Daily Management Review

Why India and Germany Are So Attracted to Each Other


The German business has big plans for India. Angela Merkel's visit to Delhi is designed to give a strong impetus to bilateral economic cooperation.

Until now, German business circles’ attention was focused on China. However, the country experiencing significantly slow economic growth, so now the German exporters and investors are showing rapidly growing interest in the second most populous nations of the world: India. Moreover, Indian Prime Minister Narendra Modi, who came to power in May 2014, has proclaimed a policy of comprehensive modernization of the country.

“This caused “great stirring" in the past year among German businesspeople", says the chairman of the Asia-Pacific Committee of German Industry (APA) Hubert Lienhard. However, he continues, reform activities of the new prime minister has not yet resulted in a considerable success. "Expectations for India, which existed after the election of Modi, in our opinion, has not yet come true," - emphasizes Lienhard, who is also head of the technology group Voith.

Nevertheless, the German managers and entrepreneurs continue to get fascinate by the three ‘D’s, which, according to Narendra Modi, stand for the high attractiveness of the country for foreign investors: Democracy, Demography, Demand. Indeed, India is a country with established democratic institutions, the majority living with nearly 1.3 billion young people, and, as they get education and join the ranks of the middle class, increasing the already huge consumer market.

"This country has all the prerequisites to become a major player in the global industry," - says the chairman of Siemens, Joe Kaeser. For this, however, India needs to make up for a lot of infrastructure, and the German technology group clearly hopes for orders in the energy and transport sector. Hubert Lienhard confirms that the new Indian Prime has significantly accelerated the implementation of energy and infrastructure projects.

The two top managers are included in the delegation of 20 German businessmen accompanying German Chancellor Angela Merkel and four ministers of her cabinet during their visit to India, which officially began on 5 October with the third German-Indian government consultations.

Receiving the visitors from Berlin, Narendra Modi noted the great role played by Angela Merkel on the international arena today, and called her "a reliable anchor in difficult times for Europe and the world." Indian Prime considers Germany a "natural partner", its strengths very well align with the priorities of today's India. Following the consultations, the two sides underlined their desire to expand cooperation not only in the economic sphere but also in areas such as security policy, exchange of technology and education.

It is significant that there was no major contracts signed during the visit: the way for billions of dollars of transactions has yet to be prepared. An important step towards this was the agreement on the establishment of a special department in India in order to facilitate companies from Germany to invest in the Indian market and to speed up the issuance of permits. Angela Merkel emphasized that such an institution, in particular, needs representatives of the German medium-sized businesses. After all, they, of course, are much more difficult to overcome the bureaucratic obstacles comparing to large companies.

However, even the largest German corporations face bureaucracy and bureaucratic arbitrariness in India, as their representatives spoke directly on the German-Indian economic forum held in New Delhi in parallel with the intergovernmental consultations. Guests from Germany criticized the fact that the requirements for a public procurement, involving the German or European company, are often completed with very questionable decisions. In particular the head of European aerospace company Airbus, Thomas Enders complained about this: "We have lost a lot of money on this."
"In order to facilitate further investment, it is necessary to solve the problems associated with land acquisition, and issues related to taxes and customs duties - said German Foreign Minister Frank-Walter Steinmeier in an interview with the Hindustan Times. - Big step forward would be the introduction of a single country-wide value added tax. "

Germany would have preferred a broader framework to solve the problem of customs. The joint statement on the results of intergovernmental consultations stressed that the two sides will work to resume negotiations on a free trade zone between India and the European Union. Indian authorities froze the talks in August after the EU suspended the issuance of permits for 700 tested drugs in India. Angela Merkel promised to come to the agreement on this issue before the end of the year.
An important topic of the talks was the protection of the global climate. Recently, India, for the first time, formulated its goal of reducing greenhouse gas emissions. To do this, the Indian authorities, in particular, are going to increase the share of renewable sources in electricity production from the current 5 percent to 25 percent in the next 15 years. As part of the agreement on partnership in the field of solar energy, Germany will provide India about half a billion euros in the form of soft loans for purchase and installation of solar panels.

The volume of German-Indian trade is still very modest - 16 billion euros (2014). However, in the first half of 2015, deliveries of German products in the Indian market increased by 18 percent.

source: dw.de