Germany is India’s largest trading partner in Europe.
India was one of the first countries to grant diplomatic recognition to the Federal Republic of Germany; this March, the two countries celebrated 70 years of diplomatic relations. Germany and India have a strategic partnership; both have been holding cabinet-level bilateral consultations since 2011; in September 2020, the German government laid out its Indo-Pacific guidelines, illustrating its interest and commitment to a region where India is a key protagonist.
Germany is the 7th largest foreign direct investor in India. Germany’s total FDI in India from April 2000 until June 2020 amounted to approx. USD 12 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.
The rapid spread of the Covid-19 pandemic the world over during 2020 led to a health crisis which resulted in an unprecedented crash in global economic activity, the repercussions of which would be felt over the next few years. Within this scenario, Indian and German enterprises have the opportunity to capitalize on each other’s strengths and seek new opportunities in commercial engagement with each other. For Indian businesses, Germany has been a source of high-quality, reliable machinery and equipment as well as aircraft and auto components.
Bilateral trade between the two countries in 2019 was valued at more than EUR 21.3 billion. In 2020, Indian imports from Germany amounted to € 10.7 billion, out of which machinery imports comprised 21.5 % and stood at € 2.3 billion.
India ranks 19th globally, in the list of top 50 destinations for the German Mechanical Engineering exports. In 2020, the total import of machinery from Germany reached a volume of € 2.3 billion. This was a drop by 23.6% compared with the same period of time in the previous year, owing to the pandemic. India exported machinery to Germany to the tune of € 688.2 million in 2020, which was a drop of 9.2% as compared to the previous year.
Among the machinery sectors, major demand of German equipment was for Power Transmission (12.7%), Valves & Fittings (5.8%), Machine Tools (5.7%), Air Handling Technology (4.9%), and Construction Equipment & Building Material Machinery (4.8%). There are other sectors like Plastics and Rubber Machinery, Fluid power equipment, Textile Machinery, and Food processing & packaging, which are growing steadily in India.
Out of the total export of German Mechanical Engineering to Asia of € 37.7 billion, India is the forth largest sales market in Asia for the German engineering industry, with a share of 6.2%, after China (48.1%), Korea (7.6%) and Japan (6.8%). In 2020, India imported machinery of the value € 19.6 bn globally. Germany is the 2nd most important supplier to India globally, share of around 11.8%.
Maharashtra, with around 44% share of German investments, remains to be the most attractive destination for German investments in India. In the last 4 to 5 years, Pune has become the hotbed for new German investments. Karnataka and Tamil Nadu are other important destinations.
