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Boosting India’s domestic manufacturing push should not lead to a situation where foreign investors feel marginalised, Germany’s ambassador to India, Philipp Ackermann, said at a press conference organised at the German embassy on Tuesday. Alongside highlighting the need for more infrastructure and skilled labour, Ambassador Ackermann also flagged the risk of protectionism in attracting foreign investments into India from countries like Germany. He said, “We understand the Indian government’s wish and desire to promote more manufacturing but it should not lead to a situation where foreign investment and investors get marginalised.”
Ackermann also noted that concluding the free trade agreement (FTA) negotiations between India and the European Union by year-end seemed “ambitious”. “There’s a fair chance that that’s not going to happen. My hope is to do it as quickly as possible. We are very much in favour of a free trade agreement and we are pushing hard but there is still a long way to go,” he added.
Ackermann was joined by Karl Haeusgen, president of VDMA, the largest association of Germany’s machinery and equipment manufacturing industry. Currently, around 600 German companies associated with VDMA have subsidiaries present in India, out of which around 170 have production and/or assembly operations. Haeusgen underscored the importance of building more infrastructure and producing high-skilled labour for manufacturing processes when asked about lessons for India from China’s growth story.
Emphasising on the need for German businesses to diversify from China, Haeusgen criticised China’s industrial policy. “A major risk with China’s industrial policy is that it wants to nationalise specific industries. While it does not mean that there are restrictions in China, it does mean that foreign players’ market share continuously shrinks to the advantage of national players,” he explained.
“When you look at the current status of the car industry, we have to talk about how important open markets are. China is not an open market. Mitsubishi and Hyundai are pulling out of China. Stellantis has already pulled out. If you want to do business in China, there are so many different hurdles to take care of that companies are pulling out. I believe this is a huge chance for India, for its economy and society, to play a much more important role in establishing an open market,” Haeusgen added.
Haeusgen also highlighted the need to improve infrastructure and quality of education in India for it to be an attractive investment destination for companies seeking to diversify out of China. “In China, SEZs were established not in tens but hundreds. Infrastructure like roads, railways, and energy supply was also built in the process. Infrastructure is key,” he said.
“One of the problems German companies face in India is the level of education. You’ll easily find top qualified people when it comes to R&D or IT. But at the manufacturing level, it is not easy to find labourers with the relevant technical knowledge. This gap between highly qualified labour and unqualified labour needs to be addressed,” Haeusgen added. He also said that VDMA is collaborating with German subsidiaries in India to train people with technical skills required in manufacturing.
Germany features in the top ten countries pumping foreign direct investments (FDI) into India. In the last three fiscal years, Germany invested close to $2 billion and from FY 1999-2000 to FY 2022-23 it invested over $14 billion. In 2022, German mechanical engineering companies exported goods worth almost 4 billion euros to India, up by 28 per cent from the previous year. India also exported mechanical engineering goods worth 1.4 billion euros to Germany, registering a 37 per cent increase.
