The fourth Indo-German government consultations will take place in Berlin on Monday and Tuesday next week. The agenda and participants are still unclear, but intensifying economic cooperation - with a focus on smart cities, infrastructure and environmental technology (Clean India) - is likely to be the focus for both sides.
Narendra Modi sees Germany as an important economic partner
India sees Germany as an important partner in implementing its economic reform programs. For this purpose, the cabinets of both countries have been meeting every two years, alternating between Germany and India, for the German-Indian government consultations since 2011.
In 2011 and 2015, Chancellor Angela Merkel traveled to New Delhi with numerous other government representatives. After 2015 - India was a partner country of the Hannover Messe - Germany is now inviting Narendra Modi to the Federal Republic for the second time during his term as Prime Minister on May 29th and 30th, 2017. It is currently unknown which ministers will be there on the Indian side this time.
Germany is already an indispensable partner for India today
For Prime Minister Modi, Germany appears to be a model for his future vision of a powerful Indian economy. The Indian head of government is convinced that India needs a strong export-oriented industry based on the example of Germany, not least to offer its population employment opportunities. Over the last twenty years, relatively speaking, very few of his compatriots have benefited from the economic opening and the boom in the IT and service sectors. More than half of the Indian population still works in agriculture or as micro-entrepreneurs in the informal sector - with correspondingly low added value and income below the poverty line.
Make In India campaign promotes (German) investments in industry
Therefore, one of Narendra Modi's primary goals is to significantly increase industrial production in India. For this purpose he has, among other things, “Make in India”campaign started. It is intended to motivate international investors to produce in India, bring technology into the country and create millions of jobs in the manufacturing sector.
Germany has a particularly important role to play in the modernization of Indian industry. Germany has been one of the ten most important foreign direct investors in India for decades. And the demand for German capital goods, especially machinery and equipment, is already extremely high and is largely responsible for the export surplus of well over 2 billion euros. Modi knows that in order to make India a global production location, more (German) machines are needed. The domestic mechanical engineering industry could benefit greatly from investments in the South Asian growth market.
German industry in India is clearly lagging behind (its own) expectations
Despite these rosy prospects, there is currently not much sense of euphoria in German industry. The economic reality on the growth market is perceived by companies to be much harsher than the rumored figures suggest.
Business climate in India (Download)
This is the result of the first public survey on the economic mood of German exporters and investors in India, carried out by the management consultancy Dr. Wamser + Batra GmbH based in Bochum. Only 29 percent of companies from Germany rate their current business situation in India as good, while 21 percent rate it as bad.
According to this study (WB Business Climate Index India, as of April 2017), German SMEs achieved only meager growth rates in India last year. According to their own information, around two out of three companies in India see themselves on a growth path, but the majority of them are only recording slightly increasing sales figures. In contrast, one in four companies (24 percent) is stagnating at the same level and 13 percent of companies even have to report declining sales. Only just under one in three companies (30 percent) comes close to the sales goals they have set themselves. However, the majority of companies miss this by a significant margin - 42 percent even by more than half!
However, the outlook is more positive: around every second company (48 percent) expects business to develop more favorably in the next 12 months, while only 9 percent expect a less favorable business situation in India.
It remains to be seen whether Chancellor Merkel and Prime Minister Modi will be able to raise the mood of German industry regarding the Indian market at the German-Indian government consultations and become more active there.
Download press release German-Indian government consultations 2017
