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Market for German companies
Trade with India as an alternative to China?
The EU and India have signed a trade agreement. Many companies have high hopes for this. A medium-sized company from Stuttgart has long experienced that doing business with the country pays off.
The German Chamber of Commerce and Industry (IHK) resorts to superlatives when it comes to the trade agreement between the European Union and India: The IHK describes the deal as the largest agreement in the world – and a “game changer” for the German economy. The agreement has now been signed.
The cable manufacturer Lapp from Stuttgart has been relying on India for almost 30 years – the country is a trading partner for the medium-sized company, but also as a production location. The first of three Lapp plants in India was inaugurated in Bangalore in 1998, the latest in Dharuhera last year. Cables are manufactured there, but also accessories for the renewable energy and rail transport sectors – especially for the Indian market.
Strategy pays off
While many companies in Germany and the EU have focused on China in recent decades, Lapp chose India. A strategy that is paying off for the company: after Germany, India is the largest market for the Lapp Group.
And yet Lapp also hopes that the trade agreement will open up further potential in the Indian market. Company boss Matthias Lapp sees the trade agreement as a “historic step” – especially for Germany. According to Lapp, India and the EU already have a large trade volume and the trend is increasing. Germany has “by far the largest share” in this.
Lapp hopes for “new dynamics among customers”
According to the company boss, Lapp is pursuing the “local for local” strategy; So it produces in India mainly for the Indian market. “But of course we also benefit from the removal of trade barriers,” explains Lapp – for example because the company’s special cables are exported to India from other EU countries.
According to Lapp, the geopolitical developments of the past twelve months are a catalyst for more intensive trade relations with India. Lapp explains: “The geopolitical developments of the last twelve months have certainly been a clear incentive for India and the EU to deepen their economic partnership and become more independent of external market distortions.” The trade agreement creates a stable, reliable economic area that is open to both sides. This offers strategic planning security, says Lapp. “Sectors such as technology, pharmaceuticals, textiles, automobiles and electrical machinery benefit immediately.”
The main beneficiaries are German medium-sized companies
Jan Nöther, director of the German-Indian Chamber of Commerce, also praised the agreement. He assumes that it will significantly facilitate market access for German products and services to the Indian market. According to Nöther, the main beneficiaries are exporting German medium-sized companies – especially those that offer “high-quality German technology solutions”. “In addition, improved investment conditions will lead to greater commitment from German industry locally,” explains Nöther.
According to Nöther, the agreement could also make a difference when it comes to the issue of skilled workers shortages and skilled workers from abroad. He believes the agreement could make it easier for Indian skilled workers to migrate to Germany. Specifically, framework agreements for digital solutions could be used, for example, for the recognition of educational qualifications and the issuing of visas. Sectors with a shortage of skilled workers such as IT, engineering and healthcare would particularly benefit from this.
Huge growth market
Eike Wenzel also sees advantages. He is a futurologist and innovation economist at the Institute for Trend and Future Research (ITZ) in Heidelberg. He looks at how markets and lifestyles change and derives forecasts and so-called megatrends from them. Wenzel explains: “The EU-India deal is so important because it opens up a huge growth market of around 1.4 billion people, reduces dependence on China, diversifies supply chains, strengthens European industry and consolidates geopolitical partnerships in a multipolar world.”
China sometimes serves as a blueprint. India, on the other hand, is a promising partner for exports and technology transfer, especially for future-oriented sectors in Germany such as mechanical engineering or energy. The Indian government is also doing a lot to achieve this, said Wenzel. “It strongly promotes the energy sector, makes India an attractive investment market and aims for largely energy self-sufficiency by 2040.” Amid geopolitical turmoil, India has understood that energy issues are questions of its own sovereignty and geostrategic security, Wenzel continued.
India still needs to work on infrastructure
Wenzel sees weak points primarily in the Indian infrastructure – from the power grids to a resilient hospital infrastructure. “Nowhere is electricity more expensive for companies than in India. This is due to the electricity that Indian energy suppliers have so far passed on to farmers at cost price.”
This is where India needs to start, said Wenzel. According to the futurologist, India will need as much electricity as the EU by 2030. And it also needs to be clarified whether the largest democracy in the world remains a democracy. India gets around a third of its oil from Russia.
Planning security as a critical point
And Nöther also believes that not all trade barriers have been removed even after the agreement has been signed. “Despite a free trade agreement, India will continue to protect certain job-intensive, traditional sectors such as agriculture, steel construction and automobiles.” According to Nöther, this means that high bureaucratic requirements, non-tariff trade barriers and complex certification procedures remain in place.
Regardless, Indian regulatory practice is considered complex, for example in terms of administrative effort. According to Nöther, it also happens that regulations are issued with short lead times. This makes planning security more difficult. So: an improvement for trade with India – but still room for improvement.
