PM Modi’s Germany, Denmark and France visit & its economic significance
Prime Minister Narendra Modi’s ongoing visit to Germany, Denmark and France from May 2 to 4, acquires much significance as it comes at a time when the Russia-Ukraine conflict in the heart of Europe, has made things worse for the entire world including India, amid huge disruptions and upheavals already created by Covid-19 pandemic for over two years. PM Modi is set to meet German Chancellor Olaf Scholz in Berlin, Denmark PM Mette Frederiksen in Copenhagen and France President Emmanuel Macron in Paris, who has recently been re-elected for a second term. India and Germany will co-chair the 6th Inter-Governmental Consultations (IGC), a unique biennial format which India conducts only with Germany.
The multi-dimensional partnerships with these countries, especially with Germany and France are spread across several avenues of cooperation. PM Modi’s departure statement before he left for Germany, is interesting to note here to give it a context,- saying he wants to strengthen the spirit of cooperation with India’s European partners, who he termed as important companions in India’s quest for peace and prosperity. Undoubtedly, economic and defence ties are on the top of the agenda with these countries.
India-Germany economic ties
Germany is India’s largest trading partner in Europe. It has consistently been among India’s top ten global partners and was the seventh-largest trading partner in FY 2020-21 and 12th during FY 2021-22 up to December 2021. Bilateral trade between India and Germany in 2020-21 was USD 21.76 billion registering a marginal decline of about 1% over FY 2019-20. Indian exports during this period decreased by 2% reaching USD 8.12 billion and Indian imports decreased by 0.35% to USD13.64 billion. During 2021-22 (until December 2021), bilateral trade was USD17.60 billion, an increase of 12.7% over the corresponding period in FY 2020-21.
Investments of German in India
As per Department for Promotion of Industry and Internal Trade (DPIIT), Germany is the 7th largest FDI source for India. The total FDI from Germany to India from April 2000-December 2021 is over USD 13 billion. In FY 2020-21, German FDI in India was USD 667 million. During 2021-22 (until December 2021), German FDI was USD 581.65 million. According to Indo-German Chamber of Commerce, there are more than 1,700 German companies in India. German investments in India have been mainly in sectors of transportation, electrical equipment, metallurgical industries, services sector (particularly insurance), chemicals, construction activity, trading and automobiles. Recent German investments in India include announcement of Robert Bosch in February 2022 to invest a total of USD 260 million in India in the next five years towards the localization of advanced automotive technologies and in building digital platforms like Mobility Marketplace and Mobility Cloud Platform. German packaging solution provider Multivac invested USD 7.4 million to establish a production site in Ghiloth, Rajasthan.
Indian investments in Germany
As per Confederation of Indian Industry (CII), there are more than 213 Indian companies operating in Germany. They are involved in trading, manufacturing, R&D and innovation and services. Indian companies have invested in Germany mainly through Mergers and Acquisitions (M&A). Investments are mostly in IT, automotive, pharma, biotech and manufacturing. The penetration of Indian software companies in German market is increasing. Major clusters of Indian companies are in the States of North Rhine Westphalia, Hesse, Bavaria and Baden-Württemberg.
Fast Track Mechanism is in place by DPIIT and German Ministry of Economic Affairs and Energy (BMWi) to address issues/grievances of companies in India and Germany. The mechanism was announced in 2019 at the 5th IGC which started meeting since 2020. The last meeting was held in January 2021.
India and France economic cooperation
Both India and France have important bilateral investments, trade and commercial cooperation, particularly in sectors like IT corridors, smart cities, railways, capital and trade exchanges, skill development etc. France has emerged as a major source of FDI for India with more than 1,000 French establishments already present in India. France is the 11th largest foreign investor in India with a cumulative FDI stock of USD 9.83 billion from April 2000 to March 2021, which represents 2 % of the total FDI inflows into India. There are more than 150 Indian companies operating in France, employing more than7,000 persons.
France’s GDP is almost similar to that of India’s, but our bilateral trade remains far below potential, even though India has enjoyed a consistent trade surplus. In the period April 2020-March 2021, India-France bilateral trade stood at USD 7.86billion. India’s exports to France were valued at USD 5.6 billion, down by 22.9%. Meanwhile, French exports to India decreased by 20.95% during the same period to USD 5.1 billion. Trade with France constitutes only 1.41% of India’s total international trade. A Joint Economic Committee (JEC/JCM) exists at the level of Ministers of Commerce and Foreign Trade from both sides. A joint announcement was also signed for setting up of a FAST-TRACK system for French companies in India and Indian companies in France. The first meetings were held on 16 February 2022 and on 25 February 2022.
Almost all the major French companies are present in India including Renault, Saint Gobain, Veolia, Michelin, Capgemini, Sanofi, EDF, Airbus, Lactalis, Sodexho and others. India’s Reliance, Tata, Mahindra, L&T and other big companies have tied up joint cooperation with major French companies like Dassault, SAFRAN, Thales, Schneider Electric and others in the defence and electronics sector. French infrastructure companies are looking forward to major opportunities in Indian projects including smart cities and renewable energy. AFD, the French Agency for Development has extended a loan of Euro 100 million to the Government of India for its Smart Cities Mission. French side has been actively cooperating with various programmes especially in three Smart Cities- Chandigarh, Nagpur and Puducherry.
India-Denmark economic cooperation
Bilateral trade in goods and services between India and Denmark has grown by 78%, from USD 2.8 billion in 2016 to USD 5 billion in 2021. Indian exports reached USD 2 billion in 2021 as compared to USD 1.8 billion in 2020, while imports amounted to around USD 3 billion as against USD 1.8 billion in 2020.
The major export items from India to Denmark are textiles, apparels and yarns, vehicles and components, metal goods, iron and steel, footwear and travel goods. India imports majorly medicinal/pharmaceutical goods, power generating machinery, industrial machinery, metal waste and ore and organic chemicals. Bilateral trade in services between India and Denmark was USD 2.3 billion in 2020.
As per Department for Promotion of Industry and Internal Trade (DPIIT), the value of total direct investment inflows from Denmark to India during April 2000-March 2021 was USD 677.02 million.
Around 200 Danish companies have invested in India in sectors such as shipping, renewable energy, environment, agriculture, food processing and smart urban development. Several major Danish companies have built new manufacturing factories under the ‘Make in India’ scheme. Major Danish companies present in India include AP Moller Maersk Group,Vestas, LM Wind Power, Grundfos, Danfoss, Carlsberg, FL Smidth,Novo Nordisk, Haldar Topsoe, Ramboll, etc. The total value of Indian investments in Denmark, as of June 2021,was about USD 450 million. Around 25 Indian companies are present in Denmark in various sectors including IT, renewable energy and engineering. Indian IT companies present in Denmark include Tata Consultancy Services (TCS), L&T Infotech, Infosys Technologies, ITC Infotech, etc. They are providing multiple IT solutions, projects consultancy and outsourcing services for Danish services sector.
