Indo-German Relations Through The Eyes Of New IGCC Head: Stefan Halusa
Sanika: How has the pandemic affected the Indo-German economy and cooperation?
Stefan: The pandemic certainly did disrupt the Indo-German trade relationship. The numbers are proof of this, e.g. with a 24% decrease in GDP in India in the second quarter of 2020. The unemployment rate went drastically up in India, when the pandemic hit, in Germany we experienced very high levels of “Kurzarbeit”.
This led to a drop of 5 % of Indian exports to Germany, and around 10% of German exports to India compared to 2019. However, both countries were also able to pick up trade at a fast pace. Between January and July 2021 we saw the bilateral trade grow by 20 % (German exports to India) and 25 % (Indian Exports to Germany) respectively. In terms of Foreign Direct Investment, India continues to be an attractive market. The country has been a destination for overseas direct investment in many sectors, the service sector being the most significant in 2020. Moreover, the digital transformation has lent some support to the businesses. Around the conglomerates we see a fast growing number of start-ups, leading to the third highest number of unicorns, another important area of future collaboration between India and Germany.
Sanika: What are some of the key industries that you would be focussing on for further cooperation at IGCC?
Stefan: German exports to India have mainly focused on the automotive sector, capital goods, pharmaceuticals, and chemical industries through the years. Indian exports as well on Chemicals/Pharmaceuticals and capital goods, but also textile/leather and food. I do see potential in both directions, but not a dramatic shift in the respective industry sectors. Energy transformation will also play a significant role. Members from both countries are in talks for various aspects of hydrogen, solar power and other areas of renewable energy generation. German companies have the know-how and technologies and this is one sector that we will look into more compared to the past.
Sanika: How would Hamburg play a role in this bilateral relation between Germany and India?
Stefan: In addition to the above, I would like to mention two additional important areas, where Hamburg can and will play a vital role in the Indo-German bilateral relationship. Hamburg is a major logistics hub in Germany and for that matter in Europe. Sea, rail, road and air routes are in place and Hamburg is home to a whole number of major players in the logistics field. The Indian Government has identified the importance of the sustainable transformation of the logistics sector and we have inaugurated a task force to give our input for this transformation. Secondly, the medical technology and health sector has a huge potential. Already before the second wave the Government of India had decided to significantly increase expenditure in this area. Major investments will go into the medical infrastructure in the next 3 years.
Sanika: India has been a big exporter of raw materials in the pharma sector. Would that continue to help bilateral trade between Germany and India - especially considering a global shift away from China?
Stefan: Yes, it should help our bilateral trade. India is known as the pharmacy of the world. There are a lot of pharmaceuticals exported from India to Europe, including Germany. On the other hand, India is also strongly dependent on inputs from China. Now, with all the ongoing discussions about “Decoupling” and the necessity of more resilient supply chains, there is a chance to adjust the supply chains, which can lead to higher trade volumes of chemicals and pharmaceuticals between India and Germany, in both directions. We share common interests in this area. We, at IGCC, will do our share to promote these partnerships to ensure both countries can benefit from stronger ties.
Sanika: The Indian government has taken an active stance in making India more business-friendly. Do you see any reflections of that in your work or in the overall cooperation between the two countries?
Stefan: IGCC conducted our annual German Indian business survey with KPMG earlier this year. The survey was conducted among our member companies and was published in June. It shows that the bureaucracy, the complexity of the Indian tax system and legal uncertainty remain areas of concerns for German companies. There however is a positive trend, like e.g. the single window to register and incorporate businesses. The World Bank’s ranking of the Ease of Doing Business Index, where India improved significantly from a 77th position in 2019 to a 63rd position in 2020, underlines this. However, there is still room for improvement in this area. So this is something we will be focusing on in the coming quarters. Our focus will not only be on the central and state governments, but also on the local and regional governments to improve the investment framework and operational ease of doing business for the companies, which are already present in the country.
Sanika: What are the hurdles Indian companies face while trying to establish themselves in Germany?
Stefan: One main issue that we hear a lot of recently is the visa and work permit process. Indian companies willing to establish subsidiaries in Germany complain about it. There is a bilateral fast track mechanism in place through which Indian and German companies can approach their respective embassy for any problems they are facing, when conducting business. As per my understanding, Indian companies have under-utilised this fast track method to address issues so far. It seems, however, it is the starting point, which causes the problems, not the operations later on.
Sanika: You've been in office for a year now, what has been a highlight at work so far?
Stefan: Actually, both the highlight and lowlight are closely related to the pandemic.
Even though I took up this role in September 2020, I have only arrived in India early January of 2021 due to the pandemic. Once I arrived I had to undertake two weeks of mandatory quarantine, which was quite okay, considering Germany was also still under lockdown back then. After the quarantine, I was able to move around, meet people and travel. That was an early kind of highlight, to jumpstart and get right into things. However, early April came the lowlight: The second COVID wave. The Maharashtra government announced another strict lockdown and everything came to a complete halt. The office in Mumbai was closed and I had to stay in my apartment, was mostly occupied with video conferencing, phone calls and responding to emails, 7 days a week. No more personal meetings; that was a very abrupt change compared to before.
But we are through this now, and I keep my fingers crossed that there will be no third wave. I am vaccinated twice, so I assume that I am much better protected than earlier in the year. I have started travelling again, meeting members and other stakeholders in the Indo-German context, which I truly enjoy. Of course, I hope that soon I will also have the chance to travel the rest of the country. I haven't seen anything so far - haven't been to the Taj Mahal or Rajasthan, or the resorts in Goa or the mountains in the north. I am looking forward to it, as travelling and experiencing the country was one reason, why I wanted to live and work in India.
For now, however, I am looking forward to the India Week in Hamburg and I hope to be able attend the event in person. Already now, I wish everyone a successful India Week and many interesting personal interactions.