Merkel visits India in search of stronger strategic ties

German Chancellor Angela Merkel is paying a three-day visit to India, starting on October 31, to seek ways to strengthen bilateral economic and strategic ties. Merkel is accompanied by a high-profile business delegation, as well as 12 German cabinet ministers, who will be holding meetings with their Indian counterparts to explore areas of mutual cooperation.

During her visit, Merkel will hold talks with Prime Minister Narendra Modi, President Ram Nath Kovind and other senior officials. On the agenda are a range of subjects including trade and investment, agriculture and high-tech. Both sides are expected to sign deals to promote cooperation in areas such as sustainable development, urban mobility and artificial intelligence.

Read more: How PM Modi changed the face of Indian foreign policy

Merkel's visit comes days after the German Parliament passed a resolution calling for upgrading the ties between Germany and India.

During the discussion in the Bundestag, German Foreign Minister Heiko Maas described India as a "pillar of stability" in South Asia. "It would be dangerous from a European point of view to constrict Asia policy too much to China, especially as we have a partner in India that is much closer to our values and our understanding of democracy," said Maas.

'A natural partner'

"We in Germany, as well as in Europe, have so far focused more on China, while underestimating the significance of India," said Johann Wadephul, deputy leader of the joint parliamentary party of Chancellor Angela Merkel's Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU).

Although Europeans benefit from business dealings with China, Beijing's stated aim to become the world's dominant technological and economic player by 2049 means that China poses a growing economic challenge for Europe, Wadephul told DW.

"No country in Europe or Asia that wishes to hold its own against China's growing power can do so by relying only on itself," he said. That's why, Wadephul underlined, we're seeking to build "an alliance of multilateralists" with "shared values."

"As the world's largest democracy, India is a natural partner for Germany within this larger alliance."

Wadephul also touched on the subject of freedom of navigation, saying that Germany is committed to a "free and open Indo-Pacific ocean."

"This is not just a matter of solidarity with India, but stems from a wider concern about open sea lanes," he stressed, pointing to potential flashpoints such as the Strait of Hormuz, South and East China Seas, among others. "These flashpoints present a global security challenge that India and Germany should address together," said Wadephul.

Huge market

Trade and investment ties between Germany and India have increased rapidly over the past decade. Germany is India's most important trading partner in the EU and its sixth most important trading partner worldwide.

The overall exchange of goods and services between the two is valued at over €18 billion ($20 billion).

Germany is also the seventh largest foreign direct investor in India, with the EU country's total FDI in the South Asian country amounting to $11.7 billion from April 2000 to March 2019.

For Germany, India represents a gargantuan market with a huge potential to do business. India's significance as a market for German firms is also on the rise as the European economy faces increased headwinds from the ongoing trade dispute between the United States and China, Brexit-related uncertainty and the threat of US tariffs on a range of EU goods.

'Reciprocal investments'

Modi, meanwhile, aims to make India a $5 trillion economy by 2024, from $2.7 trillion now. Foreign investment is crucial to reach that goal and also to transform India into a manufacturing hub — one of Modi's key priorities, aimed at creating enough jobs for the nation's burgeoning youth population.

But India has proved to be a tough market for foreign businesses, including European and German ones, to operate in. Many of them often complain about excessive bureaucratic red tape, corruption and a lack of adequate physical infrastructure, among other problems.

"We do point out to our Indian partners what obstacles are still in place that deter investments by German and European businesses," said Wadephul, stressing the need for "increased reciprocal investments."

The German lawmaker also noted that the Indian government is making an effort to remove obstacles to foreign investment. India jumped 14 places to 63rd in the World Bank’s annual rankings for ease of doing business released recently.

But India's economy is currently facing a downturn, with growth falling from 8% in the middle of last year to 5% in the last quarter for which data is available. The central bank has slashed the country's 2019-20 growth forecast from 6.9% to 6.1%.

The economy's long-term growth prospects, experts say, will depend on the Modi government's ability to push through difficult, but necessary, structural reforms like overhauling the country's complex labor laws, land-ownership regulations and troubled state-run firms.