as no surprise to frequent visitors to the country – in Delhi, the air quality index reached a high of approximately 400 in December 2025, far exceeding what is considered safe. Indeed, exporters may need to resort to purchasing carbon certificates to comply with CBAM requirements, the cost of which could offset some, if not potentially all, of the tariff savings gained from the free trade agreement.

India is best understood as a collection of regional economies rather than a homogenous entity. For international businesses, it is important to approach business opportunities in the country with a clear understanding of its regional diversity and regulatory environment.

There are four primary states that tend to draw the highest FDI, each with its own sectoral strengths and advantages:

• Maharashtra is India’s primary financial hub, and a major location for IT, automotive manufacturing and pharmaceuticals, making it a natural entry point for many corporates.
• In southern India, Tamil Nadu has established itself as a leading hub for electronics and automotives manufacturing, earning it the nickname of “Detroit of Asia”. The state is also home to significant Apple manufactoring operations and benefits from some of India’s most advanced port infrastructure, providing a further advantage for manufacturers.
• Karnataka, and Bangalore in particular, is India’s primary technology hub and home to global capability centres (GCCs) operated by major international companies such as HP and Dell, which benefit from a highly skilled, English-speaking workforce.
• Finally, Gujarat is known for its focus on renewable energy production and semiconductor manufacturing. It is also home to GIFT City, India’s most significant financial sector project.

These major states are actively competing for foreign investment – a dynamic that, rather than fragmenting investment, gives international corporates greater choice when deciding where to invest.

The opportunities arising from India’s growth are undeniable, but there are complexities that corporates must also navigate. The country’s banking sector has its own distinctive characteristics, and international businesses should also be prepared for an environment in which local institutions operate with a great degree of self-confidence and independence. This makes a deep understanding of the market and its dynamics essential.

The choice of banking partner therefore becomes crucial for international businesses looking to unlock opportunities in India. Commerzbank has deep local knowledge built on a long-standing presence in the market – underpinned by extensive local relationships and a representative office in Mumbai, where the bank has been present since 1986.

Businesses that invest in the right local relationships and work with partners who understand the market will be considerably better placed to engage with the exciting possibilities that India has to offer.

Gujarat International Finance Tec-City (GIFT City) is India’s first and only International Financial Services Centre (IFSC). It operates as a special economic zone with a tax and regulatory framework designed to attract international financial institutions and facilitate cross-border capital flows.

The incentive structure is substantial on both sides of the banking relationship – corporate borrowers benefit from the absence of withholding tax on lending out of GIFT City, a unique advantage over standard onshore alternatives, while banks can benefit from up to 25 years of tax-free profits, with the flexibility to choose which years within that period the exemption applies.

The result is a highly competitive environment for foreign currency deposits, attracting capital from other regions, including from Sri Lanka and Nepal. Almost every major global corporate bank now has a presence in GIFT City, alongside the offshore branches of India's largest private sector banks. Corporate clients are therefore increasingly seeking institutions that can provide access to its benefits, with the ability to operate in GIFT City becoming a baseline requirement rather than a differentiator.