India will become the official partner country of Germany's giant Hanover trade fair, providing a platform for increasingly confident Indian firms to size up the German market.
The Hanover fair revolves around industrial technology
Trade fairs in Germany are usually all about business. But attendees can expect a heavy dose of pleasure when India becomes the official partner country of the Hanover Industrial Fair on April 24 after a gap of 21 years.
India is cashing in on the popularity of its fashion and food scene
This time, in addition to sending the usual big-business delegations, India's marketing gurus are rolling out a lavish blitz to woo the hosts at the opening ceremony on April 23. A bevy of models will flaunt designer Indian silks, a team of star chefs is set to ensure the best in Indian curries, and a dance troupe will round out the colorful events aiming to reflect India’s current upbeat mood.
“This year India has been very active in promoting its brand and image internationally and Hanover is one of the highlights. People need to see the new India," said Nandan Nilekani, head of Indian IT giant Infosys. Nilekani fronted a similar charm offensive at the World Economic Forum in Davos earlier this year.
The hoopla is likely to add color to a normally staid German business event, but it won’t deflect attention from the real issue at Hanover: how to expand existing trade and business links between Delhi and Berlin. To date those ties are doing well, but they could be better, participants say.
It’s a familiar theme and one that is faithfully repeated at each Indo-German business meeting. In Hanover, a 300-strong delegation led by Indian Prime Minister Manmohan Singh will discuss it for the first time with the new Chancellor Angela Merkel.
Ever since India took the road to economic liberalization in 1991, Germany has taken a keen interest in the country’s progress, using fairs and business events to seal deals and translate it into actual investments, particularly in the field of heavy machinery and chemicals.
Bilateral trade has enjoyed a steady upturn over the past years, growing to a record 6.2 billion euros ($7.6 billion) in 2004 -- an increase of 22.5 percent from the previous year. The upward trend has continued in 2005.
This year, small- and midsize firms will be in the spotlight, according to Kamal nath, India's Minister for Trade and Commerce.
"We are encouraging our small-scale enterprises to visit the Hanover fair so that they can upgrade their technology because I believe that in Germany a lot of technology and innovation is in the hands of midsized firms," Nath told journalists in Delhi last week.
Indian Prime Minister Manmohan Singh (center) with Kamal Nath (right)
In addition to machinery and chemicals, Germany has gained a foothold in several other sectors of India’s fast growing economy. Engineering giant Siemens, IT major SAP, Deutsche Bank, Mercedes and logistics heavyweight DHL are all well known brands in India today.
German logistics giant DHL dominates the Indian market
India and Germany also share cultural contacts, dating back to an exchange of linguistic scholars, philosophers and Hinduism researchers over four centuries. This means Germans are popular in India, said Bernhard Steinrücke, head of the Indo-German Chamber of Commerce in Mumbai (IGCC).
“India is the only country in the world where the Goethe Institut, Germany’s official language and culture institution, is called Max Müller Bhavan (named after a renowned Indologist),” said Steinrücke. He added that the IGCC has its hands full with the arrival of a new German company in India almost every week.
The bad news
Despite all the positives, however, experts point out that given India’s economic attractions -- growth rates of around 7 percent, booming stock market, and a growing middle class estimated at 350 million people -- Germany has proved too slow to make a major entry into the Indian market.
According to the IGCC, Germany’s annual trade with India is still only as big as its trade volume with Luxembourg or Belgium in a single month, amounting to a mere 0.47 percent of Germany’s total trade. India thus ranks a lowly 34 on the list of Germany’s trading partners. A study by Deutsche Bank points out that German direct investment in India between 1985 and 2004 was a mere $1.5 billion, less than what Germany had invested in the same period in South Korea and Singapore.
Seeking German investment in energy
Montek Singh Ahluwalia, deputy head of the Indian State Planning Commission and a close advisor to Prime Minister Singh, said the key is to lure mid-sized German firms to India.
"It’s a matter of regret that we haven’t been able to build interests and bridges there as much we should have done,” Ahluwalia told journalists recently. “I hope more of that will happen after the prime minister’s visit to Hanover.”
Germany's Fraport has already won a bid to modernize the Delhi airport
When asked why they are hesitant to invest in India, German companies often cite reasons like shoddy infrastructure, excessive red tape, and power shortages. So at Hanover, India plans to bang the drum for German investment in exactly those problem areas: infrastructure and energy.
The latter is set to be a major issue, with talk of an Indo-German energy dialogue as India looks to deregulate electricity generation and distribution in order to meet growing demand.
India investing in Germany ?
Finally, the Hanover fair won’t just be a question of what the Germans can do for India, but also the other way round. An increasing number of Indian firms -- auto-component exporter Bharat Forge, conglomerate Reliance and pharmaceutical company Dr Reddy's among others -- have been buying up operations in Germany in recent years and are eyeing further acquisitions.
“Indian firms are increasingly flexing their muscle and going out and facing the world market,” said Steinrücke. “Hopefully, they’ll invest more in Germany after Hanover.”