+
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 Energy

Tata Power, Suzlon Ink Rs 60 Billion Wind Energy Deal in Andhra

Tata Power has signed an agreement with Suzlon Energy to develop, construct, and supply 700 megawatt (MW) wind turbines in Andhra Pradesh. The Rs 60 billion project forms part of a 7 gigawatt (GW) renewable energy plan announced by Tata Power Renewable Energy (TPREL) and the state government in March 2025.This marks the first wind energy project in the state since 2019. The larger 7 GW programme, covering solar, wind, and hybrid projects with or without storage, is expected to attract investments of around Rs 490 billion, making it one of the state’s largest clean energy commitments.The turb..

Next Story
Infrastructure Transport

Odisha Approves Rs 12.6 Billion For 32 New Bridges

Odisha is set for a major infrastructure boost with the approval of 32 new bridges under the Setu Bandhan Yojana for FY 2025–26. The project, valued at Rs 12.6 billion, is aimed at improving road connectivity across ten districts, enhancing mobility and driving local development.The bridges will be constructed in Bolangir, Subarnapur, Nayagarh, Sambalpur, Malkangiri, Bargarh, Koraput, Jagatsinghpur, Cuttack, and Puri. Many of these areas are rural or located in difficult terrains, where improved accessibility will greatly benefit the transportation of goods and public mobility.Setu Bandhan Y..

Next Story
Infrastructure Transport

UP Plans Rs 350 Billion Gorakhpur–Shamli Expressway

Uttar Pradesh is preparing to build its largest expressway, a 700-km six-lane project that will surpass the 570-km Ganga Expressway from Meerut to Prayagraj. Designed as a greenfield project, the Gorakhpur–Shamli Expressway will cut travel time between eastern and western Uttar Pradesh to just six hours, transforming regional connectivity.The expressway will pass through 22 districts and 37 tehsils, bringing faster travel and significant economic benefits, including higher land values for farmers and employment opportunities during and after construction. A drone survey to map the route is e..

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Talk to us?