The German Interest

Make in India being the international marketing campaigning initiated  by Prime Minister Modi, to attract businesses from around the world to make the country a manufacturing hub seems to have taken off well with the German manufacturers.

After interactions between the Indian Government and various Ministries of The German Government, with various discussions on ways to strengthen bilateral engagement in the areas of manufacturing, infrastructure, energy and automobiles, the sectors are poised to set up facilities in India enhancing collaboration in small and medium enterprises, meeting India’s energy needs, clean energy, investment in Smart Cities and high-speed railways going by the campaign. Skilling, ease of doing business, labour reforms, automobile sector, interest of the German banks in India and how this can be taken forward at the Hannover fair in Germany in April where India is a partner country were also discussed. With an annual average annual growth rate of ten percent over the last ten and the current rate at around five percent, India is one of the world’s fastest-growing economies. To stimulate growth the country is opening itself up to further foreign investment, having decided to modernize its infrastructure and industrial plant and equipment.

The German industry, right from the beginning, was always more than a supplier of goods to India. Periods of high exports were always accompanied by large flows of investment and technology. Since liberalisation started in 1991 the new spurt of German exports to India has led to an equally impressive boost in new investment and technical cooperation projects. Among foreign investors in India, Germany ranks 8th with total investment of approximately $3.9 billion since August 1991. Since April 2000, a cumulative figure of $3051 million has been invested by German firms into India. Despite the recession, German investors continued to show great interest in India during 2008-09, when they invested an all time high amount of $629 million, showing an increase of 32 per cent over 2007-08. In 2009-2010, the dollar figure fell to $626 million, even as the investment into India grew marginally. In line with the negative growth of total Foreign Direct Investment in India, Foreign investments from Germany also fell recording only USD 200 Million.

But this is predicted to grow. The German federal government recently promised some one billion Euros worth of loans to India – funds which are to be used primarily in the area of energy efficiency, renewable forms of energy and the sustainable use of natural resources. With a trade volume of 16.1 billion Euros, Germany is India’s leading trading partner within the EU. The German trade surplus of approximately 3.4 billion Euros (2012/13) reveals the high level of Indian demand for capital goods in particular – above all for machines, which constitute some 33 percent of Germany’s total exports to India. Based on a survey commissioned by the German-Indian Chamber of Commerce, German enterprises are expecting a medium-term increase in exports to India with promising business-friendly policies of the new Indian government. German investors in India take a positive long-term view of the Indian market and continue to invest in their operations to tap growth opportunities. 27 per cent of all surveyed managers indicated plans to strongly increase their investment activity in India during the next three years. 46 per cent plan a moderate further increase. Only 28 per cent want to keep their investment activity at a constant level. None of the respondents plan to decrease investments in India or to withdraw from this market.

Top sectors attracting FDI inflows in India are Transportation industry, electric equipment, metallurgical industries, fuels, services sector. Chemicals, construction activities, trading, automobiles are other important sectors.  The state of Maharashtra with 57 per cent share of German investments remains the most attractive destination of German investments in India. Pune has lately become the hotbed for German investments. Karnataka and Gujarat are other important destinations. Delhi and Andhra Pradesh have, however, experienced a drop in the investments from Germany, while southern states like Tamil Nadu and Karnataka are seen to be gaining popularity due to the conducive investment environment.

Bosch has been one of the first companies to come forward with its investment proposal when the government started offering sops for electronics manufacturing under the Modified Special Incentives Scheme (MSIPS) policy. The company is looking at increasing its investment in the country with Bosch Automotive Electronics India having proposed an investment of Rs. 550 crore for setting up a manufacturing facility in Bangalore. German-based engineering consulting company Triplan, will set up an Engineering Centre in Pune to cater to chemical, refining, life sciences and food & beverages industry through its India subsidiary Triplan India Private Ltd.  The company is also introducing its patented Closed Coke Slurry System (CCSS) technology, which it will offer to Indian refineries.  Being in line  with their strategy to offer technology and  global footprint increase. After successful delivery of projects in India in the past, this is now the strategic move towards doing more business in the country.

India hopes the Rs 1.13-lakh crore Digital India initiative that seeks to transform India into a connected economy will attract investment in electronics manufacturing, create millions of jobs and support trade. Germany was the first nation to have a bilateral visit by the Indian minister of communication and IT and he was able to meet representatives from electronics bodies and companies, such as Rhode & Schwarz, Coriant GmbH and ZVEI German Electrical and Electronic Manufacturers Association. These entities are eager to cater to the demand for mobile phones, SIM cards, smart cards and smart cities in India, created by the ambitious ‘Digital India’ initiative of the Indian Government. The improvement in duty structure in the budget and Modified Special Incentive Package Scheme (M-SIPS), whereby companies investing capital in electronics manufacturing will get up to 25% subsidy, would encourage investment in the field of electronics manufacturing, he added. India is a big country with many states, the government has given in-principle approval for setting up electronics clusters in Tamil Nadu, Andhra Pradesh, Odisha and Maharashtra, and is in talks with other states to set up more such clusters with the overall prospects from the Make in India initiative looking quite promising for both countries already.