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German managers are cautious about investing in India

German industry sympathises more with Egypt than India. Only every third company wants to invest in India. Customs and bureaucracy slow down imports.
© Freepik

The German Chambers of Commerce in Singapore and India asked the Asia heads of German companies about their assessment of the world's fifth largest economy. What are the most important criteria by which they base their investment decisions?

Only every third company wants to invest in India
Even more than eight years after Prime Minister Narendra Modi's business-friendly government took office, managers remain sceptical about India. Almost 70 per cent currently do not want to invest in the world's fifth-largest economy. Worse still for India, even those who are in the place are exercising restraint: almost a quarter of those surveyed do not want to put up any more money because of the barriers in India. 

Without the obstacles, one in two would invest more
Yet many of those responsible see opportunities on the subcontinent: if India finally cleared the obstacles, 45 per cent of the decision-makers would invest more money. A quarter would then begin to examine whether investments in the growth economy would not be worthwhile after all.

71 per cent would like to import more from India 
For Indians, the stakes are high: 71 per cent of those surveyed said they would like to buy more from India if the federal and state governments finally opened the barriers. But that is exactly what Modi needs to create manufacturing jobs and achieve the promised growth rate of at least 8 per cent on a sustainable basis. 

Population grows faster than number of jobs
Month after month, the Indian government needs to create more than a million new jobs for the adolescents, otherwise India's much-touted demographic dividend risks becoming a demographic fiasco. The subcontinent can only achieve this by significantly: faster growing foreign investments and increased purchasing, which leads to higher exports.

German business delegation visits India
The slap in the face for the Hindu nationalist government comes before German Chancellor Olaf Scholz's trip to New Delhi. Scholz takes a business delegation with him and takes up government consultations with the Indians. According to Indian sources, the talks are about closer security and defence cooperation. Secondly, they say that the visit of the Scholz delegation should help to work towards closer economic relations.

No Free Trade Agreement with the European Union 
The road seems long. For better relations also include the free trade agreement with the European Union, which has been postponed for years. "I cannot imagine that it will be negotiated by the end of this year, as announced. The hurdles are probably still too high," says Stefan Halusa, Director General of the German Chamber of Foreign Trade based in Bombay (Mumbai) in an interview with the German Frankfurter Allgemeine Zeitung. The India experts in the top echelons do not seem to be entirely convinced of the benefits of an agreement: In the end, only about half of the respondents (52 per cent) consider a trade agreement to be extremely important for their business success. Another 40 percent give it at least some weight.

Customs and bureaucracy slow down imports
When asked about the obstacles to investment in the country of almost 1.4 billion people, the managers criticised above all customs and bureaucracy, which slow down imports: cumbersome procedures (40 percent), inconsistent customs duties (38), the amount of duties (33) and the dreaded Indian bureaucracy as a whole (28) make them critical of Asia's third-largest economy. 

One in three wants more transparency in India
A full 12 per cent perceive an India without barriers after seven years of a business-friendly government with large majorities. No wonder that 79 of the India managers consider the dismantling of barriers to be extremely important. A third of the respondents also point to the burden of non-tariff trade barriers, which are particularly difficult to abolish. 30 per cent call for "more transparency" in India across the board.

India has a reputation problem
Halusa tries to categorise the critical view soberly: India has a reputation problem. The companies that are here are 80 per cent satisfied with their business, but this does not seem to translate into increased investment interest. In view of the. Halusa also urges caution: "The advice to interested parties can only be: look even more closely. Nothing is riskier than stumbling into India.