Collaboration Fosters Innovation: Can we Witness Indo-German Ties Reaching the Next Level ?

India’s evolving investment climate

In recent years, India’s economic development has shone brightly on the international stage, particularly as the country leverages its large population and potential consumer market. Many companies have chosen India as their first option for expanding overseas. Thanks to its inherent advantages, India has also attracted a significant amount of foreign investment, and its investment climate has significantly improved in recent years.?

Since opening its economy in 1991, the country has gradually relaxed foreign direct investment (FDI) regulations, transforming itself into a major global investment hub. The World Bank’s Ease of Doing Business Ranking shows that India has improved its standing, rising from 130th in 2015 to 63rd in the 2020 report.

FDI inflows reached $45.14 billion in 2014–15 and have steadily risen since then. By FY2016–2017, this figure had climbed to $60.22 billion, peaking at an all-time high of $83.57 billion in FY 2021–22. However, challenges remain. An UNCTAD report noted that uncertain global growth, geopolitical tensions, economic fragmentation, strict industrial policies, and the ongoing diversification of supply chains had contributed to a significant drop in FDI last year. In 2023, inflows fell to $28.1 billion, down sharply from $49.3 billion in 2022 and causing India to slip seven places to fifteenth in world investment rankings.

Despite these challenges, India continues to attract international investors, offering promising short- and long-term prospects. Over the past decade (April 2014 to June 2024), the country received a total of $725.96 billion in FDI from more than 170 countries, spread across 33 Indian states and union territories and 63 industrial sectors. A recent survey also revealed that nearly 60% of German companies in India plan to increase their investments this financial year.

India’s new role on the global stage

During the Asia Pacific Conference of German Industry (APK) in New Delhi that closed last Saturday, India’s new role on the global stage and in the current geopolitical environment was the underlying context for many discussions, whether about innovation, de-risking, or new balances. Just before returning to meet with Chancellor Scholz, Prime Minister Narendra Modi was in Kazan, Russia, where he attended the 16th BRICS Summit. While there are varying interpretations of the significance of BRICS, for New Delhi, BRICS provides significant leverage for promoting India’s global leadership aspirations, as well as strategic autonomy and multipolar vision both in the West and the Global South, USIP, a U.S. thinktank, writes. The APK also underlined that the important open negotiations between the EU and India cannot wait much longer for a successful conclusion or else they may soon become redundant because other countries and economic regions will have closed the gap, potentially leaving Europe behind. For example, the EU–India Free Trade Agreement has been under negotiation for more than 20 years and may be outdated by the time it is agreed upon.

From Indo-German cooperation to active participation in BRICS, India has been striving to play a more significant role on the international stage

Apart from economic development, India is also actively pursuing international cooperation. The diplomatic relationship between modern India and Germany dates back to 1951, when India was one of the first countries to recognize the Federal Republic of Germany. Since then, the two nations have developed a comprehensive and multifaceted alliance.

In 2022–23, bilateral trade between India and Germany grew by 4.9%, reaching $26 billion. Germany is India’s largest trading partner within the European Union, having invested over $14.6 billion in the Indian economy between April 2000 and March 2024. With more than 1,700 German companies operating in India and over 200 Indian firms in Germany, the economic ties are further strengthened by significant cultural and academic exchanges. There is a distinct imbalance to the movement of people and money here – German firms invest in India while Indian workers migrate to Germany. Over time this may change, as Indian companies globalize more and will invest mor abroad while recruiting more global talent into India.?

The Asia-Pacific Conference of German Business (APK) serves as a key platform for discussing current economic developments in Europe and the Asia-Pacific region, particularly between India and Germany. This year, the conference coincided with consultations between the Indian and German governments, with the participation of Prime Minister Modi and Chancellor Scholz underscoring the importance that both countries place on enhancing economic cooperation.

Can the migration of expert talent scale?

At the APK, PM Modi and Chancellor Scholz both spoke about the opportunities for increasing expert migration from India to Germany. Currently, about 137,000 Indians work in Germany in jobs in which they pay taxes and are included in social insurance. Could this be increased and significantly scaled? The German government just issued a new strategy to recruit more experts from abroad. Step one would be digital visa processing for applicants for expert visas, reducing the initial immigration hurdles. According to Table Media, in 2023, around 9,500 visas were issued in India for experts who want to work in Germany—a number that certainly has room to increase. A second step would be to create platforms for such immigrants to find jobs much more easily than in the past, such as by matching the demand from mid-sized machine-building companies that need electrical engineers or connecting IT personnel with hospitals and nursing homes.?

I also discussed points regarding lowering bureaucratic hurdles with German Federal Minister for Labor and Social Affairs Hubertus Heil, and we spoke about how Germany could retain more of the nearly 50,000 students from India now studying in Germany (an increase of 15.1% this winter semester) by helping them understand the German job market and learn German and by better matching demand with supply.

However, strategies alone won’t make a difference; they need to be supported and implemented by authorities, academia, and companies, although they are certainly a step forward. No amount of strategies, plans, schemes, and investment is going to make a difference until front-line government workers are given the support and time they need to be helpful to newcomers and hiring managers are convinced that employing someone with only "B2 Level German" might be better than leaving a post open. There is also an overall perception change required in German society about immigration – so a very rational view on immigration policy. Many foreigners living and working in Germany tell me they are sometimes perceived as part of a “too many immigrants” problem, leading to some degree of hostility. Addressing that perception, including any realities that are fueling it, would be another important step to convincing Germans and thus Germany to be more welcoming.

What companies are asking for

In a C-level roundtable with German Federal Minister Habeck, the focus was on how innovation can shape the relationships between the two countries. We discussed what works well (like R&D and production) and where there is room for improvement (like the development of complete complex systems that was mentioned by some companies). Unsurprisingly, across many of conference workshops and panels, the companies expressed their wish for fewer local regulations around data transfer, localization of data, AI safety and more transparency on the multilateral agreements, and there were calls to ease people-to-people collaboration including ease of business visa and travel. The participants of the innovation sessions argued about whether new technologies could help globalization or whether techs like AI and LLMs would instead create more hurdles for cooperation because of heavy regulations and the relevance of such technologies to national security.?

Forging a sustainable future

This APK experience has made me realize the importance of open communication. Even though advanced technology allows us to conduct phone or video conferences almost anytime and anywhere, they can’t compare to the impact of face-to-face intellectual exchanges. A lot progress took place on the fringes of the conference ?– the chats over coffee and the brainstorming in the hallways. I am also happy to see numerous development priorities and common goals shared between India and Germany. Built on economic cooperation, cultural exchange, and a commitment to sustainability, this alliance positions both nations as leaders in tackling global challenges. With Germany’s technological expertise and India’s market potential, they are set to advance key areas like renewable energy, digitalization, and infrastructure.

Looking ahead, India and Germany are enhancing bilateral ties and demonstrating how countries can collaborate to create a more resilient and sustainable world. Many young startups that were at the conference and part of the first APK Startup Pitch showed precisely that: innovative solutions, primarily based on AI, for a more sustainable, secure, and safer world. Minister Habeck mentioned in his closing speech at the APK that these young people, who came from eight different Asian countries, gave him a lot of hope for the future. I agree. As the partnership between Germany and India deepens, the two countries are paving the way for a brighter future that benefits both their citizens and the entire global community.

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