german investments in india -...

indo-german investments & cooperation

Annual Review 2010 115

German Investments in IndiaGermany is India’s 8th largest investor

Each year Germany has featured in the top ten list of investing countries in India. Since liberalization, Germany has been the

8th most important investing country for India. During the last financial year (2009-10), however, it ranked 9th in the list of top

ten investing countries. Investment inflows from the country declined by 5.3% due to recessionary trends.

Highlights:

�Cumulative FDI inflows since August 1991 is US $ 3.5 billion

accounting for 2.62% share

�Germany ranks 8th in the list of top ten investing countries since

1991

�Top sectors attracting FDI inflows from April 2000 to May 2010

are Services Sector (18.2%), Chemicals-other than fertilizers

(14.5%), Electrical Equipment (8.5%), Automobile Industry (8.0%)

and Trading (7.8%)

�1 117 technical collaborations (14%) of Germany have been

approved out of a total 8 112 of all countries since 1991

�Top five sectors inviting technology transfer from Germany since

liberalization are Industrial Machinery (209), followed by Electri-

cal equipment- incl. computer software & electronics (168), Chem-

icals – other than fertilizers (127), Misc. mechanical & engineer-

ing industry (102) & Transportation industry (94)

�Delhi, part of UP and Haryana attracted the maximum and near-

ly 51% of German investments( US $ 319 million) during Apr.’09-

Mar.’10

�Germany’s investments into India during Apr.’09 to Mar.’10

amounted to US $ 626 million, accounting for 2.4% of total in-

vestments in India in that year.

German Investment inflow in the last decade

In the last decade (since the year 2000), Germany has invested to

the tune of US $ 2 799 million accounting for 2.4% of total invest-

ments into India (Table 7). During the last 3 years investments from

Germany have gone up substantially even though the percentage

share in the total investments remains more or less the same. This

shows that German investments have kept pace with the growing

investments from other countries of the world during the last 3-4

years. In the last financial year Apr.2009- Mar.10, there was a

slight decline in German investments of about US $ 3.1 million,

nevertheless, the percentage share of 2.4% was maintained.

Sector-wise inflows of German FDI (Apr.’09-Mar.’10)

Among the top five frontrunners as far as the German investment

sectors during the last year go were Electrical Equipment (US $

173.6 mil.,27.7% share), Chemicals (US $ 106.5 mil.,17.0%), Services

Sector (US $ 76.9 mil.,12.3%), Automobile Industry (US $ 65.8

mil.,10.5%) and the Trading Sector (US $ 45.3 mil.,7.2%)(Table

8). These five sectors accounted for nearly 75% of total invest-

ments made by Germany into India during the last financial year

(Apr.’09-Mar.’10). During the previous year (Apr’08-Mar’09), the top

five sectors were the Services, Construction activities, Trading,

Miscellaneous mechanical & engineering industries and Chemi-

cals (other than fertilizers).

Source: DIPP Source: DIPP

Table 8

Table 7



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What is noteworthy is that German investments in the Printing of

books’ segment has suddenly increased during the last year as also

in Hotel & Tourism. These two categories occupied the 29th and

28th position respectively in the list of German investment sectors

in the previous year. Last year they were in the 10th and 12th posi-

tions respectively(Table 10 overleaf). Also, there were no invest-

ments in the Drug & Pharmaceutical sector in the previous year

(2008-09), while last year (2009-10), this category attracted

German investments worth US $ 8.3 million.

Region-wise distribution of German FDI

Delhi and the neighbouring region overtook Maharashtra as the

1. Electrical equipment

2. Chemicals (other than fertilizers)

3. Services sector

4. Automobile industry

5. Trading

6. Metallurgical industries

7. Miscellaneous industries

8. Industrial machinery

9. Textiles (incl.dyed, printed)

10. Printing of books (incl. litho printing industry)

11. Drugs & Pharmaceuticals

12. Hotel & Tourism

13. Power

14. Computer software & hardware

15. Others

27.7%

17.0%

12.3%

10.5%

7.2%

3.6%

2.9%

2.8%

1.8%

1.5%

1.3%

1.3%

1.2%

1.1%

7.8%

1

2

3

4

5

6

789

1011

1213

15

14

Sector-wise break up of German FDI inflows (Apr.’09-Mar.’10)

top destination for German investments during the last financial

year by attracting nearly 51% of total investments (US $ 319

million). Maharashtra followed with investments totaling US $ 188

million taking up 30% of the share (Table 9). The third most attrac-

tive destination for German companies was Andhra Pradesh with

US $ 32.4 million worth of investments and a share of 5.2%.

During the previous year (Apr.’08-Mar’09), the top three invest-

ment locations were Maharashtra, Karnataka and Gujarat. Two

new areas that have attracted German investments during the year

Apr.’09-Mar’10 are the Guwahati and Chandigarh regions though

the share of investments here is still very low.

% share

Table 9


Annual Review 2010118

Source: Department of Industrial Policy & Promotion, Govt. of India

Table 10



German Investments throughAutomatic Route

Foreign direct investments in India are approved through two routes:

1. Automatic approval by RBI: As per FDI policy of Government of

India, 100% Investments are allowed in most sectors under the Auto-

matic Route subject to sectoral caps and permission, if any re-

quired from concerned Ministry.

�100% FDI is allowed under Automatic Route in Mining and ex-

ploration of Metal and non-metal ores including diamond, gold,

silver and precious ores but excluding titanium bearing minerals

and its ores subject to the Mines and Minerals ( Development &

Regulation) Act,1957.

�100% FDI is allowed in Coal & Lignite mining for captive con-

sumption

�FDI will not be allowed in Mining of ‘prescribed substances’ is-

sued by the Department of Atomic Energy.

FDI in India on automatic route is not allowed in the following sectors:

�Proposals that require an industrial license and cases where for-

eign investment is more than 24% in the equity capital of units

manufacturing items reserved for the small scale industries.

�Proposals in which the foreign collaborator has a previous ven-

ture/tie-up in India.

�Proposals relating to acquisition of shares in an existing Indian

company in favour of a Foreign/Non-Resident Indian (NRI)/Over-

seas Corporate Body (OCB) investor; and

�Proposals falling outside notified sectoral policy/caps or under

sectors in which FDI is not permitted and/or whenever any inves-

tor chooses to make an application to the Foreign Investment Pro-

motion Board and not avail of the automatic route.

2. FIPB Route: Foreign Investment Promotion Board (FIPB) consid-

ers and recommends foreign direct investment, which do not come

under the automatic route. Normal processing time of an FDI pro-

posal in FIPB is 4 to 6 weeks. FIPB is located in the Department of

Economic Affairs, Ministry of Finance

As is evident from Table 10, with increasing liberalization across the

various industrial sectors, more and more German investments

are coming in through the automatic route i.e. through RBI, not

requiring the government’s approval. During the financial year

2009-10, out of the total of US $ 626.14 million German invest-

ments made in India, around US $ 516.5 million (82.5%) came

through the automatic route or via the Reserve Bank of India. In

the year 2008-09, 61.8% had come through the automatic route,

while in 2007-08, 66 % were routed through the RBI.

Top FDI inflow cases from Germanyin the last decade

German companies remain strong investors in India as the statis-

tical numbers as well as the recent IGCC business monitor, a rep-

resentative survey conducted by the Indo-German Chamber of

Commerce, show. Almost half of the respondents see the GDP growth

rate between eight and nine per cent in the current financial year

and German investors have positive long-term expectations for

the Indian market. Almost one-third of the respondents plan to

strongly increase their investment activities in India in the next

three years, and almost one-half of the respondents indicate a

moderate further investment increase. Only the remaining re-

spondents (not even a third) do not currently plan to invest fur-

ther. None of the respondents plans to decrease investments in

India or even to withdraw from the market.

Important large-scale German investors in India continue to be com-

panies like Volkswagen, Daimler, Siemens, and Lanxess. The Volk-

swagen plant in Pune has a yearly production capacity of 110 000

cars and continues to be the largest single investment of a German

company in India (€ 580 million). Volkswagen is not the only Ger-

man automobile investor in India. Daimler set up another production

plant in Pune in early 2009 as well as is currently setting up a new

plant in Chennai, where starting 2 012 trucks will be produced.

Automotive supplier Schaeffler is also planning in investing in India

and plans to establish a new 400-employee production facility. In

July 2010, crane manufacturer Demag Cranes, opened a new facil-

ity at Chakan near Pune. The facility was built in eight months at a

cost of € 8 million as well as has a capacity of constructing 600

standard cranes and 100 process cranes every year. Specialty chem-

icals group Lanxess remains committed to its growth strategy in

India and intends to set up a new production site in India. Con-

struction of the new compounding facilities will begin this year,

will have an investment of over € 10 million and is due in 2012. In

total, Lanxess has invested around € 50 million in the 13-hectare

Jhagadia site and will have a workforce of approximately 250

employees at this site by the end of 2010. Baerlocher will also in-

vest about € 1 million to double its production of PVC heat stabilis-

ers at its Indian plant in Dewas to meet the local Indian demand in

pipe production for irrigation and water management projects.

The world leader in independent safety and quality testing for solar

modules, TÜV Rheinland, opened its seventh laboratory worldwide

in Bangalore for testing solar modules and systems. TÜV Rheinland

invested € 2 million in this new solar test centre, which in particular

will offer services to India’s growing solar industry. German engi-

neering major Siemens will invest around € 250 million in India


Annual Review 2010120

over the next three years, which will be double of the company’s

current investment level in India. Siemens also plans to increase

its workforce in India from 17 000 to 25 000 employees by the

year 2012. A large part of the investment will be in renewable

energies.

According to the data received from the Department of Commerce,

Govt. of India, FDI inflows worth around US $ 1 342 million were

received from Germany through Indian companies over the last

decade from April 2000 to May 2010. In the list of top investing

companies during this period were MHM Holding GmbH for manu-

facturing printing/packaging inks, resins, enamels, adhesives etc.

with Micro Inks Ltd.; DKV International Health Holding for manu-

facturing power capacitors with Apollo Energy Pvt. Ltd. and Allian-

ze SE who are Insurance carriers through their Indian counterpart

Bajaj Allianz ((Life insurance).

Source: Department of Industrial Policy & Promotion, Govt. of India

Table 11

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