Germany, India hope to uplift economic mood
Prime Minister Manmohan Singh's invitation to Germany to be part of what he calls ‘India’s growth story', comes at an interesting time. That phrase has commonly been used to denote the boom in the Indian economy in the late nineties and the country's envious eight per cent growth rate up to the mid-2000s. But things have changed significantly in the recent past — colossal financial mismanagement has caused a precipitous fall in growth rate to less than five per cent, inflation has skyrocketed, and many have even been tempted to write off the ‘India growth story'. Today, fears loom large that India may just become the first fallen angel of BRICS — the influential grouping of the world's fastest emerging economies. As New Delhi now supposedly strives to resuscitate the economy, Mr Singh understandably wants Berlin's participation in those efforts. For instance, as the Prime Minister has pointed out to German Chancellor Angela Merkel during his recent visit to Berlin, the Indian Government plans to invest a whopping one trillion dollars on infrastructure development over the next five years, and Berlin could play an important role in that — particularly in the upgradation of the manufacturing sector which desperately needs a shot in the arm. But this is just one side of the story. On the other, there is no denying that, as Germany (and indeed Europe) struggles to recoup from the debilitating financial crisis of 2007-2008 as well as the sovereign debt crisis that continues to choke the Eurozone, the region looks to India (and its burgeoning domestic market) for succour. After all, a five per cent growth rate may seem to be disastrous in the Indian context, but it is a far-fetched dream for Germany, which is Europe's largest and arguably most resilient economy. In short, Germany needs India just as much India needs Germany.
It is against this backdrop of a mutually beneficial relationship that the second Indo-German Governmental Consultation must be viewed. Perhaps the most important take-away from this dialogue is the progress that has been made with regard to the India-European Union free trade agreement. While the agreement has been in the works for a long time now, both Mr Singh and Ms Merkel painstakingly highlighted the fact that they were close to signing on the dotted line. Of course, neither leader gave details — and understandably so because those details are still being crafted — but the optimism surrounding the proposed agreement was unmistakable. Other areas of bilateral cooperation that received much attention were automobiles and insurance sectors. Ms Merkel expressed her concerns about the high import tariffs in the first case and the 26 per cent cap on foreign investment in the second. On his part, Mr Singh promised to iron out the issues — although this might be easier said than done, given that the UPA regime has failed to get the Opposition on board on the contentious matters.