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India and Germany share a strong commitment to sustainability: Rajesh Nath
Interviews- Mar 25,25
In this interview with Rakesh Rao, Rajesh Nath, MD, VDMA India, sheds light on the dynamics of India-Germany trade relationship.
Germany stands as India's largest trading partner within the European Union (EU), underscoring the robust economic ties between the two nations. To strengthen economic ties, both nations must simplify regulatory frameworks, enhance infrastructure, and deepen workforce skilling efforts. With 51 per cent of German companies in India planning to increase investments, the future of Indo-German industrial cooperation looks promising, states Rajesh Nath, Managing Director, VDMA India, during this interview with Rakesh Rao.
How would you describe the current state of trade relations between India and Germany? Which sectors are driving this bilateral trade?
The trade relations between India and Germany have experienced significant growth, with bilateral trade surpassing $30 billion in 2023. As of 2024, India's exports of machinery and components to Germany have surged to $ 4.13 billion, marking a four-fold increase from the previous year. Germany stands as India's largest trading partner within the European Union (EU), underscoring the robust economic ties between our nations.
Several sectors are pivotal in driving this bilateral trade. The machinery and engineering goods sector remains central, with German technology playing a vital role in India's industrial growth. The automotive sector is another key pillar, given the push toward electric mobility and advanced manufacturing. Additionally, renewable energy, green hydrogen, and environmental technologies are gaining traction as both nations focus on sustainable industrial solutions. Digitalization and AI-driven manufacturing are also shaping the future of this collaboration, opening new avenues for Industry 4.0 applications.
With India emerging as a global manufacturing hub under initiatives like Make in India and Production-Linked Incentives (PLI), and Germany’s leadership in high-tech industrial solutions, the synergy between our nations is set to grow further. As VDMA, we see immense potential in fostering deeper technology partnerships, skill development initiatives, and investments that can elevate India’s manufacturing landscape to global standards.
What key lessons can India and Germany learn from each other to enhance economic cooperation and trade growth?
India and Germany have long been economic partners, and both nations have valuable lessons to exchange to further strengthen trade and industrial collaboration.
Germany's engineering prowess, particularly in precision manufacturing and automation, offers valuable insights for India as it scales up its industrial capabilities. The German Mittelstand (small and medium-sized enterprises) provides a successful model of innovation-driven, export-oriented businesses that India can adapt to enhance the global competitiveness of its MSMEs. Additionally, Germany's commitment to vocational training and skill development through its dual education system can be a game-changer for India's growing workforce, ensuring a steady supply of highly skilled talent for advanced manufacturing.
Conversely, Germany can learn from India's agility, digital innovation, and cost-effective production capabilities. India has emerged as a leader in IT, software, and AI-driven solutions, which can greatly benefit German manufacturers looking to integrate smart technologies into their processes. Moreover, India's experience in large-scale manufacturing, flexible supply chains, and cost efficiency offers valuable insights as Germany looks to diversify its production bases.
Both nations share a strong commitment to sustainability and green technology. Deeper collaboration in areas like green hydrogen, renewable energy, and environmental technologies can accelerate mutual growth. By combining Germany's technological strength with India's dynamic market potential, the two countries can drive a new era of industrial cooperation, ensuring long-term economic resilience.
Which industries or sectors offer the most potential for collaboration between Indian and German companies? Are there any emerging areas where you see significant synergy?
India and Germany share a robust economic partnership, with bilateral trade reaching $26.48 billion in 2024 ($16.64 billion in imports from Germany and $9.84 billion in exports). As Germany remains India's largest trading partner in the EU, both nations see significant opportunities for expansion.
Sustainability and green technologies are key collaboration areas, with Germany pledging €1 billion for projects in renewable energy, urban development, and sustainable agriculture. The AI and semiconductor sectors also hold great promise, as both nations aim to establish resilient global supply chains and strengthen technological cooperation. The automotive industry, particularly electric mobility, presents another high-potential area, leveraging Germany’s engineering expertise and India's rapidly growing EV market. Similarly, defence cooperation is a strategic priority, with discussions on joint submarine construction between German firm Thyssenkrupp and Indian partners.
Addressing Germany’s demographic challenges, skill development and vocational training are becoming increasingly important. Germany has raised visas for skilled Indian workers from 20,000 to 90,000 per year, responding to growing demand in IT, healthcare, and engineering.
With 51 per cent of German companies in India planning to increase investments, the future of Indo-German industrial cooperation looks promising. Strengthening these collaborations will drive innovation, economic resilience, and long-term growth for both economies.
How can German firms contribute to increasing the global competitiveness of Indian companies, especially in manufacturing and engineering?
German firms are instrumental in boosting the global competitiveness of Indian manufacturing through technology transfer, innovation, and skill development. As India advances towards becoming a global manufacturing hub, collaboration with Germany can accelerate this shift.
Germany’s expertise in precision engineering, automation, and Industry 4.0 offers Indian firms access to AI-driven manufacturing, IoT-enabled production, and robotics, enhancing efficiency and product quality. JVs facilitate the adoption of advanced CNC machines and smart factory solutions, helping Indian manufacturers move up the value chain.
Joint R&D initiatives further drive innovation, combining Germany’s research strengths with India’s cost-effective engineering talent. Expanding programs like the Indo-German Science & Technology Centre (IGSTC) can lead to breakthroughs in materials science, machine tools, and sustainable manufacturing.
Adopting global quality standards such as DIN, ISO, and VDA is essential for Indian firms to strengthen their exports. German companies emphasize these benchmarks, ensuring products meet international requirements and boosting India’s reputation as a trusted global supplier.
Workforce development is another key area, with German firms like Siemens, Bosch, and Festo already running training centres in India. Expanding Germany’s dual vocational training system will equip Indian workers with next-generation manufacturing skills.
Sustainability is also crucial, and Germany’s leadership in energy-efficient production, green hydrogen, and circular economy practices can help Indian manufacturers align with global carbon neutrality goals, ensuring long-term competitiveness.
With over 1,800 German companies in India, strengthening these partnerships will drive productivity, innovation, and global market expansion, solidifying India’s position as a key player in advanced manufacturing.
How has the Make in India initiative influenced German investments in India? What challenges do German firms face while setting up or expanding their presence in India?
The Make in India initiative has significantly boosted German investments, with over 1,800 German companies now operating in India across automotive, machinery, electrical equipment, and renewable energy. Favourable policies, infrastructure development, and incentives like PLI schemes have strengthened India's position as a global manufacturing hub, aligning well with Germany’s expertise in precision engineering and Industry 4.0. Bilateral trade reached $26.48 billion in FY 2024, reflecting growing economic ties.
However, regulatory complexity remains a challenge, with bureaucratic hurdles slowing approvals despite improvements in India's Ease of Doing Business ranking. Infrastructure bottlenecks in logistics and supply chains also pose difficulties, though initiatives like Gati Shakti aim to address these gaps. A key issue is the skill gap in advanced manufacturing. While India has a large workforce, expertise in automation, robotics, and precision engineering is still developing. German firms are investing in vocational training and skilling programs to bridge this gap. Cultural differences in business operations also require adaptation, with German firms emphasizing process discipline and long-term planning, while India’s dynamic market often demands flexibility.
Despite these challenges, investment confidence remains strong. The latest VDMA Business Climate Survey in India suggests that German companies remain optimistic about their growth prospects, with 56 per cent expecting positive business performance this fiscal year. Among surveyed members, 60 per cent already have local manufacturing operations in India, and of these, 69 per cent plan to expand further. Additionally, 27 per cent of companies without existing facilities are considering setting up manufacturing in India soon. This strong intent to scale operations reflects growing confidence of German manufacturers in India's industrial ecosystem and its increasing role in global supply chains.
In what ways can German firms use India's market potential, workforce, and cost advantages to enhance their global business prospects?
India offers a vast market, a skilled workforce, and significant cost advantages, making it an ideal hub for German firms to strengthen their global business footprint. With a $3.7 trillion economy and projected GDP growth of over 6.5 per cent in 2024, India provides high demand across sectors, from automotive and industrial machinery to renewable energy and digital technology.
German companies can leverage India’s cost-efficient manufacturing ecosystem to improve global competitiveness. Labour costs in India are 30-40 per cent lower than in Europe, while operational expenses, including real estate and logistics, are significantly more competitive. Establishing production and R&D centres in India allows German firms to optimise costs while maintaining quality and innovation.
India’s skilled workforce, particularly in engineering, IT, and automation, is another key advantage. With 1.5 million engineers graduating annually, German firms can tap into a large talent pool for roles in high-tech manufacturing, AI-driven industrial automation, and advanced materials research. Many German companies, including Bosch, Siemens, and SAP, have already established global R&D hubs in India.
Beyond manufacturing, India is emerging as a hub for digital transformation and Industry 4.0 solutions. German firms can collaborate with Indian tech companies to develop smart factories, AI-driven predictive maintenance, and IoT-enabled production lines, strengthening their global supply chain resilience.
With free trade agreements under negotiation and initiatives like PLI schemes and Gati Shakti improving infrastructure, India is becoming an integral part of global supply chains. By expanding operations here, German companies can enhance cost efficiency, access a growing market, and develop cutting-edge solutions, reinforcing their global leadership in manufacturing and engineering.
Given the current global economic uncertainties, how do you see the future of Indo-German trade relations evolving? What steps should both nations take to strengthen economic ties further?
Over the past decade, German FDI inflows into India have exceeded €13 billion, with major investments in automotive, industrial machinery, green energy, and digital industries. Despite global economic uncertainties, Germany remains India’s largest trading partner in the EU, and with India’s GDP projected to grow over 6.5 per cent, the country is emerging as a key pillar in Germany’s global supply chain diversification strategy.
Looking ahead, technology collaboration, sustainability, and workforce development will shape the future of this partnership. Germany’s leadership in Industry 4.0, automation, and renewable energy aligns well with India’s push for manufacturing expansion and digital transformation. For instance, German firms like Siemens and Bosch are already investing in India’s smart manufacturing and AI-driven industrial solutions. Expanding joint R&D initiatives, enhancing PLI incentives, and fast-tracking the India-EU Free Trade Agreement (FTA) will further accelerate trade and investment flows.
To strengthen economic ties, both nations must simplify regulatory frameworks, enhance infrastructure, and deepen workforce skilling efforts. Logistics improvements through India’s Gati Shakti program and ongoing investments in port modernisation and industrial corridors will help German firms operate more efficiently. Additionally, Germany’s dual vocational training model can help India bridge its skilled labor gap, particularly in EV manufacturing, advanced robotics, and semiconductor production—sectors where India is making rapid advancements.
With over 200 German Mittelstand companies (renowned for precision engineering and innovation) actively expanding in India, the momentum for deeper collaboration is clear. By scaling up investments in strategic sectors like electric mobility, hydrogen technology, and semiconductor manufacturing, Indo-German trade will not only withstand global challenges but also drive long-term industrial growth, innovation, and economic resilience.
Rajesh Nath
VDMA India
Siemens
Bosch
Festo
Indo-German Science & Technology Centre
Gati Shakti
Indo-German Trade
Thyssenkrupp
Hannover Messe 2025
Bauma
Germamy
PLI Scheme
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