by Radu Magdin
Europe needs a new economic map
For three decades, European prosperity rested on three assumptions: Russian energy would stay affordable, China would remain both factory and customer, and the United States would guarantee Europe’s security. All three have cracked. Russia’s war on Ukraine ended the energy bargain with Moscow. China has turned from manufacturing partner into a formidable industrial and technological rival. And Washington’s trade and security commitments now carry some question marks that Europeans put off examining for too long.
Europe is not powerless. It remains one of the world’s largest markets, an industrial heavyweight and a regulatory power with global reach. But it can no longer take its economic model for granted. The task is twofold: rebuild competitiveness at home, and build a far more ambitious economic presence abroad. That is why India matters.
Ursula von der Leyen called the EU–India trade agreement "the mother of all deals." Negotiations closed in January. In September the Commission sent the text to the Council, and both sides now aim to sign before the end of the year, with entry into force in early 2027. Tariff cuts alone will not deliver what the deal promises, though. Von der Leyen herself calls the parallel investment protection agreement the missing piece. Beyond that, the deal needs an industrial strategy, an investment strategy and, above all, a regional strategy. That means looking beyond Brussels and New Delhi.
Growth is moving to the cities
The UN’s World Urbanization Prospects 2025 counts 33 megacities of ten million people or more, up from eight in 1975. Nineteen of them are in Asia. The UN expects 37 by 2050, and most of the world’s urban growth over that period will come from just seven countries, with India at the top of the list. In Africa, cities such as Lagos and Kinshasa show the opposite problem: populations are growing faster than infrastructure, housing and institutions can keep up. The challenge there is turning numbers into productivity.
Asia’s leading metropolitan regions already combine scale with sophisticated industrial, financial and logistics ecosystems, and India stands out. In its 2026 Global Cities Index, Oxford Economics projects that six of the world’s ten fastest-growing cities by real GDP over the next 25 years will be Indian, and it counts 55 Indian cities among the world’s top 100 urban growth leaders. Delhi, today the 63rd-largest city economy in the world, could be 14th by 2050, with output above two trillion dollars.
This is about more than bigger cities. It is about new concentrations of purchasing power, talent, capital and industrial capability. The next wave of global growth will not spread evenly across national economies. It will gather in ambitious urban regions that can connect talent, technology and infrastructure. Asia’s rise will shape this century, and Asia’s megaregions will shape that rise.
China built scale. India is building momentum.
China understood the power of megaregions decades ago. The Yangtze River Delta around Shanghai is one of the most sophisticated industrial ecosystems on earth. The Greater Bay Area links Shenzhen, Guangzhou and Hong Kong across manufacturing, finance and trade, and Beijing–Tianjin–Hebei integrates economies across administrative borders. Their scale was planned and coordinated from the centre.
India is on a different path. Federalism, democratic politics and fierce competition between state governments produce a decentralised model. Maharashtra pairs Mumbai’s financial power with Pune’s industry. Karnataka has Bengaluru, one of the world’s great technology hubs. Gujarat combines manufacturing, ports, entrepreneurship and the financial ambitions of GIFT City. Tamil Nadu has built formidable automotive and electronics clusters, and Telangana has turned Hyderabad into a centre for technology and life sciences. These states compete with international investment destinations, and with each other.
Their ambitions differ too. China is contesting American leadership in technology and industry. India wants more global weight as well, but its immediate task is to convert enormous potential into productivity, jobs and rising incomes. China spent decades building scale; India is trying to accelerate development on a continental scale. Europe should not pick one Asian giant and ignore the other. It should recognise that Asia’s economic future is increasingly being decided by competition between its most ambitious regions.
India’s next growth story will not belong only to its champions
Maharashtra and Karnataka took 51% of India’s foreign direct investment in 2024–25, according to DPIIT. In 2025–26, Karnataka’s equity inflows nearly doubled, to 12.9 billion dollars. Investors go where ecosystems, infrastructure and skilled labour already exist. That concentration also opens a door for the challengers.
I have spent recent days in Gujarat and Andhra Pradesh, watching states position themselves for the next investment cycle. At the CII Partnership Summit in Visakhapatnam this week, Commerce and Industry Minister Piyush Goyal made a point that stayed with me: the world talks about the ease of doing business, while Andhra Pradesh talks about the speed of doing business. Chief Minister N. Chandrababu Naidu has made speed the state’s calling card, with real-time clearances and industrial incentives paid through escrow accounts. For an international investor, fast decisions, predictable incentives and on-time infrastructure are often what decides whether to invest or move on.
Official estimates put Andhra Pradesh’s real growth at 9.9% in 2025–26, up from 6.5% two years earlier. Visakhapatnam’s maritime position makes it a natural gateway for international partnerships. Pledges are not projects, of course; execution, skills and institutional continuity will decide the outcome. But the direction is clear, and Andhra Pradesh is not alone. India is not one investment destination. It is a competitive marketplace of investment destinations, and European companies and regions that understand this internal race will have a real advantage.
Europe’s China dilemma is an industrial dilemma
Trade between Europe and China remains enormous, and many European firms still depend on Chinese markets and supply chains. But commercial complementarity no longer defines the relationship. Systemic industrial competition does, whether over electric vehicles, subsidies, market access, overcapacity or strategic technologies. Europe cannot answer with trade barriers alone, and it cannot go back to the old relationship. It has to invest in its industrial base, speed up innovation, deepen its capital markets and cut regulatory clutter.
That is half the answer. The other half is diversification. India cannot replace China, and nobody should expect it to rebuild China’s industrial ecosystem overnight. It offers something else: a large and growing market, serious technological capability, a young population and room to build new industrial partnerships. Strategic autonomy cannot mean economic isolation. It has to mean having the strength to compete and the freedom to choose partners.
The mother of all deals needs thousands of smaller ones
Trade agreements create frameworks, not commercial relationships. Companies, investors, universities and political leaders have to fill them. A Central European manufacturer looking at India needs to know the difference between Maharashtra and Andhra Pradesh. An Indian technology firm entering Europe needs to know why Munich, Warsaw, Bucharest, Milan and Prague offer different advantages. A European university needs the right Indian partner institution, not a diplomatic communiqué. The mother of all deals will be judged by how many smaller deals it produces, and many of them will be regional.
The two sides fit together well. Europe is ageing and brings capital, industrial technology, research and established companies. India brings demographic scale, entrepreneurial energy and vast development needs. This is not a simple swap of European capital for Indian labour: India is already a sophisticated economy in key sectors, and Europe has to compete for Indian investment and talent. The real opportunity lies in joint ventures, investment in both directions, research partnerships and new industrial ecosystems built by both sides, all resting on relationships that outlast political cycles.
What Bavaria understood early
Europe does not have to invent regional economic diplomacy from scratch. Bavaria opened an office in Bengaluru in 2001, made Karnataka its partner state in 2007 and upgraded its representation in 2013. In 2025 the two governments added a new declaration covering artificial intelligence, quantum technology and biotechnology. When Friedrich Merz made his first official visit to India this January, he went from Gujarat to Bengaluru, ground Bavaria had been preparing for two decades.
The lesson is that economic diplomacy follows economic opportunity, and that regions with strong industrial bases can build direct international relationships that complement national foreign policy. Baden-Württemberg, Lombardy and Emilia-Romagna have the same potential. A regional government often knows its industrial strengths better than any central ministry. A mayor can connect local entrepreneurs with foreign investors faster than a summit can.
A university or business association may spot a technological match long before it reaches a bilateral agenda. All of this has to work within national and European competences, and national diplomacy remains the backbone. But there is plenty of room for regions to take the initiative. Europe’s most internationally successful regions are not waiting for globalisation to come to them. They are building their place in it.
Central and Eastern Europe should think bigger
Over three decades, Central and Eastern Europe has become a pillar of European manufacturing. Poland, Romania, Czechia, Hungary and Slovakia have built industrial capacity, engineering talent, technology sectors and logistics advantages. Yet their international economic strategies still lean heavily on traditional European partners. India deserves a much bigger place in them.
The momentum is there. Poland upgraded its relationship with India to a strategic partnership in 2024. In July, President Droupadi Murmu’s state visit to Bucharest ended with a goal to double bilateral trade within three years and a decision to celebrate 2028, the 80th anniversary of diplomatic relations, as the India–Romania Year of Innovation. India’s embassy in Bucharest has already started working directly with Romanian counties such as Argeș and Bacău. The engagement of Emmanuel Macron, Giorgia Meloni, Friedrich Merz and Donald Tusk shows that India is becoming central to Europe’s economic strategy.
The next step has to go below the national level. Polish voivodeships, Romanian counties and Czech industrial centres should identify Indian states whose capabilities match their own. Romania’s western industrial regions could work with Indian manufacturing and technology ecosystems. Cluj-Napoca and Bengaluru could deepen links in innovation and universities. Constanța and Visakhapatnam could explore maritime logistics, port services and industrial connectivity.
None of these is a ready-made success; each needs serious economic assessment and committed institutional partners. But the logic holds. For Indian companies, the region offers access to the single market, industrial ecosystems, technical talent and a role in Ukraine’s eventual reconstruction. For CEE companies, India offers diversification and a seat at one of the great economic transformations of our time. Europe’s eastern regions should stop thinking of themselves as recipients of foreign investment and start acting as international economic partners.
From sister cities to strategic sister regions
Europe’s long tradition of town twinning served reconciliation and cultural exchange well. Today’s challenges call for a new generation of partnerships: strategic sister regions. A partnership between a European region and an Indian state should not end with a memorandum, a delegation photo and a ceremonial dinner. It needs an economic agenda covering investment promotion, industrial cooperation, technology transfer, research, skills, start-up exchanges and business missions in both directions. It also needs measurable results: how many companies were connected, how many projects advanced, which joint ventures were explored, which universities are working together, which barriers were removed.
I would build these partnerships on a simple sequence: Map, Match, Mobilise. First, map Indian states’ industrial, technological and investment profiles systematically, including emerging centres and not just the established names. Second, match complementary ecosystems around real business opportunities in manufacturing, ports, technology, pharmaceuticals, energy or research. Third, mobilise regional authorities, chambers of commerce, universities, investors and companies together, so that diplomatic relationships become projects. Andhra Pradesh, with its focus on infrastructure, industry, technology and logistics, is an obvious candidate. The goal is not to spread attention evenly. It is to find genuine complementarities and build partnerships that survive changes of government.
The future belongs to regions that connect
The world economy is not becoming less competitive. It is becoming competitive at more levels at once. Countries compete for strategic influence, companies for markets and technology, regions for investment, talent and relevance. China’s megaregions have shown what integrated industrial ecosystems can do. India’s states are now competing to write the next chapter of Asian development, and global urbanisation will only increase the weight of these regional dynamics.
A continent still paying for its dependence on Russian energy, Chinese manufacturing and American security cannot afford a passive economic strategy. Europe’s most ambitious regions should not wait for every initiative to come from Brussels, Berlin, Paris or Rome. They should build their own networks, find complementary Indian partners and turn those relationships into investment, innovation and growth. The same holds for India’s states: those that build lasting ties with Europe’s industrial and technological regions will attract more capital and extend their reach.
The EU–India agreement opens a historic door. The real work starts when businesses, regions and institutions walk through it. India’s next growth story will be written by its states, and Europe’s India strategy should be written, in large part, by its regions. The next economic map will be drawn by cities and regions as much as by countries. Europe has to decide whether it will watch that map being drawn or help draw it.
By: N. Peter Kramer
