The KPMG in Germany and the Indo-German Chamber of Commerce (AHK India) conducted a survey between April 9 and May 20 this year, focusing on the economic outlook of German companies in India as well as their challenges and business opportunities.
With Indian economy is rising, about 6 in 10 German companies want to raise their investments in India during 2024-25, a recently conducted survey in several cities of Germany found.
The KPMG in Germany and the Indo-German Chamber of Commerce (AHK India) conducted a survey between April 9 and May 20 this year, focusing on the economic outlook of German companies in India as well as their challenges and business opportunities.
A total of 85 companies took part in the survey. However, a total of 99 companies participated last year.
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What are the key findings of the "German Indian Business Outlook 2024", which was presented today?
Of 85 companies, 78% of them are expecting that there would be rise in sales, and 55% forecast higher profits. According to them, India's growth story would be even more positive with 82% expect an increase in turnover and 74% of them believe that there will be higher profits.
"The companies assume that the growth rate will be very dynamic: By 2029, 37% of respondents expect sales growth of more than 20% and 25% of them anticipate profit growth of more than 20%," the survey stated.
India is gaining importance as an investment location
One of major findings of the survey is that 59% of the companies have been planning to expand their investments this year. In 2021, it stood at 36%. However, 7% of those surveyed companies want to reduce their operations in the country.
"German companies are increasingly diversifying and regionalizing their business operations across the globe, engaging with new locations. In Asia, they prioritize India as one of their preferred locations for new investments, due to the size of the population, political stability and sustainable growth prospects," explains Andreas Glunz, Managing Partner International Business at KPMG in Germany.
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What are the factors that make India attractive destination for German companies?
The survey mentioned that low labor costs, political stability and qualified specialists are the top factors for German companies to expand their business operations in India.
"In comparison with other Asian countries, 69% of German companies appreciate the steady growth of India’s economy as a particular advantage. The weakening economy in China compounds this view."
"India continues to show enormous potential. And further to this, continues to gain in importance as a location for regional production and global development," emphasizes Stefan Halusa, Managing Director of AHK India.
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"With Modi's re-election, German companies hope that many structural problems will be tackled. These include the infrastructure deficits in the areas of transportation, energy, information and communication, the complex tax system and the highly varying regional regulations. Only by solving those topics it will be possible that the growth expectations can be achieved in the medium term," explains Andreas Glunz (KPMG).
Bureaucracy and corruption remain key issues
Despite the positive outlook, the German companies surveyed also see challenges in India and 64% of those surveyed consider the bureaucratic hurdles to be particularly burdensome.
"This corresponds to an increase of 11 percentage points compared to the previous year. This is followed by corruption at 39%, although this is considered less relevant compared to the previous year (47%)."
The third biggest challenge is the tax system. More than one in four German companies (27%) cite this as a problem.
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"India offers a unique combination of market size, market potential and a talent pool for German companies. However, bureaucratic and regulatory hurdles are still the biggest problem. A more efficient administration, the continuous fight against corruption and a simplified tax system would further increase India’s attractiveness for German companies," explains Stefan Halusa.