Amidst a global landscape reshaped by geopolitical tensions and the lingering effects of the COVID-19 pandemic, India is rapidly gaining prominence as a strategic destination for German businesses. This significant shift is driven by a growing European, and particularly German, recognition of the urgent need to diversify and fortify global supply chains. As highlighted by India’s Ambassador to Germany, Ajit Gupte, in a recent interview at the News9 Global Summit in Stuttgart (November 21-23), the dependence on single-source manufacturing and sourcing is no longer tenable.
Ambassador Gupte emphasized the rising importance of ‘de-risking’ strategies among German CEOs, with India emerging as a prime contender alongside other nations like Malaysia, Thailand, and Mexico. This strategic repositioning is further underscored by recent events, including the rerouting of critical machinery and materials by Indian importers through Dubai’s Jebel Ali port to circumvent disruptions caused by China’s export restrictions. The issue of China blocking the sale of German-manufactured tunnel boring machines to India was even raised by India’s Commerce and Industry Minister, Piyush Goyal, during German Vice Chancellor Robert Habeck’s recent visit.
This burgeoning interest in India extends beyond mere supply chain diversification. Germany’s demographic challenges – a shrinking workforce and an aging population – present a unique opportunity for Indian skilled workers. With the recent increase in skilled worker visas for Indians to 90,000 annually (up from 20,000), the demand for Indian professionals spans a wide spectrum, from high-end IT and finance roles to mid- and lower-level positions encompassing nursing, transportation, and construction trades. Ambassador Gupte highlighted this as a significant shift, emphasizing that Germany is now actively seeking Indian workers across various sectors, a stark contrast to its previous reliance on intra-EU labor.
The strong bilateral trade relationship between India and Germany further solidifies this economic convergence. In FY24, bilateral merchandise trade reached $26.48 billion, with India importing $16.64 billion and exporting $9.84 billion worth of goods. Germany is India’s largest trading partner within the EU, and this relationship is poised for continued growth. Key imports from Germany include aircraft components, machinery, and automotive parts, while India’s key exports to Germany include electrical machinery, textiles, and pharmaceuticals. German investment in India is also substantial, with over 1,800 German companies operating in the country, many having a long and storied history of involvement in India’s economic development. Some, such as Siemens, boast a presence in India dating back to the 1850s.
Beyond large corporations, the Mittelstand, Germany’s network of mid-sized, technologically advanced firms, also presents significant opportunities for Indian businesses. Many Mittelstand companies are global leaders in their respective niches and are now actively seeking new markets, joint ventures, and technology collaborations. Furthermore, the succession challenges faced by some Mittelstand firms – due to aging founders or the lack of family successors – have opened the door for potential acquisitions by Indian companies. While this requires due diligence, risk assessment, and a proactive approach, the potential rewards are significant.
In conclusion, the convergence of global supply chain restructuring, Germany’s demographic needs, and the robust economic ties between India and Germany has created a unique and potentially transformative opportunity. Both Indian and German businesses stand to benefit considerably from this evolving partnership, ushering in a new era of collaborative economic growth and innovation.
