Trends in India India: Spotlight on Indo-German trade

Author / Editor: VDMA India / Ahlam Rais, Senior Sub Editor / Lisa Saller, Lisa Saller

A comparison of FDI in India since the launch of the ‘Make in India’ initiative in September last year to the corresponding period of October 2014–April 2015.

Machinery Imports of India, 2014 (€16,7 bn).
Machinery Imports of India, 2014 (€16,7 bn).
(Photo: National Stat. Office, VDMA)

Since 1991, the year of liberalization, Germany is the 7th most important investing country for India with total investments amounting to around $8,316 mn accounting for almost 3.2% share of the total investment inflow into India. The country has consistently been among the top ten investing countries for India. During the last financial year (2014–15), it ranked 7th with investments to the tune of $1,125 mn. While overall foreign direct invest-ments (FDI) into India grew 27.3% during the last fiscal, inflows from Germany grew 8.4%.

Sector break up

The top sectors attracting FDI inflows from Germany during FY April 2014 to March 2015 are the automobile industry (20.6%), services sector (15.9%), construction (infrastructure) activities (15.6%), industrial machinery (6.2%) and drugs & pharmaceuticals (6.2%). These top five accounted for about 64.5% of the total inflows from Germany during the last fiscal year. About 1,634 financial collaborations have been approved for Germany since 1991 (7.8%) of a total of 21,018 for all countries. About 1,117 technical collaborations (13.7%) of Germany have been approved out of a total 8,151 for all countries since 1991.

During the financial year 2014-15, Maharashtra – 47.3%, Tamil Nadu – 26.9%, New Delhi – 12.7%, Karnataka – 4.25% and Andhra Pradesh – 0.8% were the top investment locations for German companies in India. Germany’s total investments into India during April 2014 to March 2015 amounted to $1,125 mn, accounting for over 3.6% of the total Indian investment inflows in that year.

The trade volume between India and Germany during the first half of 2015 grew a healthy 13.5% over the same period last year to reach a volume of nearly €8.8 bn. The significant increase in bilateral trade was mainly on account of the Indian imports from Germany which appreciated 18% (€4.9 bn) during the first half of this year, after registering a negative growth of

13.7% during January–June 2014.

On the other hand, Indian exports which had more or less remained at the same level during January–June 2014, posted a growth of 8.3% during the same period this year. Indian exports to Germany during January–June 2015 amounted to nearly €3.9 bn.

India imported machinery worth nearly €1,598 mn during the first half of 2015 (1st half 2014: €1,282 mn), which accounted for 32.6% of the total imports from Germany during this period. Chemical products formed the 2nd most important item with imports amounting to €592 mn (1st half 2014: €528 mn), and a share of 12.1%. Electro-technology products featured 3rd on the list, with imports worth €582 mn and a share of 11.9% (1st half 2014: €534 mn).

Indo German trade in the engineering sector

In 2014, the trade between India and Germany declined normally by 0.87% to €15.96 bn (₹11,1720 crore) from a figure of nearly €16.10 bn in 2013. Indian imports from Germany experienced decline of 2.94% over the previous year and amounted to €8.92 bn (₹62,440 crore).

The exports from India to Germany attained a value of €7.03 bn (₹49,210 crore) in 2014. This was a slight increase of 1.74% as compared to the year 2013.

In 2014, the total import of machinery from Germany reached a volume of €2.54 bn (₹17,815 crore). This was a decrease by 8% compared with the same period of time in the previous year.

In 2014, among the machinery sectors, major demand of German equipment was for:

  • power transmission (10.2%),
  • compressors & air vacuum technology (7.6%),
  • textile machinery (6.9%),
  • material handling (5.9%),
  • machine tools (5.8%),
  • printing and paper technology (4.9%) and
  • valves (4.7%) and air handling (4.5%).

There are other sectors such as food processing & packaging, plastics & rubber, process, construction and building material machinery which are growing steadily in India.

In 2014 out of approximately €16.7 bn (₹117,012 crore) of machinery imported by India, Germany had a share of around 15.4%, marginally behind China (24.3%) and ahead of Japan (10.3%) and USA (8.7%).

Maharashtra with around 39% share of German investments remains to be the most attractive destination for German investments in India. In the last four to five years, Pune has become the hotbed for new German investments. Karnataka and Gujarat are other important destinations.