A recent survey, the "German Indian Business Outlook 2024," conducted by KPMG Germany and the Indo-German Chamber of Commerce (AHK India), has revealed a growing interest among German companies in investing in India.
Nearly 59% of German firms surveyed expressed their intention to make new investments in India in 2024, highlighting the country's increasing appeal as an investment destination.
Optimism and Growth Expectations
The survey results indicate a wave of optimism among German businesses operating in India. A significant majority (78%) anticipate a rise in sales, while 55% expect increased profits for the current financial year, showing a 7% increase compared to the previous year.The positive sentiment extends into the longer term, with 82% predicting higher turnover and 74% forecasting increased profits over the next five years.
India's Attractiveness as an Investment Destination
Several factors contribute to India's growing appeal as an investment location for German companies. Low labor costs, political stability, and the availability of qualified specialists are cited as the top three reasons.These factors, combined with India's steady economic growth and a weakening Chinese economy, make it a competitive choice compared to other Asian countries.
Challenges and Expectations from the New Government
Despite the positive outlook, German companies continue to face challenges in India. Bureaucratic hurdles, corruption, and the tax system are identified as the primary obstacles.The survey also reveals the demands of German firms from the newly elected Indian government, with calls for an improved regulatory framework, increased legal certainty, better infrastructure, and greater trade facilitation.
India's Potential as a Production Hub
India's vast consumer base of over 1.44 billion people, coupled with its growing role as a global competence and shared service center, presents significant opportunities for German businesses.By 2029, 45% of German companies plan to use India for local market production, and 40% aim to capitalize on its vast sales market potential. Additionally, more than a third plan to establish competence or shared service centers in India within the next five years.
High Hopes and Lingering Concerns
The survey, conducted shortly before India's election results, reflects the high expectations of German companies from the new government.Two-thirds of respondents hope for simplified regulations, reduced corruption, and greater legal certainty. However, concerns about bureaucratic hurdles, corruption, rising import duties, non-tariff trade barriers, cyberattacks, and air pollution persist.
Looking Ahead
The "German Indian Business Outlook 2024" survey provides valuable insights into the growing interest of German companies in India and the challenges and opportunities they face.While India's potential as an investment destination is evident, addressing concerns related to bureaucracy, corruption, and infrastructure will be crucial to attracting and retaining foreign investment.
The newly elected government's response to these concerns will play a significant role in shaping the future of Indo-German economic relations.
