contributor perspectives

India and Germany: A Partnership to Be Reckoned With

Christoph Senft
Board of Contributors
8 MINS READSep 22, 2017 | 09:30 GMT
German Chancellor Angela Merkel (L) and Indian Prime Minister Narendra Modi shake hands after a conference in Berlin.

German Chancellor Angela Merkel (L) and Indian Prime Minister Narendra Modi shake hands after a conference in Berlin. The flourishing partnership between the two leaders' countries will doubtless pay off for both in the long run.


Earlier this year, the leaders of Germany and India announced that they had taken their countries' relationship "to a new level." And to be sure, over the past few decades collaboration between the two has deepened on many different fronts. But Germany's interest in India isn't merely a byproduct of the Asian century, as the 21st century is now so frequently called. Rather, it has been building gradually over time, laying a sturdy foundation for the partnership that both countries are beginning to take more and more seriously.

The Trade Ties That Bind

For the most part, Indo-German relations have centered on trade and development since World War II. In 1956, the two states created the Indo-German Chamber of Commerce (IGCC), marking an important step in solidifying the links between their economies. Boasting several offices across India, the IGCC now offers a range of services including counseling on investments and market entries, courses on industrial training and the recognition of professional degrees and qualifications. It is also the largest German chamber of commerce in the world, spurring deeper cooperation between India and Germany ever forward.

A few decades after the IGCC's founding, the partners became even more closely intertwined with the establishment of the Indo-German Economic Commission in the 1980s. Created in part to lend support to Indian economic reforms, the new commission came not a moment too soon: The Soviet Union, then India's primary ally, collapsed in 1991, opening the door to the liberalization of the Indian economy. In light of these events, it is hardly surprising that Indian Prime Minister P.V. Narasimha Rao chose Germany for his first trip abroad that year in order to promote his nation's value as a trade partner and destination for foreign investment.

Despite his efforts, Germany was more interested in focusing its attention on China and its Southeast Asian neighbors, which had opened up their economies more quickly than India and were thus better integrated into the global market. That is, at least, until a financial crisis swept across Asia in 1997. Compared with many of its eastern peers, India escaped the downturn relatively unscathed, and Germany's interest in the subcontinent began to grow. Berlin's instincts proved to be good when India, like China, became one of the fastest-growing economies in the world in the 2000s. According to the World Bank, India's gross domestic product climbed even quicker than China's in 2015-16.

This isn't to say, of course, that the relationship between the Indian and German economies is balanced. Germany is a nation based on exports that caters to the needs of an import-reliant India. As a result, it is one of New Delhi's most important trade partners. India, on the other hand, ranks only 25th among German export destinations.

But there is much room for growth on both sides. Over the past decade, India has diversified away from the onetime mainstay of its exports — natural resources — and has begun offering products that German consumers demand, particularly in the areas of engineering, chemistry and textiles. At the same time, Indian investments in Germany have jumped remarkably in recent years. Indian corporations have channeled several billion dollars into the German IT, automotive, pharmaceuticals and biotech industries, and as of last year, over 200 Indian firms — many in the software sector — had set up shop in Germany.

Creating Fertile Ground for Growth

This prospering partnership will doubtless pay off for both parties in the long run. Backed by the wealth of the German economy, India can now provide for many of the reform schemes Prime Minister Narendra Modi's administration has advocated, including the Digital India, Make in India and Skill India programs. For instance, the Make in India Mittelstand project got its start in September 2015 to encourage German Mittelstand (or small to medium-sized enterprises) to do business in India; 80 of these firms are now making their way into the Indian market.

At the same time, Indian companies' need for technology, training and know-how has risen as the country's economy has grown. Vocational education is now a top priority for the Indian government as it seeks to bridge the gap between industry and academia in order to provide various industries with more skilled labor. New Delhi has worked closely with the private sector in this regard, and India's higher education system hopes to use Germany's dual education system — a combination of theory and practice made possible by collaboration between schools and businesses — as a model for its own institutions. India's first University of Applied Sciences, designed with the German system in mind and with the help of German partners, opened in 2016, and similar projects are in the making.

Germany, for its part, has just as much to gain in exchange for its knowledge and resources. The country not only has the opportunity to invest in and profit from India's rapidly growing market, but it also gets greater access to an increasingly well-qualified workforce — something its own aging labor pool desperately needs. Conveniently, the majority of Indian students tend to pursue fields that play to Germany's strengths in manufacturing and exports, such as science, technology, engineering and mathematics. These fields are also weaknesses in the German education system, which does not produce enough qualified workers within them to meet the demands of the German economy.

Considering this rather perfect match, it's no wonder that Indian exchange students and researchers have traveled to Germany in droves over the past few years. Since 2006, the number of Indian students enrolled in German universities has nearly quadrupled to reach 13,537, nudging India up to second place on the list of countries with the most students in Germany by 2016. The two nations recently signed a partnership deal in higher education that will strengthen these ties even further by supporting joint research and collaboration between students and doctoral candidates.

By all accounts, science and technology will become a central focus of this cooperation in the years ahead. A number of Indo-German tech institutes have already sprung up since the Indo-German Committee of Science and Technology was founded in 2003, providing a space for joint research in water and waste management, land use, energy, scientific applications and innovation. Many of these institutions also coordinate with businesses and promote networking between Indian and German scientists.

New Delhi and Berlin have complemented these academic initiatives with several high-level committees, projects and working groups intended to explore issues related to science and technology. Chief among them are the biannual Indo-German Government Consultations, which began in 2011 and have since spawned 26 bilateral deals in energy, industry, vocational training, security, agriculture, science and culture. These meetings, which bring the countries' heads of state together with high-level delegations of ministers and representatives from an array of sectors, are unique: Neither India nor Germany has such prominent panels in science and technology on such a regular basis with other countries, signaling just how important they believe their budding partnership to be.

Partners of a Different Kind

Germany has even more to gain from the relationship than a boost in business. India's politics and culture more closely align with Europe's values than China's do, spurring the perception on the Continent that New Delhi may be a more reliable partner than Beijing. And with the exception of Japan, no other country on the Asian landmass more closely shares Germany's understanding of international relations and foreign policy than India. Both states value human rights, believe in international institutions and hope for a permanent seat on the U.N. Security Council someday — a goal on which they have worked together to craft a joint strategy. And in a world that seems to be reorienting itself toward nationalism and bilateral deals, these kinds of political affiliations will play a bigger role in shaping the decisions of nations.

India, too, has political motives for building an enduring relationship with Germany. New Delhi considers the European leader to be a source of constant stability, even when political and financial crises strike. And if India is to achieve its ambition of becoming an economic and political power capable of joining other mighty nations on the global stage, it will need partners like Germany on its side.

When India and Germany officially signed onto a strategic partnership in May 2000, it wasn't clear how strong the relationship would become. But over the past 17 years, the rather vague promise to work together more often has become a flourishing relationship that encompasses nearly every aspect of international cooperation. If the past decade is any indication of those still to come, the Indo-German partnership will be a force to be reckoned with in the not-so-distant future.

Connected Content

Regions & Countries

Article Search

Copyright © Stratfor Enterprises, LLC. All rights reserved.

Stratfor Worldview


To empower members to confidently understand and navigate a continuously changing and complex global environment.