“GERMAN Firms Use INDIA as a key Hub

“GERMAN Firms Use INDIA as a key Hub"

Germany Trade and Invest (GTAI), the economic development agency of Germany, has been assisting German businesses in seeking opportunities in India and vice versa for almost three decades now. The Dollar Business caught up with Asha-Maria Sharma, Director, GTAI India, to understand how GTAI has been helping German and Indian companies – particularly SMEs – connect.

INTERVIEW BY NILADRI S. NATH | September 2017 Issue | The Dollar Business

TDB: Germany Trade and Invest (GTAI) has been working towards improving trade relations between India and Germany for years now. Do you think bilateral trade between the two countries is heading in right direction?

Asha-Maria Sharma (AS): India is an important country for Germany, as India ranks 28th in the list of the most important suppliers and 24th amongst the most important German export destinations. Germany is also India’s largest trading partner in the EU.

The Germany Trade and Invest (GTAI) has been working closely with the Indo-German Chamber of Commerce (IGCC) for many years. And the bilateral trade between India and Germany clearly shows an upward trend. Although growth over the last few years has been moderate because of the gloomy global economy, the trade volume has grown to €17.4 billion in CY2016 from €10.5 billion in CY2006.

TDB: How do German companies perceive India’s present economic environment?

AS: Currently, about 1,800 German companies have business set up in India. In fact, many of them have been settled here for a long time now. In terms of doing business in India, there are still some challenges – for instance, logistics can be very challenging. But, with that said, the German business community has very well received the Indian government’s decision to liberalise the FDI regime and its efforts to improve the ease of doing business. And, most importantly, India offers immense business opportunities in various fields.

TDB: In what ways is GTAI helping Indian and German companies engage in investment and business?

AS: GTAI provides German companies with comprehensive information about Indian companies (mainly SMEs) and the general business environment. In 2011, GTAI established an office in Mumbai with the intent to provide information and practical support to Indian companies that are interested in investing in Germany. In addition, GTAI organises investor conferences in India, every year. The conferences focus on several industries and sectors – and explain the market opportunities in Germany. And, in case there are Indian companies interested to invest in Germany or do business, GTAI provides customised consultation services for free and the information is kept confidential.

TDB: Some of the largest German companies such as Volkswagen, BMW, Audi, Bosch, Deutsche Bank, etc., have established operations in India. What makes India a favourable investment destination for German companies and investors?

AS: India is a huge country with a large population – not to mention the growing middle-class population and the vibrant economy – and this has attracted German companies. Moreover, German enterprises use India as a manufacturing hub to supply their products to other markets in the region. The large pool of talented young people, combined with widespread English language skills, is another big plus point when it comes to setting up a business in India. I would also mention that quite a few German firms are not only manufacturing, but have also opened R&D centres in India.

TDB: Do you also see opportunities for cooperation in the fields of IT, biotechnology, renewable energy, etc.?

AS: There is enormous scope! Indian and German companies are already working together, successfully, as joint ventures in these sectors. For instance, German companies are actively involved in India’s Smart Cities Projects. We also see huge scope to collaborate in the development of Industry 4.0. And, the High Technology Partnership Group is already supporting this effort by identifying potential opportunities for cooperation. Also, during the 4th Indo-German Inter-governmental Consultations, in May 2017, Joint Declarations of Intent have been signed on cooperation for sustainable urban development and in the field of digitalisation, amongst others.

TDB: Germany is one of the largest sources of FDI in India. In fact, in the last seven years, German investment totalled $9.69 billion. Do you think German companies will raise the stakes in the future?

AS: In the recent years, German companies have been steadily increasing their investments in India – all thanks to the sustained dynamic growth of the Indian economy. By the look of the current market trend, many of them are likely to step up their existing activities. New players are also expected to enter the market soon. Under the roof of the successful ‘Make in India’ initiative, the embassy of India in Berlin has also initiated ‘Make in India Mittelstand’ initiative, which specifically targets German SMEs that are interested in investing in India. Going forward, I believe such initiatives alongside transparent, fast and hands-on administrative support combined with growing markets for German products, ranging from food to high-tech, will continue attracting German firms to India.

TDB: Indian investments in Germany have also grown remarkably over the last few years – and have already crossed the $7-billion mark. Currently, there are more than 200 Indian companies, such as Bharat Forge Limited, Hexaware Technologies, NIIT, etc., operating in Germany. What makes Germany an attractive investment destination for Indian companies?

AS: Germany is Europe’s largest economy and that itself makes the German domestic market quite attractive. It is also an excellent hub for business expansion across Europe because of its geographical location – an advantage that all investors look for. Germany also has a stable and reliable legal system and an efficient administration, which offers full protection to investors and their investments. Germany further offers competitive tax rates for businesses. Over the last few years, a steady investment flow, both in brownfield and greenfield projects, from India to Germany has been observed across industries. Now, Indian investors aim to set up value chain activities in Germany and engage in R&D, leveraging the technological and innovation capabilities of the German engineering ecosystem.

TDB: Are there any policy initiatives the German government has undertaken to strengthen bilateral trade ties with India?

AS: Yes, of course. During the recent held 4th Inter-governmental Consultations, India and Germany have underlined their commitments to advance India’s strategic partnership with EU and to move forward with the EU-India Broadbased Trade and Investment Agreement (BTIA). And not to say, bilateral trade between India and Germany would strongly benefit from the conclusion of the said free trade agreement.

"INDO-GERMAN trade would strongly benefit from conclusion of the BTIA"

TDB: Are there any specific areas that German investors want the Indian government to work on to create a more conducive investment climate?

AS: In recent years, Government of India has made tremendous efforts to improve the ease of doing business in the country. Implementation of Goods and Services Tax (GST) will also greatly help these efforts. However, still, there are areas that could be improved upon – for instance, World Bank points out the difficulties in registering property and in dealing with construction permits. Also, improving the means to enforce contracts would further boost investors’ confidence.