32

Indo-German Report

Coming Full Circle

India's business ties with Germany go back almost five centuries.That was in the 16th century when German merchants establishedtrade links. Later, products of German technology, from Mercedescars to Siemens consumer wares dazzled Indian consumers. In thelast two years, Indian companies have begun investing in Germany.Abhijit Joshi reports on the changing equations

In Germany, Indian business came ofage some time ago. More specifically,it was in November 2003 when India’slargest exporter of auto components,

Bharat Forge, bought out the German forg-ing major Carl Dan Peddinghaus. With thatacquisition, the Indian company becamethe world’s second largest forging major. Ayear later, Bharat Forge bought out anoth-er associate company CDPAlumiumtechnik for Euro 6.3 million. Andrecently in February, Dr Reddy'sLaboratories acquired Betapharm, thefourth-largest generic pharmaceuticalscompany in Germany.

Traditionally, it has been the bigGerman firms which have invested in Indiathat have been a source of technology incollaborations with Indian firms. More than$1.65 billion (or Euro 1.4 billion) has beeninvested by major German companies inIndia. This includes German industrial lead-ers like Siemens, Daimler-Chrysler, Bayer,BASF and Robert Bosch, among others.

And, nearly 1,600 Indo-German collab-oration agreements and over six hundredjoint ventures are in operation today. Thehighest number of collaborations are formachinery and parts followed by heavyvehicles, chemicals and technical consul-tancy services.

Since India is a rapidly growing market,ACQUIRING GERMANY’S BETAPHARM: Dr Anji Reddy of Dr Reddy’s Laboratories

indo german report 090306.qxp 28/306 10:33 AM Page 32

33

German firms in India have seen double-digit sales and profit growth in recentyears. That is more than what they arerecording elsewhere. A Deutsche Bankreport 'German FDI to India: UntappedPotential' brings out an unusual fact: thatIndian subsidiaries of German companiesregularly outperform their German parents.

Because of the opportunities, existingGerman companies in India have rampedup their operations. Mico, the flagshipcompany of the Bosch group in India, lastyear announced that it will be investing$125 million over the next three years onCommon Rail Diesel Injection systems atits Nasik plant in Maharashtra.

Siemens is further augmenting its man-ufacturing capacities, to cater to the grow-ing domestic demand and exports. It hasrecently announced the setting up of a newtransformer factory at Kalwa, nearMumbai. Dr Klaus Kleinfeld, president andCEO of Siemens AG said during a recentvisit, “India is amongst the fastest growingeconomies in the world, with a large mid-dle class population and favourable demo-graphics, which in itself is a huge demanddriver. Moreover, its highly skilled talent

pool will further drive India's economy onthe technology front.”

Siemens first came to India in 1867 butonly started manufacturing 90 years later.It now has annual revenues of $1.23 bil-lion and employs over 12,000 people.Kleinfeld's visit was a signal that Siemens’Indian subsidiary will play a larger role as apartner in its global operations.

The Indian IT story is inevitably attract-

ing German companies like DaimlerChrysler and Siemens who are setting upresearch centres at Bangalore. Automobilegiant DaimlerChrysler has set up aResearch & Technology Centre atBangalore. Some of the research at thiscentre will find its way into cars made intheir plants globally.

Daimler, which first came into Indiathrough a joint venture with the Tatas, oneof India's largest industrial houses, hasinvested about $140 million in the countryso far and has a car assembly plant nearPune. At present, it sells just about 2000of its high-value Mercedes sedans annual-ly, but sales have been growing at an aver-age rate of 16 per cent.

The Indian connection with Germany isan old and enduring one. Trade dates backnearly five centuries when German mer-chants first set up shop in India during the16th century. German philosophers likeSchopenhauer and poets like Goethe havebeen deeply influenced by Indian culture.One of the foremost European scholars tostudy Sanskrit and Indian philosophy wasMax Mueller. It was Siemens that first builtthe telegraphic link between Calcutta and

DRAWING GERMAN INVESTMENT: Dr Klaus Kleinfeld, president and CEO, Siemens AG, (left) in Mumbai with J Schubert, MD, Siemens India

India’s huge market and its

pool of high-skilled

workers appear tobe the perfect fit

for German companies.

indo german report 090306.qxp 28/306 10:33 AM Page 33

34

INDO-GERMAN REPORT

THE THREE-POINTED STAR SHINES BRIGHTLY IN INDIA: Mercedes sedans roll off the DaimlerChrysler plant near Pune

2000-2001 2001-2002 2002-2003 2003-2004 2004-2005

EXPORTS TO GERMANY 1,907.57 1,788.36 2,106.68 2,544.57 2,674.70 %Growth -6.25 17.80 20.79 5.11 India's Total Export 44,560.29 43,826.73 52,719.43 63,842.97 80,540.19 %Growth -1.65 20.29 21.10 26.15 %Share 4.28 4.08 4.00 3.99 3.32

IMPORTS FROM GERMANY 1,759.59 2,028.10 2,404.53 2,918.58 3,891.68 %Growth 15.26 18.56 21.38 33.34 India's Total Import 50,536.46 51,413.29 61,412.13 78,149.61 109,173.23 %Growth 1.74 19.45 27.25 39.70 %Share 3.48 3.94 3.92 3.73 3.56

TOTAL TRADE 3,667.15 3,816.45 4,511.21 5,463.14 6,566.38 %Growth 4.07 18.20 21.10 20.19 India's Total Trade 95,096.75 95,240.01 114,131.56 141,992.58 189,713.42 %Growth 0.15 19.84 24.41 33.61 %Share 3.86 4.01 3.95 3.85 3.46

TRADE BALANCE 147.98 India's Trade Balance -5,976.16 -7,586.56 -8,692.70 -14,306.65 -28,633.04 Exchange rate: (1US$ = Rs.) 45.6844 47.6919 48.3953 45.9513 44.9315

Indo-German Trade

Source: Dept. of Commerce, Govt. of India

Values in $million

indo german report 090306.qxp 28/306 10:33 AM Page 34

35

London in the 19th century.In the last 20 years, trade between the

two countries has grown many times.Bilateral trade between Germany and Indiagrew 25 per cent to cross $7.2 billion in2004.

“Trade is expected to touch Euro 10 bil-lion in the next two to three years,” saysBernhard Steinruecke, director general ofthe Indo-German Chamber of Commerce(IGCC). But while Germany is India's fourthlargest trading partner, India is a distant35th trading partner for Germany, andbilateral trade between Germany and Indiaaccounts for less than half a per cent ofGermany's total trade.

The major import from Germany is stillmachinery which accounted for 32 percent of Indian imports from Germany in2004. Other imports from Germany includ-ed traditional imports of electronic goods,metal products, chemicals and plastic and

THE HANNOVER FAIR

GERMANY is a global champion in hostingtrade fairs. Fairs of international impor-tance are held for several major industries,printing, photography, automobiles, booksetc. Of these, the Hannover Fair, alsoknown as the Hannover Messe, is thelargest and most important meetingground for businesses around the world.Over 200,000 visitors from all over theworld are expected to visit the 6,000stalls this year.

The first Hannover Fair was organised in1947 by the British military government in

order to test Germany's post-war econom-ic advancement. The event went global in1950, with US participation.

This year, Hannover Messe 2006 willtake place from April 24 to 28, 2006.India has been invited as the PartnerCountry for Hannover Technology Fair2006. This privileged invitation comesafter a gap of 21 years and is a testimonyto the collective global recognition ofIndian manufacturing and growing eco-nomic significance in the world.

The display categories this year are

process automation, factory automation,industrial building automation, energy,pipeline technology, subcontracting, digi-tal factory, industrial facility managementand services, micro technology and mar-ket research and technology.

As Partner Country, India has issued aspecial logo for the event. Besides show-casing India's innovative drive and poten-tial in technology, Indian participation isexpected to be maximum in the Energy,Research and Development, Subcontrac-ting and automation sectors too.

A GLOBAL FORGING MAJOR WITH GERMAN ACQUISITION: Bharat Forge CMD Baba Kalyani

indo german report 090306.qxp 28/306 10:33 AM Page 35

36

INDO-GERMAN REPORT

rubber. Other high precision equipment likeoptical & measuring equipment, aircraft,medical equipment, automotive and com-ponents and pharmaceuticals make up thetrade basket.

Textiles are a major export accountingfor 28 per cent of the total exports toGermany in 2004. Leather goods, food,chemicals, electro products, metal prod-ucts, pharmaceuticals, machinery, auto-motive & components, gems & jewelleryand plastic & rubber comprise India'sother major exports.

The interest in India is gaining a largerfollowing among German industry. Smalland medium German companies are nowshowing interest in collaborations withIndian companies. Last February, about70 small and medium-sized German com-panies visited India to explore the poten-tial. Their interest matches the enthusi-asm of other foreign investors in India,many of whom are planning to expandtheir local operations further, mainly inthe service sector.

Indian companies too are now showingan interest in investing in Germany. Theacquisition of Betapharm by Dr Reddy's

was prompted by Germany being the sec-ond largest generics market in the world,and by far the largest in Europe.

“We see our investment in Betapharmas a strategic initiative towards becominga mid-sized global pharmaceutial companywith a strong presence in all key pharma-ceutical markets. Betapharm has createda strong growth platform.... and we arelooking forward to partner them in build-

ing a strategic presence in Europe,” saidDr Anji Reddy, chairman, Dr Reddy’sLaboratories.

Dr Reddy's is not the only Indian com-pany investing in Germany, often seen asa gateway to European markets. The $1.5billion Kalyani group has three plants inGermany and is planning to expand fur-ther. "Germany's strengths in precisionengineering when combined with India'sskills in manufacturing and informationtechnology would make us a winningcombination," says Baba Kalyani, chair-man of Bharat Forge, the flagship compa-ny of the Kalyani group. New economycompanies like TCS, Infosys, Wipro,Hexaware are also actively present inGermany.

Thanks to the growing economy andthe huge market, India will continue to beattractive to investments from globalmajors. After all, India's large and grow-ing market, its pool of high-skilled work-ers and the potential it offers foreign firmsfor cost reduction appear to be the almostperfect fit for German companies thathave a track record for technical expertiseand efficient business execution.

IT'S PARTY time at the Indo-GermanChamber of Commerce (IGCC) whichis celebrating its golden jubileeanniversary this year.

When IGCC was first establishedin 1956, it had less than 500 mem-bers. Currently, the Chamber hasthe distinction of being the largestGerman Chamber of Commerceabroad with more than 6500 mem-bers.

The IGCC is one of the mostimportant institutions that promotesIndo-German trade relations.Bernhard Steinruecke, Director-General of Indo-German Chamber ofCommerce, Mumbai, is optimisticabout the future of Indo-Germantrade. "India has a lot going for her.Apart from the language — mostpeople speak English, a well estab-lished legal system, banking system,a vibrant stock market and a freepress. Also the business opportuni-ties in India are huge.”

The Chamber conducts studies

and market surveys to track the per-formance of the Indo-German jointventures. Besides, it has developed abenchmark, the IGCC -15 index thattracks the stock market performanceof select companies.

IGCC has its head office inMumbai and branch offices in NewDelhi, Chennai, Kolkata, Bangaloreand Düsseldorf, besides a liaisonoffice in Hyderabad and Berlin.

The Chamber has been looking toexpand its network further by havinghonorary representatives of thechamber in tier-II cities in India likeKochi, Hyderabad, Coimbatore, andAhmedabad.

The IGCC has taken the lead insetting up the Indo-German TrainingCentre (IGTC), that conducts Post-Graduation in BusinessAdministration Program based on theGerman Dual System. The course sofar has had 100 per cent placementsince its inception in 1991.

INDO-GERMAN CHAMBER OF COMMERCE: A TIME FOR CELEBRATION

IN CELEBRATION MODE: IGCC’s Bernhard Steinruecke

The interest inIndia is growing inGerman industry.Small and mediumGerman companiesare now collaborat-

ing with Indiancompanies.

indo german report 090306.qxp 28/306 10:33 AM Page 36