You have to give Robert Habeck one thing: he doesn’t take it easy. Where other cabinet members treat themselves to a little holiday, the Federal Minister of Economics is touring first through Germany and now to India. The goal of the Green politician: The German economy should become more independent of China. And so the idea of ​​taking a closer look at India is obvious.

More people are said to live there than in China, namely 1.4 billion. Yet another reason to establish a new and close partnership here. Habeck has been traveling to New Delhi and Mumbai since Wednesday – India is an “important partner for the diversification of the German economy,” they say. And currently holds the G20 presidency, which is why Habeck is taking the G20 energy ministers’ meeting in Goa with him on Saturday.

In India, Habeck is all about renewable energies and green hydrogen

Steady program, high goals: The Federal Economics and Climate Protection Minister named India a strong growth market in the Indo-Pacific region just before leaving. “The journey is also characterized by more resilience and more diversification. Closer cooperation, especially when it comes to renewable energies and green hydrogen, has a lot of potential for both sides and can increase our resilience and economic security.” Since the Ukraine war, Germany has wanted to broaden its supply chains, and it needs allies, especially in Asia.

So far, the country has been just one trading partner among many for Germany. The trade volume is only about a tenth of that with China. 2000 German companies are active in India with around half a million employees. India has many well-educated people, which is why digital technology and microelectronics are particularly active here, alongside pharmacy and chemistry.

As usual, the minister will be accompanied by a business delegation, including some large corporations and start-ups such as Enpal. The manufacturer of solar systems, for example, squints at the Indian subsidy program Production Linked Incentives – the Indian answer to the US subsidy program worth billions, the Inflation Reduction Act. In regions like Gujarat, solar panel production is booming. Enpal wants to find out to what extent it can obtain solar modules from there.

Speaking of “can”: you can do a lot in India, and the entrepreneurs say so too. In view of the size of the Indian market, sustained high economic growth and a steadily growing middle class with purchasing power, the country offers attractive business opportunities. “India is one of the most important German economic partners in Asia,” said Wolfgang Niedermark, member of the executive board of the Federation of German Industries (BDI), the dpa news agency.

Economic experts see several disadvantages compared to China

But business representatives also formulate strong concerns much more clearly than politicians. Niedermark speaks of structural problems such as excessive bureaucracy and deficiencies in the infrastructure. India also continues to levy high tariffs on goods from Europe in several sectors. The BDI expects Habeck to act as a “strong supporter” of a free trade agreement between the EU and India.

Kirsten Schoder-Steinmüller, Vice President of the German Chamber of Industry and Commerce, adds: “Investors in India are still facing major challenges: above all bureaucracy and a complex regulatory environment. India still has major disadvantages here compared to economic engagement in China.” Corruption is also not uncommon, as a survey by the Indo-German Chamber of Commerce has shown.

Economist: “The claim that India is booming is completely wrong”

So it may be several years before India is a real alternative to China. There are always setbacks: Recently, a $20 billion investment by Foxconn was called off. The Taiwanese will probably build the semiconductor factory somewhere else.

The economist Ashoka Mody from the US University of Princeton warns in an interview with the “Handelsblatt”: “The assertion that India is booming is completely wrong.” India lacks productivity – and the gap to China is getting bigger, not smaller.

Mody doesn’t believe that India benefits from the fact that Western governments want to become more independent from China: “Companies go where it is best for their business. As a relatively unproductive location with a comparatively small domestic market, India is in bad shape.”

He sees greater opportunities for countries in Southeast Asia that are members of the RCEP free trade zone. India did not want to take part in this duty-free trade because local companies are afraid of not being able to compete. India’s tariffs are high. “The country is therefore difficult to integrate into supply chains,” says Mody.

“India’s tariffs are high, the country is difficult to integrate into supply chains”

The fact that the constitution is democratic and the Indian government does not allow itself to be monopolized by China does not help much either. Ashoka Mody is particularly worried about Indian protectionism and the lack of a free trade agreement: “India’s tariffs are high. The country is therefore difficult to integrate into supply chains.”

German companies are also seeing tendencies towards protectionist policies. The government under Prime Minister Narendra Modi is showing good signs, but lacks determination. This can also be measured in figures: Recently, foreign direct investments fell for the first time in over ten years – by 16 percent to 71 billion dollars.

In 2022, Volkswagen delivered 100,000 cars to India and 3.2 million to China

At Siemens, it all sounds a bit more positive, which could have something to do with the recent mega order for 1,200 electric locomotives by the Indian railways. The Munich group sees clear improvements around the tenders.

Managers from the car industry are privately warning against too high expectations of India. It is an “unfulfilled promise” for the industry – merely an addition to China, by no means a replacement. Volkswagen delivered 100,000 cars to India in 2022 and around 3.2 million to China.

So there is still a lot to do for Robert Habeck. After all, for many years he is the first Federal Minister of Economics to be seen in India.