The potential India-EU FTA is significant since the region is home to many global firms that run large-scale operations from India
| Photo Credit:
iStockphoto
India’s deepening economic ties through Free Trade Agreements (FTAs) are transforming its knowledge economy and positioning it as a critical global services hub. As trade barriers ease and regulatory clarity improves, global corporations are scaling operations in India. With tariffs on services offshoring unlikely in the near term and US talent shortages intensifying, industry experts note that India remains a resilient magnet for expansion of Global Capacity Centres (GCC), foreign investment and innovation-led growth.
Following FTAs with the US and the UK, India recently completed the 11th round of negotiations with the European Union (EU) on their proposed FTA.
“As India intensifies its global economic engagement through a series of FTAs with countries such as the US, the UK, Australia and the UAE, and regions like the EU, the ripple effects are beginning to manifest in its growing GCC sector. These FTAs are set to enhance India’s attractiveness as a destination for establishing and expanding GCCs, particularly for mid-sized and large multinational enterprises seeking high-end talent, cost-efficiency, and market access,” Alouk Kumar, CEO, Inductus Group noted.
The potential India-EU FTA is significant since the region is home to many global firms that run large-scale operations from India, such as manufacturing majors in Germany and across other EU nations such as Belgium and the Netherlands.
An immediate impact of these FTAs is the reduction of tariffs and non-tariff barriers, said Kumar. FTAs contribute to creating an integrated trade environment, encouraging mid-sized and large MNCs to consolidate both manufacturing and knowledge services, such as innovation-led R&D, analytics, product & process automation, in a single geography. This is relevant in sectors such as IT, automobile, life sciences, fintech and aerospace.
FTAs also open doors for mid-market firms from partner countries, who previously hesitated to set up GCCs in India due to regulatory and market-entry complexities. With trade facilitation, however, these firms can explore cost-effective and innovation-led R&D-driven operations from India, especially in Tier-II cities where real estate and talent costs are relatively lower.
However, many US firms are keenly waiting for the FTA since there is a lack of clarity about tariffs being applied on services or outsourcing of business processes, particularly to India.
“There is an apprehension among the mid-sized and large corporations that the tariffs may also be extended to the services being outsourced or procured from India. This is why some large corporations in the US have put their decision on hold. The impact could be seen in the performance and financial results of large IT Sector organisations in India, which has declined over the last 2-3 quarters. This may continue in the absence of clarity by the US administration,” Kumar added.
Manoj Marwah, FS GCC Consulting Leader at EY India, expressed optimism over the continued absence of US tariffs on services offshoring.
He noted that offshoring generally rises when clients face increased cost pressures—tariffs only compound these pressures by driving up costs, particularly during inflationary periods. The post-2008 recession saw the largest wave of offshoring, though that environment was a stranger to GenAI.
While budget constraints may cause organisations to scale back on transformation initiatives—potentially affecting outsourcing—the ongoing reduction in immigration is likely to constrain IT talent availability in the U.S., pushing more work to offshore GCCs.
Marwah emphasised the complexity of the current landscape, with both headwinds and tailwinds in play. Some dip is expected in the near term, with a strong bounce back in the medium term. He underscored that India, viewed as an ally, stands to benefit from these developments, particularly with the trend of friend-sharing.
Nilesh Thakker, President, Zinnov, shared, “With over 1,700 GCCs and a 1.9 million-strong talent pool, India has evolved from a back office to the nerve center for innovation, digital transformation, and strategic operations. UK and EU companies are looking to India not just for scale, but to co-create value,” he said.
Behemoths such as Carl Zeiss is expanding its tech hub in Bengaluru to 5,000 employees. At the same time, Sanofi’s €400 million investment in its Hyderabad center underscores the country’s importance in global pharma operations.
On the other hand, operational nuances—such as evolving frameworks for transfer pricing, data governance, and digital taxation—require careful navigation. Talent mobility, too, is improving but remains a work in progress. “These aren’t roadblocks, but indicators of a maturing ecosystem where opportunity must be met with strategic foresight and compliance agility,” he said.
Published on May 23, 2025
The potential India-EU FTA is significant since the region is home to many global firms that run large-scale operations from India
| Photo Credit:
iStockphoto
India’s deepening economic ties through Free Trade Agreements (FTAs) are transforming its knowledge economy and positioning it as a critical global services hub. As trade barriers ease and regulatory clarity improves, global corporations are scaling operations in India. With tariffs on services offshoring unlikely in the near term and US talent shortages intensifying, industry experts note that India remains a resilient magnet for expansion of Global Capacity Centres (GCC), foreign investment and innovation-led growth.
Following FTAs with the US and the UK, India recently completed the 11th round of negotiations with the European Union (EU) on their proposed FTA.
“As India intensifies its global economic engagement through a series of FTAs with countries such as the US, the UK, Australia and the UAE, and regions like the EU, the ripple effects are beginning to manifest in its growing GCC sector. These FTAs are set to enhance India’s attractiveness as a destination for establishing and expanding GCCs, particularly for mid-sized and large multinational enterprises seeking high-end talent, cost-efficiency, and market access,” Alouk Kumar, CEO, Inductus Group noted.
The potential India-EU FTA is significant since the region is home to many global firms that run large-scale operations from India, such as manufacturing majors in Germany and across other EU nations such as Belgium and the Netherlands.
An immediate impact of these FTAs is the reduction of tariffs and non-tariff barriers, said Kumar. FTAs contribute to creating an integrated trade environment, encouraging mid-sized and large MNCs to consolidate both manufacturing and knowledge services, such as innovation-led R&D, analytics, product & process automation, in a single geography. This is relevant in sectors such as IT, automobile, life sciences, fintech and aerospace.
FTAs also open doors for mid-market firms from partner countries, who previously hesitated to set up GCCs in India due to regulatory and market-entry complexities. With trade facilitation, however, these firms can explore cost-effective and innovation-led R&D-driven operations from India, especially in Tier-II cities where real estate and talent costs are relatively lower.
However, many US firms are keenly waiting for the FTA since there is a lack of clarity about tariffs being applied on services or outsourcing of business processes, particularly to India.
“There is an apprehension among the mid-sized and large corporations that the tariffs may also be extended to the services being outsourced or procured from India. This is why some large corporations in the US have put their decision on hold. The impact could be seen in the performance and financial results of large IT Sector organisations in India, which has declined over the last 2-3 quarters. This may continue in the absence of clarity by the US administration,” Kumar added.
Manoj Marwah, FS GCC Consulting Leader at EY India, expressed optimism over the continued absence of US tariffs on services offshoring.
He noted that offshoring generally rises when clients face increased cost pressures—tariffs only compound these pressures by driving up costs, particularly during inflationary periods. The post-2008 recession saw the largest wave of offshoring, though that environment was a stranger to GenAI.
While budget constraints may cause organisations to scale back on transformation initiatives—potentially affecting outsourcing—the ongoing reduction in immigration is likely to constrain IT talent availability in the U.S., pushing more work to offshore GCCs.
Marwah emphasised the complexity of the current landscape, with both headwinds and tailwinds in play. Some dip is expected in the near term, with a strong bounce back in the medium term. He underscored that India, viewed as an ally, stands to benefit from these developments, particularly with the trend of friend-sharing.
Nilesh Thakker, President, Zinnov, shared, “With over 1,700 GCCs and a 1.9 million-strong talent pool, India has evolved from a back office to the nerve center for innovation, digital transformation, and strategic operations. UK and EU companies are looking to India not just for scale, but to co-create value,” he said.
Behemoths such as Carl Zeiss is expanding its tech hub in Bengaluru to 5,000 employees. At the same time, Sanofi’s €400 million investment in its Hyderabad center underscores the country’s importance in global pharma operations.
On the other hand, operational nuances—such as evolving frameworks for transfer pricing, data governance, and digital taxation—require careful navigation. Talent mobility, too, is improving but remains a work in progress. “These aren’t roadblocks, but indicators of a maturing ecosystem where opportunity must be met with strategic foresight and compliance agility,” he said.
Published on May 23, 2025
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It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout. The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here’, making it look like readable English. Many desktop publishing packages and web page editors now use Lorem Ipsum as their default model text, and a search for ‘lorem ipsum’ will uncover many web sites still in their infancy.
The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here’, making
The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here’, making it look like readable English. Many desktop publishing packages and web page editors now use Lorem Ipsum as their default model text, and a search for ‘lorem ipsum’ will uncover many web sites still in their infancy.
It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout. The point of using Lorem Ipsum is that it has a more-or-less normal distribution
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