living up to the ‘natural partner’ status
In assessing German Chancellor Angela Merkel's ongoing three-day India tour, the key question that we need to ask is: Will the trip build on the momentum generated during Prime Minister Narendra Modi's visit to Germany earlier this year and help uplift the bilateralIJ The two countries are “natural partners” if India's growth story can be fuelled by German expertise, Germany too stands to benefit from access to India's markets, especially since its traditional markets in Europe are shrinking. Moreover, both India and Germany are strong and robust democracies, committed to a free world of equality and liberty. Yet, despite these natural affinities and complementing profiles, the India-Germany relationship has functioned below par. In 2014, bilateral trade was pegged at a modest 16 billion euros. Sure, Germany is still India's most important trading partner within the European Union, but globally it ranks at number six. German investment, despite having a long presence in this country, has also plateaued. Corruption and a difficult business environment discouraged foreign investors from putting their money in India in this past decade, while more recently, the global financial crisis and the sovereign debt crisis in the EU has meant that Germany has focussed its attention on domestic affairs. The question is: Can back-to-back high-profile visits provide the political impetus to change the narrativeIJ
While it is still too early to say for certain, there are some positive indicators in this regard. For one, in the first seven months of 2015, the bilateral trade volume rose by 13 per cent as compared to the previous year. While India's imports from Germany rose by 17.5 per cent, exports went up by 8.1 per cent. The total trade numbers are still below what they were at the start of the decade, but there’s a definite upward trend. Two factors are pushing this: First, on the Indian side, Prime Minister Modi has taken substantive steps to improve the ease of doing business in India, and, though his reforms process still has a long way to go, his efforts to hardsell India on foreign shores are steadily bearing fruit. The second factor here is that the Modi Government's priorities match well with Germany's unique selling points. From Make in India and Skill India, to Clean India and Clean Ganga, to Digital India and the Smart Cities programme, there is potential for a natural India-Germany collaboration in each of these flagship projects of the Modi administration. Every one of these schemes has the potential to transform at least one aspect of the India Story and touch the life of ordinary Indians at the grassroots level. The extent to which German companies are able to seize the opportunity and participate in these projects will determine the quality of the India-Germany bilateral in the decades ahead.
At the multilateral level, there are two big issues: One is UN reforms, and Germany is already working closely with India through the G4 mechanism on this. The second aspect is the India-EU free trade agreement, which has been languishing for years now. One obstacle to that has been the EU ban on some 700 Indian generic pharmaceuticals. This and other matters that have held up the deal, reportedly in its final stages, must be resolved at the earliest.