Philipp Ackermann: 'The German economy feels at home in India'

This time, the APK is taking place in India, the country to which you are ambassador. What impetus do you hope to gain from this conference?

I believe that the choice of location in these times sends a very clear message to India that the German economy in Asia is more interested in India. There are various reasons for this: One of them is the rapid development that is taking place here. Another is certainly what is happening in or with China. I believe that this APK reflects the mood that people are looking more towards India. I don't believe that we will turn India into a second China in the shortest possible time in terms of economic figures. But at the same time, I can see that the Indo-German trade volume can continue to grow.

What is the current state of Indo-German trade relations?

We have a trade volume of $33 billion. That is by far the largest trade volume of any EU country with India. Moreover, the flows in both directions are quite balanced. Our Chamber of Commerce has six offices across the country, it is the largest foreign chamber of commerce in Germany. Around 2,200 German companies are active in India. Among them are not only the big ones, but also a lot of medium-sized companies that are particularly interested in digitalization here. Overall, it can be said that the German economy feels at home in India.

What do you attribute this to?

The Chamber of Commerce has just conducted its annual survey with KPMG. The mood has been on the rise for years. The German economy wants to invest in India: 80 percent of companies believe that this is the right thing to do. But you also have to realize that the volume of German trade with China is around €350 billion, which is more than ten times as much. So India is still a growth market and there is still a lot that can be done.

What kind of companies are setting up here?

There are a few interesting companies in the renewable energy sector, for example Siemens Energy and Enercon, as well as smaller companies such as Verbio. Many have located their research and development departments here. Mercedes-Benz, for example, employs 8,000 engineers in Bangalore in a research center that focuses on autonomous driving and driving safety for global production. Siemens Healthineers is also building a huge center here. There is a huge amount of investment, particularly in the digital sector. SAP employs more engineers in India than in Germany. You can tell that this is a very interesting location for many.

What makes India such an attractive location for German companies?

The level of education in the technical fields is exceptionally high. The people who come out of the universities are well-educated, motivated and ready to work. Indian technical universities, especially at the top end, are well-positioned internationally. The top earners are worldly and English-speaking, often having studied abroad, which is a great advantage. The infrastructure is also improving enormously: the digital infrastructure and the physical infrastructure such as airports, railways and roads.

So why don't more companies go to India?

There are still some deficits, particularly in the area of infrastructure. The legal procedures for investments are also sometimes cumbersome. Although the rule of law works in India, the procedures are often too slow, which is of course an obstacle to investment.

There are always accusations of erratic bureaucracy – regulations that are set very unexpectedly and overnight and are perhaps not always economically rational from the industry's point of view. Of course, there are also political reasons for this, China being one of them.

How sustainable is the Indo-German partnership?

This is a very interesting and beautiful partnership because it is so concrete. It has been booked for almost ten years with ten billion euros. In times of tight budgets here and elsewhere, this shows how seriously we take the partnership. It is important to note that 95 percent of this is in the form of loans. It is not development aid in the traditional sense. These are KfW loans, which are extremely popular here because of their very favorable interest rates. Indian banks charge horrendous interest rates and a KfW loan like this is an interesting alternative for the government.

The partnership consists of three main areas. Firstly, renewable energies with projects in which suppliers or energy companies switch to more renewables with the help of German loans. Secondly, the smart city. Every day, 1,000 people migrate to Delhi. We support the city's focus on expanding public transportation and renewables. The third pillar is biodiversity. Here we support projects for forests, agriculture, nature parks and biodiversity.

We will launch a website for the government consultations that will make these projects tangible and understandable. As I said, the charm of the partnership is that it is so concrete and based on individual projects that cover the whole of India.

China is not included. What is the state of China-India relations?

The Chinese were never really present at APKs, except for those that took place in China itself. Relations between India and China are not at their best. There is little direct contact. The Border Mechanism, a kind of commission to resolve border demarcation from both sides, meets every now and then, but overall there is hardly any bilateral contact between China and India. From India's point of view, China is the biggest foreign policy problem. However, it is good news that joint patrols have now been resumed for the first time since 2020.

How do you rate China in the Indian market, in competition with German and European companies? For example, in terms of cars, electronics, mechanical engineering and the like.

The volume of trade between India and China is similar to that between the US and India. And it continues to grow. There is quite an imbalance: About 80 percent of the trade volume comes from China, and 20 percent goes to China. I believe that the Indian market cannot do without China.Another example: 90 percent of our generic drugs come from India, but again 90 percent of these generic drugs are produced with components from China. It is similar with solar panels – India is now starting to set up its own production. This is an important national goal, but the cells are actually still all from China. So there is a huge dependency. The Indian side says that the Chinese are not allowed to invest here, unlike in Europe. Trade flows can be cut, and that can be done quickly if things get dicey. But you want to hide the investments.

Are de-risking from China and overcapacity in India also an issue like in Germany?

Overcapacity is not a problem here. One goal of the people in India – based on their self-image and self-confidence – is to promote their economy to the outside world. At the same time, they come from a strongly protectionist economic policy. The Indian car industry, for example, would not even exist if the government had not been so protectionist when it came to car imports. This is at odds with what the Indian economy actually wants. Because that includes free trade. De-risking is more of an incentive. However, because investment activity is not so high, they themselves are not so strongly affected by it.

Is de-risking reflected in an influx of German companies to India?

Speaking purely anecdotally, I have noticed that many companies – including SMEs – are saying that they perhaps need to establish another foothold in Asia. Many other countries are competing with India: Indonesia and Malaysia, Singapore and Vietnam, for example. These are all countries that the German economy sees quite positively. India is a very federally organized country, comparable to Germany. Many Indian provincial governments offer incentives to attract SMEs. For the German economy, not everything necessarily boils down to India. But we are already noticing that interest in the country is growing.