Out of approximately Euro 18.6 billion of machinery imported by India in 2016, Germany had a largest share of around 16%, ahead of Japan (11.2%) and Italy (7%), says Rajesh Nath.

Germany is known globally for its engineering technology. The German manufacturers are internationally well positioned with their broad range of sectors: In 23 out of 31 comparable sectors, they are among the global top three; in 14 of which, they are in first place.

In 2016, German mechanical engineering was once again one of the largest industrial sectors in Germany despite a volatile economic and political environment. The production in real terms remained near constant at the previous year’s level. At around Euro 220 billion, the nominal turnover was a record result. With an average annual increase of 5,000 employees in more than 6,780 companies, mechanical engineering remains the largest industrial employer in Germany.

In 2016, the German production of mechanical engineering maintained the previous year’s level despite numerous pressures. The estimated production value reached Euro 203 billion in nominal terms. This is a new record. In 2016, mechanical engineering recorded another rise in the number of jobs, making it the sixth year in a row to display growth. Hence, mechanical engineering is once again the industry with the largest workforce in Germany. In December, approximately 1,019 thousand people were employed on a permanent basis. Compared to the previous year, the number of permanent employees increased by 0.6 percent and thus by nearly 6,000 employees. Employment reached its peak in November with 1,021 thousand people.

India is the third largest sales market in Asia for the German engineering industry. Germany’s total investments into India during April 2014 to March 2015 amounted to $ 1,125 million, accounting for over 3.6% of total Indian investment inflows in that year. Top sectors attracting FDI inflows from Germany are automobile industry (20.6%), services sector (15.9%), construction (infrastructure) activities (15.6%), industrial machinery (6.2%) and drugs & pharmaceuticals (6.2%). These top 5 accounted for about 64.5% of total inflows from Germany during the last fiscal.

In 2016, out of approximately Euro 18.6 billion of machinery imported by India, Germany had a share of around 16%, ahead of Japan (11.2%) and Italy (7%). 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. Maharashtra with around 47.3% share of German investments remains to be the most attractive destination for German investments in India. In last 4 to 5 years, Pune has become the hotbed for new German investments. Karnataka and Gujarat are other important destinations.

VDMA identified the potential of the Indian market way back in the 1990s. That time the export of the German machinery to India was to the tune of only Euro 400 million, not large by any standard. However VDMA saw a big future in the market and decided to open its own office in India. Presently more than 550 VDMA member companies are engaged with their own business in the Indian market.

In 2016, the trade between India and Germany grew by 0.7% to Euro 17.42 billion from a figure of nearly Euro 17.29 billion in 2015. Indian imports from Germany experienced a marginal growth of 0.5% over the previous year and amounted to Euro 9.8 billion. The exports from India to Germany attained a value of Euro 7.62 billion in 2016. This was an increase of 1% as compared to the year 2015.

In 2016, the total import of machinery from Germany reached a volume of Euro 2.97 billion. This was an increase by 2% compared with the same period of time in the previous year. Among the machinery sectors, major demand of German equipment was for power transmission (10.8%), textile machinery (without dryers) (8%), machine tools (6.1%), plastics and rubber machinery (6%) and valves & fittings (5%). There are other sectors like food processing & packaging, process, construction and building material machinery which are growing steadily in India.

In order to become successful in India, companies need to know the characteristics and peculiarities of the Indian market. Here, the VDMA offices in India support the companies based on the needs of the members. These support activities include the provision of information on taxation and the Indian market, such as market entry barriers, future market developments or the current legal situation. In addition, the VDMA India office represents the interests of the members, including support for promotion actions, for example through participation in fairs and the organisation of symposia, meetings or similar presentation platforms for companies. With four offices in India, VDMA is geared to cater to the needs of the members and acts as an important bridge-head between the German and Indian industry.

India’s estimated growth in gross domestic product (GDP) was 7.1% for FY 2016-17 as against the growth rates of 7.6% and 7.2% during FY 2015-16 and FY 2014-15 respectively. India is still a favourite destination for foreign direct investment (FDI). Inflows during FY 2016-17 rose by 8% to Euro 56.48 billion, due to government's effort to improve ease of doing business and relaxation in FDI norms. As a matter of fact, India’s manufacturing sector has the potential to touch $ 1 trillion by 2025, which accounts for 25-30 % of the country’s GDP and will create up to 90 million new jobs. The Make in India programme of the Government of India is expected to raise the manufacturing sector output to 25% of GDP by 2025.

Recently, India ranked 4th among 190 economies for protecting minority investors in the Ease of Doing Business rankings released by World Bank. The country jumped 30 positions compared to last year to speed its way to the 100th overall spot. However, there is more to it than just the three figure mark. The indicators used for devising the index are: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

Many German companies have set up and are setting up manufacturing in India in addition to the sale and service office. Several German companies and VDMA members are planning towards more investments in India. German companies like Siemens, Bosch, Schaeffler Group, Pheonix Conveyors, Liebherr, Schwing Stetter, KSB, Wirtgen, ZF, Thyssenkrupp, Vulkan, Nord Drives to name a few have invested substantially in the last 5 years.

Rajesh Nath is the Managing Director of VDMA India and was recently conferred the ‘Cross of the Order of Merit’, the highest civilian honour awarded to individuals for their services to Germany. He can be contact on email: rajesh.nath@vdmaindia.org