"We hope an FTA between Europe and India becomes reality soon. We believe strongly that solutions can be found to the benefit of both Germany and India."

Germany is India's biggest trading partner in the European Union. Hubert Reilard, president of the Indo-German Chamber of Commerce and managing director of the Bangalore-based EFD Induction, on the growing connect between the two countries, the proposed FTA with Europe, and why he is keen that small- and medium businesses invest in both countries. An interview by Kiran Bajad.

What is the current size of trade between India and Germany? What is the value of exports from India to Germany and which are the top three business sectors?

Germany is India’s biggest trading partner within the European Union and the sixth most important partner worldwide. The trade volume has increased from 2.7 billion euros (Rs 20,638 crore) to almost 17 billion euros (Rs 129,948 crore) in 2015.

German imports from India amounted to around 6.3 billion euros (Rs 48,157 crore) in 2015.  Textiles have the largest share followed by machinery and organic chemicals. The export of vehicles from India to Germany reached a level of 250 million euros (Rs 1,911 crore).

Germany's exports to India amounted to 10.6 billion euros in 2015 (Rs 81,026 crore). Machinery has by far the highest share (3.1 billion euros) followed by electronic and medical/technical equipment. Export of vehicles to India amounted to 790 million euros (Rs 6,038 crore).

The proposed Free Trade Agreement with Europe is seeing strong support from the Indian textile sector but the automotive industry is opposing it. What is your take on the proposed FTA?

Negotiations for a comprehensive FTA were started in 2007 and are ongoing. India enjoys trade preferences with the EU under the general scheme of preferences. The agreement would be one of the most significant trade agreements touching the lives of 1.7 billion people.

Keeping this in mind, it speaks for itself that negotiations are not easy. Industries, like the textile industry which see a benefit, may support it to a good degree and others, like the automotive industry, have concerns about increased competition in case of lower import duties or easier import of second-hand vehicles.

Preferential access to the EU market is critical for India, especially in the supply of services and opportunities for Indian IT vendors (including German IT companies in India). Greater access to the Indian market for European companies is equally critical in view of the slow growth rates in Europe. 

However, we hope very much that an FTA becomes reality soon and we believe strongly that solutions can be found to the benefit of both the countries. I would like to mention in this context that the Indo-German Chamber of Commerce (IGCC) is a bi-lateral chamber representing German business interests in India but on an equal basis we also represent Indian business interests in Germany.

Like the ‘Make in India’ campaign, Germany has launched a ‘Made in Germany’ programme. How is the response to that initiative?

‘Made in Germany’ is a sort of a trademark for product reliability and quality of German equipment and is reflected, for example, in India’s import of German machinery.

‘Make in India’ and ‘Made in Germany’ are by no means a contradiction. I strongly believe that ‘Make in India’ and ‘Made in Germany’ open up potential for co-operation between the two countries.

The strength of the German machine tool industry can be combined with the skills of Indian IT engineers to invent new and advanced products.

German experience in the renewable energy sector can be of great use for the 100 smart cities campaign of the Indian government since it requires new technology for storing of energy and handling of big fluctuations in electrical grids in terms of supply and demand.

According to a joint statement between the Indian and German governments during the visit of Chancellor Angela Merkel last year, Germany will provide funds of 2 billion euros (Rs 15,288 crore) in a deal aimed to boost solar energy and green developments across the country.

How you see ‘Make in India’ helping German companies set up a manufacturing base in India? And do you expect the government to focus on specific areas to promote stronger Indo-German business ties?

Relations between Germany and India already have a strong foundation based on mutual respect and understanding. The two governments have a unique format of inter-governmental consultations. The third meeting of this kind between the Narendra Modi government and the German delegation led by Chancellor Angela Merkel took place last October in Delhi and Bangalore.

The focus areas of the Indian government are vocational training, renewable energies, urbanisation and smart cities as well as cleaning of rivers. Germany can benefit from Indian expertise in IT and start-ups and many other areas.

What, in your opinion, are the key areas of strength of India and Germany?

I believe that the bond between Germany and India is based on a common value system.

India is a big democracy and the somewhat complicated political scenario with stronger local parties is sometimes seen as a weakness for progress, decisive and timely decisions. Yes, many decisions like GST should have been taken a long time ago. However, a sound economy based on human values will develop best in a free society, in a democracy, and I am convinced that this will turn out to be India’s strength in the future and the basis for a cooperation based on mutual benefit and not just short-term profit.

We have many things in common and a long relationship in the field of technical cooperation and cultural exchange, and this forms a strong bond for our economic future as well.

We have more than 1,600 German companies operating in India and we have an increased number of Indian companies investing in Germany.

We have a partnership between the state of Bavaria and Karnataka as well as one between Baden-Württemberg and Maharashtra. India was the partner country at last year’s Hannover Fair, the biggest technical fair in the world, and everybody remembers the spectacular performance of the Indian delegation at the opening ceremony.

Where does India stand in the list of countries that Germany has trade relations with? Do you see the rank changing in the next 2-3 years?

Among foreign investors in India, Germany ranks eighth with a total investment of 4.7 billion euros during the period 2000-2012.

The ‘real’ investment of German companies may be higher than the statistic for direct foreign investments may indicate since the local investment of local German companies may not be a part of the statistics.

German imports to India amounted to 10.6 billion euros in 2015, around 3 percent of India’s overall imports in 2015. India’s exports to Germany amounted to 6.3 billion euros, around 2.7 percent of India’ overall exports.

It may be a bit difficult to make a prediction regarding rankings but I would like to see many more small- and medium businesses from Germany investing in India and likewise many more Indian companies investing in Germany.

As president of the Indo-German Chamber of Commerce, what are your key priorities and focus areas?

Key priorities are a result based on major fields of co-operation mentioned earlier. Three of them include:

1.  As in the past, we will focus on supporting small and medium businesses for establishing and developing their business in India, and vice-versa for Indian companies in Germany.

2.  We will play a positive role in supporting vocational training measures in India since Germany has a long history in this field.

3.  We will support initiatives as regards the program for development of smart cities. Germany has already decided to support projects in three smart cities in India.

What is the total number of German companies currently actively involved in the Indian automotive industry?

Bosch Limited started operations in India more than 90 years ago with a representative office in Calcutta and established its corporate office in 1951 (MICO) in Bangalore.

The Bosch Group is now the leading German company in the automotive sector in India with manufacturing units all over the country and a big R&D unit as well.

Other leading parts and systems manufacturers which have invested in India include LuK (clutches), ZF (steering systems), Knorr-Bremse (brakes) and many others.

In the premium car segment, we have Audi, BMW and Mercedes-Benz with a solid market position in their respective segments. Volkswagen has built manufacturing facilities in Pune and sells the Polo, Vento, Jetta and Ameo in India. Skoda, a Volkswagen company, has established its presence in the Indian market long ago and is a highly respected brand in the local market.

Can you elaborate on your company, EFD Induction’s future growth roadmap for India?

I believe that EFD India will play an important role in the EFD Group to secure the future of our company. 
We move to a state-of-the-art factory in the Aerospace Park in Bangalore in the second half of this year.

We have good growth potential in the Indian market in the field of induction hardening of critical automotive components and we can develop other business segments in other industries as well.

We will extend our operations as a hub for other countries in Asia like Thailand, Malaysia, Indonesia and Vietnam. We provide good and fast service and application support in India and Asia. We are a supplier of goods and services to our own group and I expect this business segment to grow fast in the future.

This interview was first published in Autocar Professional's July 1, Indo-German special