Germany bets on India to reduce reliance on China
ECONOMY & POLICY

Germany bets on India to reduce reliance on China

Chancellor Olaf Scholz is reportedly leading a high-level delegation to New Delhi, with the aim of increasing Germany’s access to India’s vast market as part of a strategy to reduce its reliance on China. While India may not emerge as the "new China," German companies remain largely optimistic about its growth potential, drawn by a skilled young workforce, lower costs, and an economy growing at around 7%. The visit comes at a challenging time for Germany, whose export-oriented economy faces its second consecutive year of contraction, amid concerns over a potential trade dispute between the European Union and China, which could negatively impact German businesses.

Germany has been working to lessen its reliance on Beijing, a strategy shaped by its previous dependence on cheap Russian gas before the Ukraine war in 2022. Economy Minister Robert Habeck is said to have highlighted India's importance, noting that as the world’s most populous country, it is a key partner for the German economy in the Indo-Pacific and essential for the diversification of supply chains. Habeck reportedly emphasised the need for reducing critical dependencies and enhancing the resilience of German companies operating in and with Asia.

However, China remains Germany's largest trading partner, and German direct investments in India, which stood at approximately €25 billion in 2022, are about 20% of the volume invested in China. Volker Treier, head of foreign trade at the German Chamber of Commerce (DIHK), reportedly suggested that this figure could rise to 40% by the end of the decade. Treier also noted that while China will continue to play a major role, India’s importance to German companies is expected to grow significantly, positioning it as crucial to the success of Germany's efforts to de-risk from China.

Scholz, accompanied by a majority of his cabinet, including the foreign and defence ministers, is expected to meet with Indian Prime Minister Narendra Modi before overseeing the seventh round of Indian-German government consultations.

German firms reportedly face challenges investing in India, citing bureaucracy, corruption, and the tax system, according to a study by KPMG and the German Chambers of Commerce Abroad (AHK). Nevertheless, there is optimism, with 82% of German companies in India expecting revenue growth over the next five years, and 59% planning to expand their investments, a marked increase from 36% in 2021.

Examples of this optimism include DHL, which is planning to invest €500 million in India by 2026, capitalising on the fast-growing e-commerce market. Volkswagen, facing falling sales in China and high production costs at home, is reportedly exploring new partnerships for joint production in India. The company already operates two factories in the country and has signed a supply deal with local partner Mahindra. Similarly, engine maker Deutz is said to have struck a deal with TAFE, India’s third-largest tractor manufacturer, to produce 30,000 engines under licence.

Chancellor Olaf Scholz is reportedly leading a high-level delegation to New Delhi, with the aim of increasing Germany’s access to India’s vast market as part of a strategy to reduce its reliance on China. While India may not emerge as the new China, German companies remain largely optimistic about its growth potential, drawn by a skilled young workforce, lower costs, and an economy growing at around 7%. The visit comes at a challenging time for Germany, whose export-oriented economy faces its second consecutive year of contraction, amid concerns over a potential trade dispute between the European Union and China, which could negatively impact German businesses. Germany has been working to lessen its reliance on Beijing, a strategy shaped by its previous dependence on cheap Russian gas before the Ukraine war in 2022. Economy Minister Robert Habeck is said to have highlighted India's importance, noting that as the world’s most populous country, it is a key partner for the German economy in the Indo-Pacific and essential for the diversification of supply chains. Habeck reportedly emphasised the need for reducing critical dependencies and enhancing the resilience of German companies operating in and with Asia. However, China remains Germany's largest trading partner, and German direct investments in India, which stood at approximately €25 billion in 2022, are about 20% of the volume invested in China. Volker Treier, head of foreign trade at the German Chamber of Commerce (DIHK), reportedly suggested that this figure could rise to 40% by the end of the decade. Treier also noted that while China will continue to play a major role, India’s importance to German companies is expected to grow significantly, positioning it as crucial to the success of Germany's efforts to de-risk from China. Scholz, accompanied by a majority of his cabinet, including the foreign and defence ministers, is expected to meet with Indian Prime Minister Narendra Modi before overseeing the seventh round of Indian-German government consultations. German firms reportedly face challenges investing in India, citing bureaucracy, corruption, and the tax system, according to a study by KPMG and the German Chambers of Commerce Abroad (AHK). Nevertheless, there is optimism, with 82% of German companies in India expecting revenue growth over the next five years, and 59% planning to expand their investments, a marked increase from 36% in 2021. Examples of this optimism include DHL, which is planning to invest €500 million in India by 2026, capitalising on the fast-growing e-commerce market. Volkswagen, facing falling sales in China and high production costs at home, is reportedly exploring new partnerships for joint production in India. The company already operates two factories in the country and has signed a supply deal with local partner Mahindra. Similarly, engine maker Deutz is said to have struck a deal with TAFE, India’s third-largest tractor manufacturer, to produce 30,000 engines under licence.

Next Story
Real Estate

Dharavi Rising

Dharavi, Asia’s largest informal settlement, stands on the cusp of a historic transformation. With an ambitious urban renewal project finally taking shape, millions of residents are looking ahead with hope. But delivering a project of this scale brings immense challenges – from land acquisition to rehabilitate ineligible residents outside Dharavi and rehabilitation to infrastructure development. It also requires balancing commercial goals with deep-rooted social impact. At the helm is SVR Srinivas, IAS, CEO & Officer on Special Duty, Dharavi Redevelopment Project (DRP), Government..

Next Story
Real Estate

MLDL Records 20.4% Growth in Pre-Sales

Mahindra Lifespace Developers Limited (MLDL), the real estate and infrastructure development arm of the Mahindra Group, announced its financial results for the quarter ended March 31, 2025. In line with INDAS 115, the company recognises revenues using the completion of contract method. Key highlights FY25: Consolidated sales (Residential and IC&IC) of Rs 32.99 billion. Gross development value (GDV) additions in FY25 were Rs 1.81 trillion compared to Rs 440 billion in FY24 (~4x growth). Residential pre-sales of Rs 28.04 billion in FY25, reflecting 20.4% growth o..

Next Story
Infrastructure Transport

UCSL Delivers India's First Green Cargo Vessel to Norway

In a landmark achievement for Indian shipbuilding and the Atma Nirbhar Bharat initiative, Udupi Cochin Shipyard Limited (UCSL), a subsidiary of Cochin Shipyard Limited (CSL), has delivered the first of six next-generation green cargo vessels to Norway-based Wilson Ship Management AS, Europe’s largest short-sea shipping operator. The 3,800 DWT vessel, named Wilson Eco 1, was handed over during a ceremony at New Mangalore Port. The delivery is part of a Rs 5.06 billion project supported by Norway’s green maritime funding programme, marking India's entry into the European eco-friendly ca..

Advertisement

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Advertisement

Talk to us?