A recent survey conducted by the Indo-German Chamber of Commerce (IGCC) has shown that the recent series of scandals and scams has made the German companies sit up and take a hard view of their operations here.
However, they have no plans to exit the market. On the contrary, a number of companies have plans to expand their businesses here. But, they believe Indian duties need to come down significantly with a greater opening of the market, Bernhard Steinruecke, director-general, IGCC, told Nayanima Basu in an interview. Edited excerpts:
The Indo-German trade, after declining 2.3 per cent in 2009, grew an impressive 18 per cent in 2010 to 15.4 billion euros. The governments of the two countries have set a target of achieving 20-billion-euro two-way trade by 2012. Do you think that is achievable?
In the first three months of this year, the trade rose 30 per cent. So, in the first quarter of 2011, we reached a volume of more than 4.5 billion euros.
On that basis, we forecast the target of 20 billion euros would be easily achieved. There is a possibility of even exceeding it.
Chancellor Angela Merkel is visiting India on May 31. What will be the main focus during her visit?
Chancellor Merkel is coming for the first ever Indo-German government consultation. She is coming with five Cabinet ministers and this is going to be Germany’s first such joint cabinet meeting with an Asian country.
This is part of the strategic partnership between Germany and India. The focus of the meeting will be commerce, politics, education, technology and culture.
More From This Section
I understand IGCC has conducted a survey of the German companies operating in India on the recent spate of scandals in the country vis-à-vis a change in their business strategies. What are the key findings?
Basically, a vast majority of the companies expect India’s growth story to continue, some believe India’s growth to match or surpass China’s. This was a bit of a surprise for us.
Most companies say their turnover last year was over 20 per cent and they expect it to be two-fold this financial year. Most say they have been profitable and see profitability rising in the current financial year. More than 55 per cent expect sales to surge over 10-20 per cent over those in 2010-11.
But are they realigning their risk strategies going forward in order to do business in India, while taking a hard look at their investment and expansion plans in the country?
On the one hand, most think the scandals have, to a large extent, harmed the image of India, while on the other, they also say they will not pull out their investments from India and their expansion plans are well on track.
Are we going to see more German investments in India? If so, in which sectors? How much of an increase in investments is expected?
Many companies have also indicated they plan to increase their activity in India in the next three years. These are mainly in sectors like capital goods and machine tools, chemicals, auto & auto ancillaries, electronics and IT. Most companies have investment plans this year. All of those want to invest substantially. We expect a steady growth in investments in the coming years.
What are the expectations of the German industry from the India-EU free trade agreement (FTA), which is likely to be concluded by the end of this year?
We also expect the India-EU FTA to be concluded by this year. German industry feels that the tariffs in line with the World Trade Organisation (WTO) rules should eventually reduce to zero and the market should open up as strong as possible. And Germany, being the largest economy in Europe, is also interested in the early conclusion of the trade agreement, because that will substantially open up the European market for India.
Moreover, the Indian market, which still has a lot of tariff and entry barriers, needs to open up because the required technology transfer will properly happen only after that. So we expect a positive impact from the India-EU FTA.
What are some of the problem areas that act as hurdles for German companies to do business in India? How do you plan to address those?
For a vast majority of German companies, the single largest problem in India is infrastructure, while for some it is corruption and for others it is bureaucracy. The German companies are also in dialogue with the Indian government when it comes to reforms.
India is a huge growth market, so a German company active globally must have its operations in India, or it is missing out on one of the most attractive markets in the world.