+
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
Infrastructure Urban

India to Invest Rs 600 Billion to Upgrade 1,000 ITIs

As part of its drive to modernise vocational training, the Ministry of Skill Development and Entrepreneurship (MSDE), in collaboration with Gujarat’s Labour and Employment Department, held a State-Level Workshop at the NAMTECH Campus within IIT-Gandhinagar to discuss the National Scheme for ITI Upgradation.The consultation brought together key stakeholders from industry and the training ecosystem to align expectations and support implementation of the scheme, which aims to transform 1,000 Industrial Training Institutes (ITIs) across India using a hub-and-spoke model. The total outlay stands ..

Next Story
Infrastructure Urban

India Unveils Rs 600 Billion Maritime Finance Push

The Ministry of Ports, Shipping & Waterways (MoPSW) hosted the Maritime Financing Summit 2025 in New Delhi, bringing together over 250 stakeholders including policymakers, industry leaders, global investors, and financial institutions. The summit, held under the ambit of Maritime Amrit Kaal Vision (MAKV) 2047, focused on transforming India into a leading maritime power with strengthened financial, infrastructural, and technological capabilities.Union Minister Sarbananda Sonowal emphasised India's strategic progress, noting that average port turnaround times have dropped from four days to u..

Next Story
Infrastructure Urban

Govt Allocates Rs 500 Million To Boost Community Radio

The Central Government, through its ‘Supporting Community Radio Movement in India’ scheme, has allocated Rs 500 million to strengthen the community radio ecosystem across the country. The initiative aims to assist both newly established and long-operational Community Radio Stations (CRSs), ensuring their relevance to local educational, social, cultural, and developmental needs.According to the policy published by the Ministry of Information and Broadcasting, CRSs may be set up by not-for-profit organisations with at least three years of demonstrated community service. These stations are ex..

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Talk to us?