With the help of the “Make in India” campaign and foreign investors, India wants to Prime Minister Narendra Modi to make India a leading industrial nation. However, the share of manufacturing in India is currently only 16 percent of the gross domestic product and is therefore even lower than the share of agriculture (17 percent). If Modi has his way, industry should generate 25 percent of GDP in the foreseeable future.
Germany has an important role to play in modernizing the Indian economy. On the one hand, Germany is one of the ten most important foreign investors in India. On the other hand, Germany exports technology to India in the form of machines and systems. In order to make India a global production location, more machines “Made in Germany” are needed. The domestic mechanical engineering industry could benefit from these upcoming investments in India.
The Indian growth engine is stuttering – and German mechanical engineering is losing ground
The machinery and plant market in India is only moving forward slowly.
Despite this huge catch-up and investment potential, the industry share has virtually not increased since the start of the “Make in India” campaign in 2014. Investments in systems and machines have also been stagnating for years. Many companies are too capital-poor to make the necessary investments. Indian banks are also extremely cautious when granting loans. German mechanical engineering is also suffering from this relatively weak demand in India. In addition, (low-cost) providers from the Far East have been successfully capturing market share for years.
In 2006, the German share of machines and systems imported into India was still over 20 percent, the Chinese share was 13 percent. In 2016, India imported over a quarter of its machinery imports from the People's Republic. Germany is now a distant second with 14 percent. Last year, the Federal Republic exported machines and systems worth almost 3 billion euros to India. The top exports are drive technology, followed by textile machines, machine tools and plastics and rubber machines. (Source: GTAI)
Local value creation as a critical success factor
“Made in Germany” enjoys an extremely high reputation in India. Unfortunately, German providers are increasingly unable to assert themselves in the extremely price-sensitive market. German premium quality is often only affordable for export-oriented companies. The vast majority of Indian companies rely on supposedly cheaper investments from Asia. Therefore, many German mechanical engineers feel forced to produce (at least partially) locally - and specifically for the Indian market.
Current opportunities for German mechanical engineering in India
Of all the industrial sectors, the vehicle sector (cars, commercial vehicles, motorcycles) is still performing best and is generating high single-digit growth rates. Many German suppliers with their production facilities in India also benefit directly from this. The automotive industry is also the most important buyer of machine tools.
Despite the current stagnation, the Indian textile industry wants to grow significantly in the next few years with government support. It is to be modernized with the help of subsidies.
The plastics and packaging industry is also predicted to have good growth opportunities. In this area too, German mechanical engineering has been exporting proven technology to India for years.
Dr. Wamser + Batra, the experts for German mechanical and plant manufacturers in India
Around half of our 160 customers come from the mechanical and plant engineering sector. We are currently providing this industry know-how to a number of companies, among others Thuringian medium-sized companies. The one announced at this year's Thuringian Foreign Trade Day by Economics Minister Tiefensee “Export Initiative Mechanical Engineering” is in the starting blocks. The aim of the concept is to inquire about and discuss the challenges and support needs of Thuringian mechanical engineering in internationalization, to promote export activity through tailor-made offers and to provide an exchange platform for Thuringian mechanical engineers and metal processors.
Our offer includes specially designed entrepreneurial trips (including participation in trade fairs) but also the individual search for and initiation of contacts on site as well as the use of suitable funding instruments in cooperation with LEG Thuringia.
