German CEOs see India as one of the most important prospective destinations, says India’ ambassador Ajit Gupte

German companies are looking at India as one of the most important prospective destinations in the backdrop of the need for diversified global supply chains, according to India’s ambassador to Germany Ajit Gupte.

“What has happened as a result of the conflict  and also the Covid-19 pandemic is that there is growing realization in Europe and particularly in Germany, that you need to build global resilient supply chains, that they can no longer depend on sourcing everything, manufacturing everything in one particular country. And that they need to rebalance, they need to de-risk,” Gupte told Mint in an interview on the sidelines of the News9 Global Summit in Stuttgart during November 21-23.

“De-risking is a phrase which I have heard in the short time when I have met German CEOs. And they are looking at various options,” he said. “India is certainly one of the most important prospective destinations that they are looking at. But to be frank, they are also looking at other countries like Malaysia, Thailand, Mexico. So, there is competition.”

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This comes in the backdrop of Indian importers resorting to rerouting critical machinery and materials through Dubai’ Jebel Ali port to mitigate disruptions caused by China’s export restrictions to India, including those on machines manufactured by German firms there.

India’s Commerce and Industry Piyush Goyal had raised the issue of China blocking the sale of tunnel boring machines manufactured by Germany' Herrenknecht to India with German vice chancellor and federal minister for economic affairs and climate action Robert Habeck during his recent India visit as part of German Chancellor Olaf Scholz’ delegation.

Opportunity for Indians

Gupte said with Germany facing a major challenge in terms of demography and visa quota increased for Indian skilled workers to 90,000, it provides an opportunity for Indians not only in high-end sectors such as IT or finance but also at middle- and lower-level segments,

Mint first reported about the skilled labour visas increase for Indians to 90,000 every year from the current cap of 20,000, quoting ambassador Philipp Ackermann, with Germany facing a workers’ shortage. This was subsequently announced during Scholz's visit for the seventh round of India-Germany Inter-Governmental Consultations (7th IGC) and 18th Asia-Pacific Conference of German Businesses (APK 2024) last month in New Delhi.

“Germany faces a major challenge in terms of demography. The percentage of people who are old is high, it is increasing. They are not getting enough replenishment of workforce for various reasons,” Gupte said.

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“It's a demographic challenge, like in many other developed countries. What has happened and what is different is that in the last few years, they have started looking at India as a key source, not only for skilled labour like IT professionals or IT programmers or finance, but also at various middle- and lower-level segments,” Gupte said. “They are looking now at Indians also as nurses, nursing assistants, truck drivers, train drivers, bricklayers, masons, waiters, waitresses, receptionists.”

According to Gupte, “This is a big shift because when I was here last, they would look at within the EU. Now they are really looking at India. So, this is an area for Indians to come to Germany. But they would also have to learn German, and be willing to make that transition.”

Bilateral merchandise trade between India and Germany was at $26.48 billion in FY24, with Indian imports at $16.64 billion by value and exports at $9.84 billion, according to the ministry of commerce & industry data. The bilateral trade between the two nations was $26.74 billion in FY23, with Indian imports at $16.60 billion and exports at $10.14 billion.

A key trade partner

“I think Germany is one of the most important trade and investment partners for India. It is the largest trade partner of India in the EU…There are good prospects of growth in the future,” Gupte said.

Top imports from Germany include aircraft and spacecraft components, machinery, auto components, electric instruments and components, and iron & steel. Top exports from India include electric machinery, ready-made garments including ones made from cotton, telecom instruments, organic chemicals, iron, auto components and drug formulations.

“Germany is also a very important investor in India. German companies have invested, according to German statistics, upwards of $20 billion in India. And there are more than 1800 German companies. Some German companies have been in India for more than 150 years. For example, Siemens has been in India since the 1850s. Many German companies ... have played a very important role in the modernization and industrialization of the Indian economy, and continue to play that role,” he added.

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Gupte also said the succession issue at many Mittelstand or mid-sized firms, which are global technology leaders and are looking to be acquired, also offers an opportunity for Indian firms.

“There are a lot of Mittelstand companies in Germany. The Mittelstand are not really SMEs because they are all leaders. Most of them are leaders or proficient in a certain technology, and many of them are, in their own area, global leaders. Some of the companies have a turnover of as much as a billion dollars,” Gupte said. “Now these Mittelstand companies are looking at new markets … They are looking at joint ventures, technology collaboration. So, there are a lot of opportunities for Indian companies to partner with them.”

Gupte said there is also an “issue of succession in many of the Mittelstand, where maybe it was founded by somebody, and the founder does not have children”. “Or maybe in some cases, children don't want to follow the same profession. So here again, many of the Mittelstand are looking at possible acquisitions,” said Gupte. “Even in that space, there are opportunities. But it requires some amount of research, some amount of diligent effort, a leap of faith, and some risk-taking.”