India-Germany Relations in Post-Merkel Era – Explained, pointwise

Introduction

Recently, Olaf Scholz has been sworn in as chancellor of Germany, ending the 16-year tenure of Angela Merkel. For the past 40 years, just three individuals have occupied the chancellery. So, the new ruling coalition in Germany offers scope for enhancing India-Germany relations.

Germany is a significant contributor to manufacturing FDI within India. So the new chancellor’s actions in trade, green finance, and supply chains will have a direct impact on investment and growth in India.

About India-Germany relations

Bilateral Trade: Germany is India’s largest trade partner within Europe. Indian exports to Germany focus on the textile sector, followed by chemical products, electrical engineering products, metal and leather goods and foodstuffs. Similarly, German goods, especially capital goods (machinery, metal goods, electrical engineering products, chemical products, motor vehicles and vehicle parts) are in great demand in India. According to the Ministry of External Affairs, the bilateral trade in India and Germany was ~21 billion Euros in 2019.

Investments: For decades, Germany has been among the ten principal foreign direct investors in India. Investments have focused on the transport, electrical and metal sectors, service sectors. According to the Ministry of External Affairs, FDI from Germany between 2000-2019 was ~USD 12 billion. More than 1700 German companies are active in India, providing around 400,000 direct and indirect jobs. Out of these, about 1000 are 100% subsidiaries and balance are liaison offices, joint ventures and agencies. Indian investments in Germany have remarkably increased over the last few years. Indian corporate entities have invested over EUR 6.5 billion in Germany, especially in sectors of IT, automotive, pharma and biotech. There are more than 200 Indian companies operating in Germany.

Parliamentary Exchanges: There is an Indo-German Parliamentary Friendship Group, in the German Bundestag since 1971. Visit by Parliamentarians from both sides take place regularly.

Sister States arrangement: Some States and Cities of India and Germany have entered into twinning arrangements. For example, Mumbai and Stuttgart are sister cities since 1968. Karnataka and Bavaria, Maharashtra and Baden-Wurttemberg have Sister State arrangements.

Defence Cooperation: India-Germany Defence Cooperation Agreement (2006) provides a framework for bilateral defence cooperation. Further, India and Germany have shown their firm commitment to fighting against terrorism. For instance, Germany supports India led movement for the adoption of Comprehensive Convention on International Terrorism.

Science & Technology: Indo-German Science & Technology cooperation started with the signing of the Intergovernmental S&T Cooperation Agreement in 1971 and 1974. There are more than 150 joint S&T research projects and 70 direct partnerships between Universities of both countries.

Culture and diaspora: There has been growing interest in Germany in Indian dance, music and literature, as well as the motion picture and TV industry. There are about 1.7 lakh Indians and people of Indian origin in Germany.

G4 Grouping: India and Germany are members of the G-4 group, along with Brazil and Japan. The G4 nations support each other’s bids for permanent seats on the United Nations Security Council.

What are the policies adopted during Angela Merkel’s term in Germany?

1. Admitted Syrian refugees to the country, 2. Demonstrate strong and sustained growth in the economy when other countries are struggling with their economic models (Except China), 3. Not declared China as a systemic rival, like France, as their middle-sized enterprises rely on supply chains that are centred in China, 4. Phased-out nuclear power in Germany, which results in various challenges like (a) Germany became the largest emitter of Carbon in Europe, (b) The country has the highest electricity prices in Europe, (c) Impacted Germany’s foreign policy: German economy needs Russian natural gas. So, they are not condemning Russian actions against Ukraine.

What is the importance of India in the India-Germany Relations?

First, Germany views India as an important partner for resolving global issues, including climate change, food security, energy, and international peace and security. Germany has gradually expanded the areas of cooperation in context of India-Germany Relations.

Second, Germany is also keen to implement connectivity projects, through the European Union, to counter China. So, in this backdrop  EU-India connectivity partnership holds importance. The coalition sees the conclusion of an India-EU BTIA as an important aspect to develop relations.

Third, Germany views India as a pillar of Asian stability and a country that shares European political values such as Equality, Liberty, Fraternity and Democratic values.

Fourth, In the mid of the great power rivalry between the US, China and Russia, Germany is looking to diversify its global partnerships beyond the Euro-Atlantic space and seeks to bring India into its larger geopolitical landscape. For instance, within the German Indo-Pacific (IP) guidelines, India is mentioned for enhancement of engagement and fulfilment of objectives.

How to strengthen India-Germany relations?

Both countries are already engaged in green energy like solar power, transportation, smart cities, metros and the Namami Gange. Apart from that, the following measures should be adopted:

First, The Merkel initiative of establishing inter-government consultations should continue.

Second, India is interested in the development of education and skill development policies, in which Germany can help India. Similarly, Germany is looking for skilled manpower from abroad and India should take advantage of it.

Third, Both countries should realize the cooperative goals of the IP guidelines, which should also involve businesses. German companies should be encouraged to use the liberalized PLI scheme to establish manufacturing hubs in India.

Fourth, Both should also initiate an Africa vaccine production facility together. Germany already committed to giving a 250mn Euro loan to Africa for this. If implemented with India, as in the Quad initiative, such a facility can be established in the underserved East African region.

Fifth, Germany, despite being among the countries with the least sunshine hours in the world, is one of the largest solar power producers across the globe. So, India should force Germany to play an active role in International Solar Alliance.

In multipolar world order, the convergence of India and Germany will be a win-win situation for India-Germany relations. Post-Brexit, Germany became the more important player in European Union, so collaboration with Germany will ultimately lead to a collaboration with the EU as a whole.

Source: The Hindu, The Hindu