German Chancellor’s visit to India

German Chancellor, Angela Merkel lands in India this week for a three day trip. Needless to say, Chancellor Merkel’s visit is of great significance. She is not only accompanied by her elite cabinet ministers, but also by a large delegation of business leaders.

With 21 billion $ worth of trade, Germany is the top trading partner from EU. And there is still scope for expansion. Today there are around 1,700 German companies in India, creating 4 lakh jobs. Germany needs IT skills and India needs technology, to create more jobs. The major agenda that India is seeking is in manufacturing, infrastructure, vocational training and renewable energy. We, India is a fast growing economy with 7+ growth rate and we need a large amount of foreign investment. With the new policies, thanks to our new government, our Indian economy is opening up as never before. The recent visits by our PM to various nations highlights this. There is a significant relaxation in caps on FDI in key sectors.

India-Germany(Picture courtesy : indiatoday.intoday.in)

Infrastructure:
With Metro rail projects, Smart cities, Speed railways taking into shape it is vital that we have the support of German technology. German companies like Siemens are there from Decades. Companies like Deutsche Bahn can help us in developing high sped corridors. It is only about how well we reform and utilize their expertise.

Manufacturing sector:
The ‘Make in India’ providing huge potential, India is keen to parter in manufacturing sector. Indian government is driving hard to on the ease of doing business. German companies that are already make in India have brought their global business networks and advanced technologies.

Vocational Training:
Vocational training is used to prepare for a certain trade. It is all the training needed for a certain job especially Auto repair, plumbing etc. Germany is eager to provide its expertise in modernisation of the apprenticeship system and supporting in Small and medium enterprises. (http://thekalyan.com/2014/12/26/small-and-medium-enterprises-smes-are-key/)

Renewable energy:
Germany sees an opportunity to partner with India in development of solar power on rooftops in cities in India. Forecasts show that India plans to add 175GW of renewable energy in the next seven years. (our non renewable energy is 195GW for only 2014-15). German cooperation on in this aspect will be a great asset.

Clean Ganga Project:
It is also an opportunity for India if we can get the expertise of German’s having cleaned up Rhine River that was in the same state as Ganga now.

In conclusion this visit is an opportunity for India in many economic aspects.

(Analyzed from dw.com, financial express, yahoo news Indiatoday)

So what is FDI all about?

FDI – Foreign Direct Investment.

FDI in simple terms is a company from a country investing into the business of another country.

Example, Wal-Mart trying to invest into the retail markets in India. FDI can be done as investing into production, joint ventures, acquisitions or expanding the existing operations into another country.

dollors

Why India seeks FDI?

  • Capital need – as the money in India is inadequate for a good economic growth
  • Especially country like India when transforming from developing to developed nation!!
  • FDI bring Technology, skills and business expertise
  • Employment increase
  • Indirectly helps increasing exports

 

Why the opposition?

  • Domestic companies loose the markets
  • Small enterprise face tough competition in terms of quality, knowledge, skill and technical expertise.
  • Eventually, domestic companies may surrender their ownership to these companies.

Automatic route and Government route

In FDI policies, a company interested for FDI has to take prior Government approval if legislated as Government route. And no prior approval is required is automatic route.

There will be a percentage of FDI that a company can invest on –

Some of them for example are:

  • FDI cap in telecom – 100% (automatic route upto 49% and beyond via govt. route)
  • Insurance sector – 49% – Automatic route
  • Single brand retail – 100% 49% through automatic, 49-100% through government
  • Petroleum 49% in – automatic route, from earlier approval route