German Chancellor Friedrich Merz is due to travel to India with an economic delegation on Sunday, as Berlin seeks a leap in cooperation with the South Asia country and less dependency on China.
With around 2,000 German companies already running branches in India and employing more than 500,000 people, the prospects for the three-day trip are strong, according to Volker Treier, foreign trade chief of the German Chamber of Industry and Commerce (DIHK).
“India is an increasingly important trading partner for the German economy,” Treier told dpa. “Given its economic dynamism, young population and growing industrial base, India is rapidly gaining relevance for our companies – especially for the diversification of supply chains and the expansion of international value creation.”
The previous coalition government under chancellor Olaf Scholz in particular emphasized the need to reduce unilateral dependencies on China by expanding economic relations with other countries.
German direct investment in India stood at €27 billion ($31.4 billion) in 2023. In China, German companies have built production facilities and manufacturing capacities worth €100 billion.
However, Treier said that despite its size, India currently ranks only 23rd among Germany’s trading partners, while Germany holds first place among India’s EU trading partners.
Doubling in the past decade, the trade volume in 2024 was €31 billion ($36 billion), with Germany exporting more than it imported.
The key goods sent to India include machinery, chemical products, aircraft, ships and trains, while main imports to Germany are pharmaceuticals and goods from the Indian chemical industry, machinery and clothing.
Promising potential
“India is of great importance to the German economy, especially from a strategic point of view,” said Treier, noting that German companies already have a strong presence in key sectors like mechanical engineering, the automotive industry and chemicals.
“These industries are benefiting from India’s industrialization, modernization and growing demand for high-quality technology,” he said.
Other future growth areas include energy and climate technologies, industrial digitalization, infrastructure development and the training and further education of skilled workers, where German expertise is in high demand.
Free trade agreement sought with India
More than a quarter of a century after negotiations began, the way is now clear for a huge EU free trade zone with the South American Mercosur countries of Brazil, Argentina, Uruguay and Paraguay after a majority of the EU countries gave the go-ahead on Friday for the deal.