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INTRODUCTIONBilateral relations between India and Germany are founded on common democratic principles and are marked by a high degree of trust and mutual respect. India was amongst the first countries to establish diplomatic ties with the Federal Republic of Germany after the Second World War
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An Overview of INDIA – GERMANY TRADE RELATIONS Today & Tomorrow
INTRODUCTION INDIA-GERMANY RELATIONSHIP Bilateral relations between India and Germany are founded on common democratic principles and are marked by a high degree of trust and mutual respect. India was amongst the first countries to establish diplomatic ties with the Federal Republic of Germany after the Second World War. Germany established its Consulate General in Mumbai in 1951, leading to the establishment of a full-fledged Embassy in New Delhi in 1952. Germany is India’s most important trading partner in the EU and its sixth most important trading partner worldwide. India was ranked 26th in Germany's global trade during 2017.Post the economic reforms and liberalization of the Indian market, it opened up its economy in 1991, the volume of trade between the two countries has increased rapidly. India and Germany maintain a 'Strategic Partnership' since 2000-01. In May 2000, both countries adopted the ‘Agenda for the Indo-German Partnership in the 21st Century’, which includes regular meetings of Heads of both Governments as well as annual meetings of the Foreign Ministers.
INDIAN ECONOMY As the world’s third largest economy in purchasing parity terms, India aspires to better the lives of all its citizens and become a high-middle income country by 2030. Between 2011-15, more than 90 million people escaped extreme poverty & improved their living standards thanks to robust economic growth. However, India’s growth rate has decelerated in the past two years. India’s ability to achieve rapid, sustainable development will have profound implications for the world. India’s success will be central to the world’s collective ambition of ending extreme poverty and promoting shared prosperity, as well as for achieving the 2030 Sustainable Development Goals (SDGs). Indeed, the world will be able to eliminate poverty only if India succeeds in lifting its citizens above the poverty line. Previously, the growth was projected to be 6.0 percent this fiscal year and expected to rise to 6.9 percent in 2020/21 and to 7.2 percent in the following year. INDIA’S GROWTH PROJECTIONS REVISED DOWN Given the challenges that businesses and people are facing currently, the Indian economy is most likely to experience a lower growth during the last quarter of the current fiscal. In case the spread of corona virus continues, growth may remain subdued in the first quarter of FY 20-21 as well. Most international credit rating agencies have therefore revised their 2020 and 2021 growth projections for India keeping in view the negative impact of coronavirus-induced travel restrictions, supply chain disruptions, subdued consumption and investment levels on the growth of both global and the Indian economy. However India is not alone, rather there is a silver lining to the cloud as many Rating agencies feel India will benefit in the short to long term period.
The Economist Intelligence Unit (EIU) in its Post-Covid-19-Outbreak revised the growth forecast for G20 countries in 2020. It downgraded the projected FY21 GDP growth of India to 2.1 per cent from 6 per cent before the outbreak. While this looked like a free fall but when compared with the other G20 countries, India’s growth projection stood on the top while others are set to dive deep into recession except for two other countries – China and Indonesia, where both of these countries will grow at 1 per cent in 2020. The biggest contraction in the GDP growth this year among the rest 17 of the G20 countries would be suffered by Italy (-7 per cent), Germany (-6.8 per cent) and Argentina (-6.7 per cent) followed by Brazil (-5.5 per cent), Mexico (-5.4 per cent), France (-5 per cent), Saudi Arabia (-5 per cent), and UK (-5 per cent). The US economy may contract by -2.2 per cent in 2020. Moody's Investors slashed India’s growth forecast for the calendar year 2020 to 0.2%, from 2.5% projected in March. For 2021, the rating agency expects India's growth to rebound to 6.2%. China is projected to grow 1 per cent in 2020 and 7.1 per cent in 2021. The International Monetary Fund (IMF) further slashed India’s growth estimate for FY21 to 1.9% from 5.8% estimated in January, warning that the “worst recession since the Great Depression” will dwarf the economic damage caused by the global financial crisis a decade back. It also said that India and China would be the only two major economies likely to register growth, with all others contracting. As per -IMF’s latest estimate, the Covid-19 pandemic will shrink world output by 3% in 2020.
AN OVERVIEW OF THE INDIAN ECONOMY MACROECONOMIC INDICATORS 2016 2017 2018 2019 2020 Prices (INR trillion) Gross domestic product 153.6 7.2 6.8 5.8 6.2 Total domestic demand 156.3 9.9 7.7 5 6.1 Exports of goods and services 29.5 4.7 12.5 5 4.4 Imports of goods and services 32.2 17.6 15.4 2.2 4.4 Net exports -2.7 -2.8 -1.1 0.5 -0.2 INDIA’S SHARE IN GLOBAL TRADE India’s share in global trade (merchandise and services) was 2.1% ( USD 481.74 billion out of total USD 23,044 billion) for exports and 2.6% ( USD 600.62 billion out of total USD 23,112 billion) for imports in 2017. Total exports from India (Merchandise & Services) registered a growth of 2.13 per cent year-on- year during April 2019 February 2020 to USD 491.64 billion, while total imports are estimated at USD 559.45 billion, according to the data from the Ministry of Commerce and Industry. While India’s share in Japan is only 0.83% for import and 1.3 % for export.
GERMAN ECONOMY Germany is the world's fourth-largest economy following the United States, China, and Japan. Gross Domestic Product of Germany grew 0.6% in 2019 compared to last year. The GDP figure in 2019 was USD 3,846,591 million. The GDP per capita of Germany in 2019 was USD 46,334 i.e.- USD 1,328 higher than in 2018( USD 47,662). Germany is a leading exporter of machinery, vehicles, chemicals, and household equipment and benefits from a highly skilled labor force. TOP 3 TRADE PARTNERS TOP 3 EXPORTED GOODS 2018 2018 China Industrial Machinery United States Motor Vehicles & Parts Netherlands Electrical Machinery Iron, Steel, Coal, Cement, Chemicals, Machinery, Vehicles, Machine Tools, Electronics, Food and Beverages, Shipbuilding and Textiles are the top industries in Germany. Germany has been flourishing over the past 12 years, as Chancellor Angela Merkel has led the country to robust economic growth and record low unemployment rates. Germany has a mixed economy. It allows a free market economy in consumer goods and business services. But the government imposes regulations even in those areas to protect its citizens. Germany has a command economy in defence since everyone receives the benefit, while those with higher incomes pay more in taxes. The government provides health care insurance and education. That means you pay into the system according to your income and receive benefits according to your needs.
AN OVERVIEW OF THE GERMAN ECONOMY MACROECONOMIC INDICATORS 2015 2016 2017 2018 2019 Prices (billion EUR) Working day adjusted GDP 1.5 1.9 2.5 2.1 2.1 Total domestic demand 1.8 1.5 2.4 2.4 2.2 4.7 2.4 5.3 4.5 Exports of goods and services 4.5 Imports of goods and services 5.2 5.1 3.8 5.6 4.3 Net exports 0.3 0.1 -0.3 0.4 0.1 GERMANY IMPORT AND EXPORT As the third-largest export economy in the world, Germany exports more than USD 1.3 trillion and has a positive trade balance of USD 273 billion (after taking into account imports worth USD 1.05 trillion). Germany’s total nominal GDP is 3.4 trillion, making it the fourth-largest economy worldwide and GDP per capita is USD 48,700. The country is divided into 16 mainly autonomous states with each one having its own constitution. Germany is also a land that enjoys a high level of natural resources, mainly coal, copper, natural gas, nickel and uranium. It is also one of the dominant manufacturers in the world of cars, boats and a number of electronic products.
The import destinations are listed below (%): Export Destination United States United Kingdom Austria Belgium Switzerland India Netherland Italy Poland China France 10 8.3 6.4 5.7 5.4 5 4.8 4.6 4.5 3.9 0.90 Products % Machines 54 13 18 26 22 24 37 7.1 20 29 20 Textiles 10 2.3 1.7 0.71 5.2 3.3 2.4 2.1 2.1 2 22 Metal 5.6 8 10 3.6 15 11 9 15 8.4 17 7.4 Chemical product Plastic and Rubber 4 19 14 22 11 5.4 2.9 23 34 6.4 15 3 7 6.7 4.2 7.6 7.4 5.6 13 11 5.6 4.3 Instrument 3.9 2.2 2.9 13 2 1.8 2.1 1.3 5.4 2.3 1.8 Footwear and Headgear 3.2 0.56 0.49 - 1.9 0.63 0.49 0.69 0.42 0.63 4.5 Transportation 2.8 4.8 28 16 13 14 24 10 3.5 16 6.2 Foodstuff 0.46 6.7 4.8 1.1 6.4 5.7 0.96 5.3 2.4 5.3 1.7 Mineral Products 0.18 15 1.5 2.9 0.83 1.9 1.1 9.8 0.23 1.1 0.35 Vegetable Product 0.69 7.1 2.7 2.8 4.1 2.3 1.3 2.8 0.48 1 6.3 Precious Metal 0.37 1.4 0.58 2 0.83 0.27 0.43 1.8 7.4 1.2 1.4 Animal Products 0.69 6.5 2.4 0.62 1.8 4.2 0.70 3.3 0.71 2.7 0.82 Wood Products 0.55 0.33 0.44 0.15 0.37 2.3 1.4 0.65 0.39 - 0.19 Animal Hides 1.1 0.26 0.52 - 1.3 0.31 0.44 0.15 0.15 0.32 4.6 Animal and Vegetables Bi- products - 1.7 0.25 0.13 0.57 0.19 - 0.64 - 0.30 0.81 Stone and Glass 1.3 0.59 1.1 2.3 1.9 1.8 1.5 1.5 0.69 1.3 1.2 Paper Goods 0.51 1.8 2.2 0.91 2.2 4.4 2 1.5 1.6 3.8 0.15
The export destinations are listed below (%): Import Destination Czech Republic United States China Belgium Switzerland Austria India Italy Poland Netherlands France 10 8.3 6.4 5.7 5.4 5 4.8 4.6 4.5 3.9 0.92 Products % 28 21 36 22 22 24 26 17 26 19 44 Machines 0.69 1.9 0.65 2 3.7 2.2 4.3 2.4 3.6 2.2 1 Textiles Metals 4.9 8.3 5.6 6 8.3 9.4 12 11 12 9 8.3 Chemical product 17 21 9.1 12 17 13 8.9 15 10 22 14 Plastic and Rubber 4 6.7 4.2 5.4 6.1 8.2 6.4 7.8 9.7 5.8 6.8 Instrument 8.5 3.5 9.1 3.7 4.9 4.6 2.9 2.7 2.6 5 9.6 Footwear and Headgear 0.16 0.56 - 0.65 1 0.39 0.65 0.51 0.84 0.48 - Transportation 30 29 30 34 10 21 15 28 14 13 10 Foodstuff 0.98 3.8 0.76 3.9 5.4 4 4.4 4 4.2 2.4 0.32 Mineral Products 0.46 2.9 0.34 0.83 3.5 2 4.5 4.5 2.2 5.6 0.40 Product 0.49 1.1 - 1 2.7 0.85 1.3 1.6 1.6 0.76 0.21 Precious Metal 0.80 0.59 0.22 2.3 1.5 1.3 0.56 0.58 0.33 4.1 0.79 Products 0.24 1.4 1 1.3 5 3.8 2.3 1.6 2.1 0.64 - 0.43 0.78 0.31 0.48 0.86 0.52 1.6 0.86 0.53 1.5 0.69 Wood Products Animal Hides - 0.18 0.11 0.20 0.31 0.44 0.37 0.15 0.36 0.21 0.14 Animal and Vegetables Bi- products - 0.26 - 0.18 1.3 0.33 0.21 0.65 0.83 0.14 0.11 Stone and Glass 0.80 1.2 0.86 0.97 1.3 1 1.6 1.3 1.4 1.7 1.3 Paper Goods 0.85 2.9 0.50 1.9 2.7 2.3 3.3 2.8 4.3 3.3 1.6
INDIA-GERMANY ECONOMIC RELATIONS India was amongst the first countries to establish diplomatic ties with the Federal Republic of Germany after the Second World War. India and Germany have a 'Strategic Partnership' since 2001, which has been further strengthened with the inception of the Intergovernmental Consultations (IGC) in 2011 at the level of Head of Governments which allows for a comprehensive review of cooperation and identification of areas of engagement. India is amongst a select group of countries with which Germany has such a dialogue mechanism. Economic Cooperation is one of the main pillars of the Indo-German relationship. India and Germany share a multifaceted relationship across a diverse range of areas including political, defense and security, economic, science and technology, education, cultural and people to people exchanges. India and Germany have had regular exchange of visits at the highest level. PM Shri Narendra Modi undertook his first official visit to Germany in April 2015, when India was the Partner Country at the Hannover Messe-2015. PM Modi visited Germany twice in 2017: the first was a bilateral visit on May 29-30, 2017 to Berlin for the 4th Intergovernmental Consultations and was followed by a visit on July 6-8, 2017 to Hamburg to attend the G20 Summit. At the invitation of Chancellor Merkel, PM Modi also visited Berlin for a short official visit in April 20, 2018, on his return journey from CHOGM Summit in London. The PM and Chancellor also met on Dec 01, 2018 on the sidelines of G20 Summit in Buenos Aires. German President Dr. Frank-Walter Steinmeier paid a 5 day State Visit to India in March 2018. Chancellor Merkel visited India in 2007, 2011 and in October 2015. Germany is India's largest trading partner in Europe. India was ranked 26th in Germany's global trade during 2017. Bilateral trade increased to USUSD 21.98 bn (2017-18), a growth of 17.15%. In 2017-18, India’s exports were worth USUSD 8.68 billion to Germany and imports were worth USUSD 13.29 billion. Germany is the 7th largest foreign direct investor in India. Germany's total FDI in India from April 2000 until June 2018 amounted to USUSD 10.99 billion. There are more than 1700 German companies active in India and over 600 Indo-German Joint Ventures in operation. German investments in India are mainly in the sectors of transportation, electrical equipment, metallurgical industries, services sector (particularly insurance), chemicals, construction activity, trading and automobiles. Indian Corporate entities have invested over USUSD 7 billion in Germany. There are around 200 Indian companies operating in Germany. Important sectors in Germany for Indian investments are IT, automotive, pharma and biotech. Germany has been an important development cooperation partner since 1958. Total bilateral Technical and Financial Cooperation, amounts to USD 18.37 billion. Energy, sustainable economic development and environment and management of natural resources are priority areas under development cooperation.
INTER GOVERNMENTAL CONSULTATIONS (IGC) German Chancellor Angela Merkel visited India on 1st November, 2019 foron a scheduled meeting with Prime Minister Narendra Modi at the fifth biennial Inter-Governmental Consultations (IGC) in New Delhi. The discussions between the two sides touched upon foreign and security policy issues, as well as how the two countries would work together towards climate protection and sustainable development. This prime focus was on economic & trade relations, innovation and digitalization, and climate protection and sustainable development. The discussions also touched upon renewable energy, smart cities, and new forms of mobility. The German Chancellor said that she was impressed by the developmental dynamics of India and how the country has rapidly developed over the past few years. She also added that India has great potential. Therefore, it is important that the Germanys, being the largest trade partner of India in the EU (European Union), would work further for the strengthening of itstheir relationship with India,and learn from India it and is also are able to use their its technological development in India. The two countries signed pacts in the fields of space, civil aviation, maritime technology, medicine, education, agriculture and Artificial Intelligence (AI). German Chancellor Angela Merkel brought her trip to India to a close with a pledge for German investment of €1 billion (USD 1.12 billion) into new green mobility projects under a German-Indian partnership.
Germany would invest in a number of environmentally friendly policies, such as more than 500 electric buses to replace diesel-powered ones in urban areas in India. This project will be carried out over the course of the next five years. India has invited Germany to take advantage of opportunities in defense sector in the upcoming defense corridors in Uttar Pradesh and Tamil Nadu. The countries agreed to work on bilateral and multilateral platforms to counter terrorism and extremism. India and Germany agreed to deepen their efforts to resume stalled negotiations for a free trade agreement between India and the European Union. Germany agreed to continue cooperation to expedite reforms in the United Nations (UN) Security Council. The two nations also stressed on restoring full functioning of the World Trade Organization (WTO) dispute settlement system and reforming the organization without undermining its fundamental principles such as Special & Differential Treatment etc. RECENT DEVELOPMENT Prime Minister Narendra Modi and German Chancellor Angela Merkel on 16th April, 2020 exchanged views on the low availability of medicines and medical equipment to fight the coronavirus pandemic as they agreed to explore avenues of cooperation in the area. The two leaders held a telephonic conversation and discussed COVID-19, the situation in their respective countries, and the importance of international collaboration for fighting the health crisis. They shared views on the inadequate availability of medicines and medical equipment required during the pandemic, and agreed to explore avenues of cooperation in this regard.
GERMANY’S INVESTMENTS IN INDIA GERMAN INVESTMENT INFLOWS SINCE 2000 Nearly 1,800 German companies have invested USD10.71 billion (Rs. 69,309 crore) in India from April 2000 to December 2017. FDI Inflows from Germany (in USD mil.) % Change over Previous Year Year (April-March) 2000-01 123.34 - 2001-02 113.48 -0.8 2002-03 143.91 +26.8 2003-04 81.17 -43.6 2004-05 145.35 +79.1 2005-06 302.82 +108.3 2006-07 119.95 -60.4 2007-08 513.61 +328.2 2008-09 629.22 +22.5 2009-10 626.14 -0.5 2010-11 199.74 -68.1 2011-12 1621.95 +712 2012-13 859.62 -47 2013-14 1038.42 +20.8 2014-15 1124.86 +8.3 2015-16 985.68 -12.4 2016-17 1069.14 +8.5 2017-18 1146.15 +7.2 Total 10844.56 +11.8 German FDI in India has increased in recent years. Germany’s FDI in 2016-17 increased by 8.5% and reached USD 1069.14 million from USD 985.68 million in 2015-16. The FDI in 2017-18 further increased by 7.2% and reached USD 1146.15 million. Cumulatively, since 2000 till March 2018, the investments in India have been around USD 10844.56 million.
% OF SECTOR WISE GERMAN FDI INFLOWS (APRIL 17 - MARCH 18) Automobile Industry Services Trading Electric Equipment Pharmaceuticals Industrial Machinery Chemicals Miscellaneous Industries Consultancy Construction Others Currently, about 1,800 German companies have business set up in India. TOP 10 GERMAN COMPANIES IN INDIA COMPANY’S NAME 1. DHL Express India Pvt Ltd The company is leader in global express shipping. 2. Metro Cash And Carry India Pvt Ltd The company is an international self-service wholesaler. 3. Robert Bosch Engineering and Business Solutions Pvt Ltd It is operating across different business areas including mobility solutions, consumer goods, industrial technology as well as energy and building technology. 4. SAP Labs India Pvt Ltd It is a leading provider of business software solutions. 5. Volkswagen Group Sales India Pvt Ltd It majorly deals into automobile sector. 6. Audi India Ltd It deals into automobile sector. 7. BASF India Ltd BASF is world’s leading chemical company. 8. Daimler India Commercial Vehicles Pvt Ltd This company designs, manufactures, and sells commercial vehicles 9. Deutsche Bank It is one of the leading banks on the basis of total assets. 10. Mercedes-Benz India Pvt Ltd It deals into automobile sector.
TRADE RELATIONS Indo-German trade story dates back to the 16th century when the German companies started manufacturing in India. Some notable names are Krupp AG & Demag, who set-up the Rourkela Steel plant, while, Bosch set-up its 1st unit to make spark plugs in 1953, followed by Siemens, Bayer, Daimler-Benz, etc. India has more than 1,600 German companies and over 600 Indo-German joint ventures in operation which include big names like, BMW, Volkswagen, SAP, Siemens AG, and Merck. FDI from Germany has increased more than 41% from 2013-14 and has reached a umulative amount of USD 4.50 billion till 2017-18. Government of India is seeking investments from German companies in areas including smart cities and construction of airports to increase economic cooperation between themselves. India does not rank in the list of top 10 trading partners of Germany, but has significant trade with Germany. The exports by India to Germany amounted to USD 8.2 billion, while imports by India from Germany stood at USD 12.6 billion, resulting into a trade deficit of USD 4.4 billion for India in 2018. This underlines that there remains a big potential. Year 2014 2015 2016 2017 2018 India's export to Germany (EUR million) 7087 7584 7653 8473 13750 YoY growth% - 7.01 0.90 10.71 62.28 India's import from Germany (EUR million) 8894 9734 9784 10685 12800 YoY growth% - 9.44 0.51 9.21 19.79 Bilateral Trade (EUR billion) 15.98 17.31 17.44 19.16 21.17 YoY growth% - 8.32 0.75 9.87 10.49 MAJOR GOODS INDIA EXPORTS TO GERMANY Machinery, nuclear reactors, boilers USD 1.10 billion Organic chemicals USD 1.03 billion Articles of apparel, knit or crocheted USD 933.99 million Articles of apparel, not knit or crocheted USD 818.59 million Electrical, electronic equipment USD 685.45 million
Footwear, gaiters USD 484.22 million Pharmaceutical products USD 432.77 million Articles of leather, animal gut, harness, travel good USD 427.72 million Vehicles other than railway, tramway USD 381.98 million Articles of iron or steel USD 361.54 million Other made textile articles, sets, worn clothing USD 300.39 million MAJOR GOODS INDIA IMPORTS FROM GERMANY Machinery, nuclear reactors, boilers USD 4.47 billion Electrical, electronic equipment USD 1.73 billion Optical, photo, technical, medical apparatus USD 1.32 billion Vehicles other than railway, tramway USD 1.06 billion Plastics USD 681.78 million Organic chemicals USD 485.19 million Miscellaneous chemical products USD 366.18 million Articles of iron or steel USD 354.73 million Iron and steel USD318.97 million Commodities not specified according to kind Pharmaceutical products USD282.80 million USD220.32 million Year Bilateral Trade (USD billion) 2014-15 15.98 2015-16 17.31 2016-17 17.44 2017-18 19.16 2018-19 21.17
IMPACT OF COVID 19 China remained Germany's most important trading partner for the third consecutive year with a total trade volume of 199.3 billion Euros (225.7 billion U.S. dollars) in 2018. MAJOR GOODS GERMANY IMPORTS FROM CHINA Vehicles other than railway, tramway USD 28.44 billion Machinery, nuclear reactors, boilers USD 24.15 billion Electrical, electronic equipment USD 17.51 billion Optical, photo, technical, medical apparatus USD 9.33 billion Aircraft, spacecraft USD 4.76 billion Pharmaceutical products USD 3.33 billion Plastics USD 2.77 billion Articles of iron or steel USD 1.86 billion Commodities not specified according to kind USD 1.75 billion Organic chemicals USD 1.56 billion Miscellaneous chemical products USD 1.27 billion Iron and steel USD 1.04 billion Rubbers USD 1.02 billion China's economic slowdown and trade tensions between the world's top two economies have dampened German businesses' spirits. Many German firms operating in China report a "gloomy" business outlook. Nearly a quarter of German companies operating in China are planning to relocate all or part of their business out of the Asian country, according to a study released by the German Chamber of Commerce. The annual survey of 526 member firms in China found that 23% of them have either already decided to withdraw production capacity from the country or are considering it. A third of those companies have planned to leave China entirely. The rest say they will transfer part of their business and production overseas, largely to lower-cost countries in Asia. Operating costs in China have been rising as the country seeks to rebalance its economy from an export and investment-led model to one driven by services an consumer spending. Of the 104 companies that have decided to leave or are considering doing so, 71% cite the rise in production costs — particularly of labor. As stated above, Germany was already planning to relocate its factories from China to
lower-cost countries in Asia pre Covid 19, but after the current pandemic, several countries are thinking and formulating strategies to reduce the over dependency on only one country and have indicated that they would be moving their manufacturing operations from China to other countries. These companies are looking for reasonable prices with quality material, which can be made available in India. Thus, the Indian manufacturers have the opportunity to establish them- selves as manufacturing hubs and leverage the void created in Chinese manufacturing. India was ranked 26th in Germany's global trade during 2017. Therefore India has a very big opportunity to acquire higher rank in Germany's global trade because it is emerging as a strong alternative to China for foreign companies investing in manufacturing and sourcing. The 10 major imports of Germany are as follows and India is not a major exporter of any of the below items, therefore, this is an opportunity area for India. Product Value (USD Billion) Major Importing Countries Machinery 150 China, USA, Czech Republic and Italy are the biggest import partners of Germany for machinery products. Electrical Machinery 147 China is the biggest market from where Germany is importing electrical machinery equipments. Vehicles 124 Czech Republic, Spain and France are the main markets supplying vehicles and its accessories to Germany. Mineral Fuels & Oils 96 Russia, Netherlands, Belgium and Norway are the top markets selling mineral fuels & oils to Germany Pharmaceutical 54 The top pharma import market of Germany are Netherlands, Switzerland, USA. Plastics 44 Germany is the third largest plastic importer in the world. Optical 40 The country imports mainly optical instruments from the USA, Switzerland, China and Japan. Organic Chemicals 34 Switzerland, Belgium, Netherlands, Singapore and Ireland are the top countries selling organic chemicals to Germany. Iron and Steel 28 The country is mainly importing Iron & Steel from France, Belgium, Italy and Austria. Articles of Iron or Steel 23 Italy, Poland, China and Czech Republic are Germany’s top import partners of iron steel articles.
As every cloud has a silver lining, this pandemic can open doors for India to increase its bilateral trade with Germany. With the ‘Make in India’ initiative by the Government of India, the country is focusing majorly on machinery and ancillary parts. At present, India exports machinery and equipment worth USD 35.8 billion and Germany majorly depends on China for machineries. Automobiles contribute 7.1 per cent to GDP and auto components contribute 2.3 per cent to GDP. The FDI equity flows in the sector (per cent of total) is 5.2 percent (Apr 2000- Dec 2019). The key export markets for automotive includes US, Mexico, Bangladesh, African region and Asia. The other commodities/ sector where India have edge includes Metals, electronics and pharmaceuticals etc. which can be exported in large scale to Germany to increase its share which is at present only 0.92% of Germany’s import share. The two countries will jointly be focusing on driving the digital transformation through innovation and frontier technologies, especially artificial intelligence, making economic growth sustainable by cooperating on climate change, creating space for people to people contacts through legal mobility for skilled labour, and contributing to a reliable international order by strengthening and updating multilateral institutions. Consul general of Germany in Mumbai, Jurgen Morhard had said in November 2019 that India is really a preferred investment destination for German companies because India shares their values, their democracy and their rule of law, the judiciary. India has mechanisms for facilitating problems. It is a young, growing society which is a huge market and you don’t find this elsewhere. India might complain about things but there’s a huge difference because the outlook of German companies is always about the long run. The German companies are not in India for a sprint but for a marathon. India has so far been a very reliable partner. He also said that cooperation between Indian and German companies is very easy to set up because small and medium sized German companies are family owned and many manufacturing companies in India too are family owned. This makes a huge difference because it is a different commitment. Family owners understand the business much better as they have the same values, goals and targets.
RECENT DEVELOPMENTS INDIA TO EMERGE AS AN ALTERNATE MANUFACTURING HUB FOR THE WORD India offers land twice Luxembourg's size to firms leaving China. India is developing a land pool nearly double the size of Luxembourg to lure businesses moving out of China. A total area of 461,589 hectares has been identified across the country for the purpose. At present, investors keen on setting up a factory in India need to acquire land on their own. Making unused land available in special economic zones, which already have robust infrastructure in place, is also being examined. A detailed scheme for attracting foreign investments is expected to be finalized by the end of May, 2020. The government has hand-picked 10 sectors--electrical, pharmaceuticals, medical devices, electronics, heavy engineering, solar equipment, food processing, chemicals and textiles -- as focus areas for promoting manufacturing. It has asked embassies abroad to identify companies scouting for options. Invest India, the government's investment agency, has received inquiries mainly from Japan, the US and South Korea expressing interest in relocating to the Asia's third-largest economy. States have been separately urged to evolve their own programs for bringing in foreign investments. The Prime Minister held a meeting on 30th April, 2020 to dis- cuss steps to fast-track strategies for wooing investors. Andhra Pradesh, a southern Indian state, is in touch with several companies from Japan, the US and South Korea. The northern state of Uttar Pradesh is also developing an online system for land allotment for all industrial and commercial purposes and is in talks with global com- panies for attracting investments in sectors such as defence and aerospace. COVID-19 CRISIS WILL OPEN UP OPPORTUNITIES FOR INDIA's PHARMA INDUSTRY As per recent estimates, India accounts for about 10% of world’s pharmaceutical production by volume and 1.5% by value. The industry is the world’s largest supplier of generic drugs and controls around 18% of the global market. It is also a leading producer of vaccines in the world and caters to about 50% of global vaccine demands. This is due to an already high demand for Indian drugs because of cheaper pricing, making these more affordable to both developing and developed nations. India’s existing advantage of large-scale pharmaceutical production allows it to significantly leverage its soft power by investing in the outward growth of the
sectors of other nations by: a) Ramping up exports in pharmaceuticals. b) Becoming a preferred medical tourist destination for those seeking affordable treatment in quality secondary/tertiary health services. c) Pursue medical diplomacy by providing medical training and technical expertise to many other developing nations whose healthcare systems are much worse than India. The country wise data on Indian pharmaceutical exports also indicates how many nations – now most affected by COVID-19 – are the primary export destinations for the Indian pharmaceutical industry. India had sent consignments of 85 million hydroxychloroquine (HCQ) tablets to 108 countries to fight COVID-19 pandemic. A media report quoted a top government official as saying that besides the HCQ tablets, India also sent close to 500 million paracetamol tablets to the COVID-19 affected countries. Not only states, but many international NGOs and public health non-state actors have been using generic Indian drugs for affordable treatment in countries within Africa, parts of Latin America over the last decade. UNICEF and UNITAID too rely heavily on generic drugs manufactured in India for their aid programs. There is, therefore, a much greater potential for India’s pharmaceutical sector now to increase trade partners both regionally and in other parts of the world. The government can encourage this by investing in more R&D for drug and pharma research within India (public medical colleges and universities can be used for this purpose) and provide for more incentives to the private sector to enhance its production for export channels. In a post-coronavirus global order, India’s comparative advantage can rely heavily on becoming a major provider for global public-goods and services (i.e. in healthcare, education and tech-support capacity for innovation), given how the demand for these are likely to go up in the years to come. WAY FORWARD Germany can invest in smart cities; modernization of railway networks and stations to setting up of high-speed rail corridors; generation of renewable energy to construction of transmission and distribution networks.
Digital India: German and Indian digital companies should jointly work towards further enhancing the scope of market opportunities and bilateral investments in each other’s countries and creating greater bonds between their thriving tech ecosystems. DIGITAL INDIA India-EU free trade agreement: India and Germany should go for the speedy conclusion to the agreement. India should also safeguard its interest while negotiating bilateral investment treaties. e-Mobility: It is being envisaged as an important area of collaboration, including under the already well-established Joint Working Group on Automotive. Embracing International Standards and Certifications: This can strengthen the competitiveness of the Indian industry and support the integration of India in global and regional value chains. Use Online Platforms for Easy and Early Access of Information on Technical Regulations: The costs for collecting required information are a major factor for companies when it comes to technical regulations, which are complex and frequently changing. Leveraging soft power: India stands out as a leading liberal democratic state. It can entice Europe with the values which it espouses.
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