Indo-German Economic Ties (The Hindu)

Mains Paper 2 : International Relations
Prelims level : Indo-German economic ties
Mains level : Significance of the Indo-German economic ties

Context

•  India and Germany signed multiple pacts and joint declarations of intent and exchanged agreements after bilateral talks between Prime Minister Narendra Modi and German Chancellor Angela Merkel in New Delhi on 1st November 2019.
•  The agreements were inked for cooperation in fields such as space, civil aviation, maritime technology, artificial intelligence, digital technology, medicine, defence, cyber security and education.

Background:

•  Prime Minister said the expertise of economic power houses like Germany could help in his government’s aim to build a “new India” by 2022. He invited Germany to also take advantage of opportunities in defence production in dedicated corridors in Uttar Pradesh and Tamil Nadu.
•  Germany is India’s largest trading partner in Europe and more than 1,700 German companies operate in the country. Merkel said she was accompanied by a big German business delegation including small and medium enterprises (SMEs), who wanted to engage in business with India.

Significance:

•  In the context of the on-going flux of uncertainties in world economy and politics like the Policies of the United States and China which is dubbed as new world Imperialism the ties between India and Germany assumes importance in global affairs.
•  With certain commonalities like both countries i.e, Germany being the largest in Europe and India in South Asia and historical sufferings much in similarity like Germany had the challenge to rise again after the war and India after colonialism meets a great synergy in their objectives.

What is the cooperation of Germany to India in Economic context?

•  Germany owns 2.91% of total FDI in India between April 2000 to December 2017 making it the 7th largest foreign investor in India.
•  The famed SME sector in Germany, also known as “Mittelstand” are tied into the “Make in India” and have great potential for creating jobs, bringing in new technologies, etc.
•  The “Mittelstand” companies can help transform Indian manufacturing due to their expertise in technology which can boost up Indian manufacturing sector.
•  Both the countries have a win-win situation as Germany is an economic powerhouse and India is a promising market that is growing as well as developing.
•  Germany is an important trade and investment partner for India in particular with investment, technology, renewable energy, Infrastructure etc which is in boom.
•  With India and Germany being part of G-4 vying for a permanent seat at the UNSC they have opportunity to build ties and achieve their goals together.
•  With Brexit in place, Germany will be more important to India along with France who also considers economic ties with India.

What are the concerns?

•  The bilateral investment treaties which insist that an investor has to first exhaust all domestic legal options before it can take a case towards international arbitration is a point of concern for both India and Germany.
•  With US abandoning the principle of ‘Most Favored Nation’ status and India too imposing protectionist policies threaten the idea of Free and Fair trade.
•  Domestic politics in Germany is much more complicated in the last 4 years like the refugee problems and growth rate is of concern in the ties.

Way forward

•  Addressing the legal issue of the bilateral investment treaty can help the “Mittelstand” companies in India and around 140 Indian companies operating in Germany.
•  India and Germany can stand together and voice for Free and Fair trade which should be the main agenda in the ongoing global affairs.
•  With strong institutional mechanisms in place and regular consultations and meetings, the problems of Domestic politics can have the least impact on the ties.

Conclusion

•  India stands to gain from Germany which is an economic powerhouse and Germany from India, which is a promising market.
•  By handling judiciously the impacts of ‘Bilateral Investment Treaty’ and with more cultural and people-to-people ties, India can establish a strong institutional relationship with Germany which can give a robust boost to Indian Economy as a whole.

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Prelims Questions:

Q1. Which of these organizations are matched correctly with their headquarters?
1. Organisation for Economic Cooperation and Development (OECD) - New York
2. World Trade Organisation - Geneva
3. World Bank - Washington DC

Select the correct answer using the codes given below:
a) 1 and 2 Only
b) 1 and 3 Only
c) 2 and 3 Only
d) All of the above

Answer: C
Mains Questions:
Q1. What is the cooperation of Germany to India in Economic context?