Going Bold in the Indian Market: A Strategic Response to the US-China Trade War
International trade tension boosting India's investment appeal due to dispute with customs.
With the US and China still grappling with their escalating trade disputes, German companies are making a strategic move, eyeing opportunities in India. A survey by KPMG and the German-Indian Chamber of Commerce reveals that an impressive 79% of the surveyed companies plan to invest in India by 2030, marking a significant increase from the current 53%. Notably, over a third (35%) are targeting investments of over five million euros within the same time frame.
The Indian Shimmer
India is projected to be the beneficiary of this geopolitical tension, going by the findings of the spring survey, which polled 97 companies. Half of the respondents (50%) anticipate the US-China rivalry to have positive impacts on their Indian operations, with a mere 18% fearing potential negative effects, such as trade barriers.
"India largely evades the focus of US tariffs and avoids Chinese counter-tariffs," comments Andreas Glunz, KPMG's International Business Board Member. It's also predicted that Indian goods may incur lower US tariffs compared to other Asian countries, offering relative advantages.
The Dragon's Roar
While German companies harbor hope for their Indian ventures, 47% of them also express concern about the potential rise of Indian competitors in the coming five years. This apprehension has increased from the 25% expressed last year.
"The 'China effect' looms large in the minds of German corporations," notes Glunz. They fear a repeat of intense competition on a global scale in India - not just in the Indian and Asia-Pacific markets, but on the world stage. Consequently, investments in India are high on the agenda, according to the survey. More than half of the respondents (56%) intend to use India as a production base for the regional market by 2030. For 68%, India ranks among the top five most crucial markets.
The Big Picture
The growth in German investment in India creates opportunities for the Indian and German business landscapes, enriching the global market and intensifying competition between the two countries' firms. This strategic shift fosters cooperation and collaboration, enabling German firms to localize production and R&D in India, drawing on the country's skilled labor force and cost advantages. Simultaneously, this partnership enhances Indian companies' capabilities through technology transfer and joint ventures, promoting a new generation of globally competitive Indian businesses.
However, the increased presence of German firms brings advanced technologies and management practices, intensifying competition in sectors like automotive components, machinery, and semiconductor manufacturing. This strategic rebalancing reverberates beyond local markets, affecting global markets, where Indian firms gain from increased exposure and capacity building, ultimately positioning themselves as formidable players alongside their German counterparts.
- As India becomes a key focus for German companies seeking opportunities due to the US-China trade war, the nation's finance sector may witness an influx of investment to the tune of over five million euros by 2030, as per the survey.
- Amidst the anticipated rise of Indian competitors, German firms are strategically positioning themselves in India to localize production, research and development, and capitalize on the skilled labor force and cost advantages, which may lead to further finance investments in the Indian market.
