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Successfully investing in India

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last updated on 19. May 2021 | reading time approx. 2 minutes

 

 

 

How do you assess the current economic situation in India?

The situation is complex but has many positive aspects. The economic data shows a subdued development. India’s overall economic situation is of course being affected by the fight against the pandemic. The country, being a territorial state, is also struggling with the various waves of infections, which must be encountered with restrictions in daily life. At the same time a digitalised vaccination campaign is being carried out. A vaccine developed especially for and in India plays a central role. In the year 2020 it was evident that the economy in the significant sectors continues to function even in the pandemic. In many important sectors, we are seeing new projects and great progress in the implementation, such as the construction of production facilities.

 

How would you describe the investment climate in India? Which sectors offer the largest potential?

Foreign investment continues to be welcome and encouraged. Active support, e.g. in the form of a low tax rate, is available for setting up or expanding production in India.

Products in the field of specialised equipment are still in demand, as are the fields of renewable energies and the production of technical components of all kinds. All areas of infrastructure are still attractive for investment, this applies to products and services in the area of new construction or upgrading of existing networks as well as ongoing maintenance.

We also service more and more medium-sized companies that use India as a location for central services in the field of engineering and development. Large global companies are already in the “third stage of expansion”, for which India is the central component for knowledge-based services in those companies. German companies are also benefiting increasingly from the fact that a comparatively large pool of applicants is available in the field of technical digital services, in a whole range of Indian metropolitan regions.

  

What challenges do German companies face during their business ventures into India?

Serving the entire subcontinent requires sensible planning of the location and strategy. Distances and resulting transport logistics must be planned at an early stage and be realistic. Indian corporate customers expect a high level of individual and personal support throughout the business relationship. Finding and retaining the “right” employees has become even more important in the pandemic. Even without frequent personal visits by the parent company on site, ways must be found not to “let go” of the control and to intervene when necessary. This can be done, e.g., through increased external monitoring and auditing of the processes at the Indian site. The regulatory environment, e.g. in the areas of company law, tax law and labour law, remains challenging. Here as well, the successful companies are those, that proactively address these topics and plan in an appropriate manner.
 

The Ministry of New and Renewable Energies of India has announced that every state in India should have at least one so-called Green City. How far has India come in the field of renewable energies?

The potential of renewable energy in India continues to be enormous and has now entered the consciousness of public authorities on a large scale. We are clearly seeing increasing opportunities for companies in the field of renewable energy. This applies to projects under the Green City Strategy as well as numerous other projects across the country. The key is to individually assess opportunities and plan participation in projects well in advance. Numerous “flagship” projects already exist, this applies to the wind energy sector as well as to the photovoltaic sector. Local manufacturing of the components is usually an essential part of a successful strategy.
 

In your opinion, how will India develop?

India will undoubtedly emerge as one of the beneficiaries of the “post-pandemic era”. Local production for the purpose of export has become even more strategically attractive through the free trade agreement with ASEAN. Demographics and the immense domestic market will further increase its importance in international comparison. The “world´s digital service center” is highly focused on becoming a “global manufacturing hub” as well. India remains a highly attractive growing market.

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Martin Wörlein

Partner, Head of India practice

+49 911 9193 3010
+49 911 9193 9003

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