South Asia is increasingly emerging as an attractive growth region for international exporters. A significant indicator of this is the free trade agreement between the EU and India, which was signed on 27 January 2026 and has been described by political representatives on both sides as particularly far-reaching. Against a backdrop of increasingly shifting global trade flows, both economic regions are seeking closer cooperation.

A volume of 31.3 billion euros has already been forecast for German-Indian trade in goods for 2025. The agreement could further reinforce this trend. At the same time, the Indian economy continues to grow significantly: in 2025, economic growth stood at 7.3%, and according to the International Monetary Fund, 6.4% is still expected for 2026. The main drivers of this momentum are, in particular, a strong domestic economy and extensive investment in infrastructure projects.

South Asian markets as an alternative to traditional markets

It is not just India, but the entire South Asian region that is growing in economic importance. India and Bangladesh, in particular, are increasingly establishing themselves as manufacturing hubs. This trend is also linked to current developments in global trade: rising tariffs and political uncertainties are affecting trade patterns, prompting companies to diversify their supply chains more extensively.

This is creating new sales opportunities for German companies. Industrialisation and the expansion of production are leading to rising demand for machinery and plant, a traditional export segment for German industry. In many projects, South Asian customers are increasingly turning to automation and energy-efficient technologies.

The expansion of renewable energies and modern grid infrastructures is also opening up opportunities: investment is increasingly flowing into solar and wind energy, smart grids and electricity networks. Furthermore, demand for medical technology is growing, particularly in the high-end sector. Although Chinese suppliers often offer lower prices and shorter delivery times, German companies stand out for their quality, engineering expertise and durability.

Varying market conditions within the region

Despite the positive outlook, a differentiated market strategy is crucial, as economic conditions vary significantly from country to country.

India is by far the largest market in the region. Under the new free trade agreement, tariffs on virtually all industrial products are set to be phased out once the agreement is fully implemented. One example is the automotive sector: import duties on vehicles from the EU are set to fall from the current 110% to 10%. Combined with a strong domestic economy and extensive infrastructure programmes, this makes India the key market for companies with a South Asian strategy.

Bangladesh offers particular opportunities for manufacturers of machinery for textile and consumer goods production, as there is increasing investment in automation and energy-efficient production processes. However, political uncertainties could slow down growth.

Pakistan is seeing growing demand, particularly in the areas of energy infrastructure and digitalisation. At the same time, however, there are higher political and financial risks, such as historically fluctuating availability of foreign currency and ongoing exchange rate volatility.

In addition, there are smaller but interesting markets such as Sri Lanka, Nepal and Bhutan. These countries offer niche potential, particularly in the areas of renewable energy and transport infrastructure, even if the market volume remains limited.

A local presence as a key to success

However, a purely export-oriented approach from afar often reaches its limits in South Asia. Companies with a local presence – for example, through sales offices, service units or joint ventures – gain clear competitive advantages.

It is particularly important to signal to local customers a commitment to a long-term partnership. This includes, for example, after-sales services, training programmes for users, and the adaptation of products to regional standards and operating conditions.

Another approach is to collaborate with local partner companies. Joint ventures can facilitate market entry and help to better navigate regulatory requirements. This opens up additional opportunities, particularly in India, as the new free trade agreement is also intended to provide service providers from the EU with improved access to sectors such as financial services and maritime transport.

Risk management remains crucial

Despite the attractive growth opportunities, companies should plan their risk management and financing carefully.

In markets with long payment terms and, in some cases, volatile economic conditions, supply chain finance solutions can also be helpful. These models improve financing along the supply chain by transferring receivables or liabilities to financial service providers, thereby generating additional liquidity.

Source: ExportManager (in German)