german investment in india report

GERMANY INVESTMENTS AND OPPORTUNITIES

QUAD BUSINESS SOLUTIONS | GURGAON, INDIA | +91 124 4930776 WWW.QUADGROUP.IN

CONTENT LAYOUT

INDIAN ECONOMY

GERMANY AND INDIA

ROAD AHEAD

BUSINESS CENTRE


INDIAN ECONOMY SINCE 1991


INDIA’S GROWTH STORY

The Indian Economy has

shown accelerated growth since the

economic reforms of 1991.

Presence of public sector in many industries was

reduced to pave way for FDI.

In 2008, India grew at 6.7%. This

growth accelerated to

9.3% in 2010-11.

The contribution of total trade in

goods and services to the GDP rose

from 16% in 1990–91 to 47%

in 2008–10.

India's major trading partners are the European Union, China, the United States of

America and the United

European Union.

Since January 2003, India has

received over US $ 5 billion of FII

investment.


GDP GROWTH RATES OF INDIA POST RECESSION

6.7

8.5

9.3

6.2

5.4 5.3

6.8

8 8.5

7.6

6.5 6.4

0

1

2

3

4

5

6

7

8

9

10

2008 2009 2010 2011 2012 Q1 2013

Actual Forcasted

source-www.rbi.org.in QUAD BUSINESS SOLUTIONS | GURGAON, INDIA | +91 124 4930776

WWW.QUADGROUP.IN

CURRENT SCENARIO

The Indian Rupee has reached an all time low of Rs58.15*. IT and Pharmaceutical companies will benefit. Auto-makers and Petro-Chemical based products like textiles and tyres are majorly impacted.

Foreign institutional investors brought around $15 billion into Indian equities (Jan-May ’13). June has seen capital outflows so far.

Companies like Bosch and BASF are looking to increase their promoter stakes to 75%.

Previous year FDI for India stood at $27.3 billion, lower by 13%.

India has received $15 billion of net FII equity inflows out of the $17 billion inflows into Asia Pac (ex-Japan / China / Australia)

Inflation rate as of April ’13 stood at 9.4%. The high inflation expectations, coupled to an actual trend of falling inflation is expected to create a opportunity for investors.

With the 4.9% of fiscal deficit in 2012-13, the government expects more investment in the coming quarters. Raghuram Rajan plans to liberalise rules for FDI and portfolio investment.

*as of 11th June ‘13 QUAD BUSINESS SOLUTIONS | GURGAON, INDIA | +91 124 4930776

WWW.QUADGROUP.IN

INVESTMENT IN INDIA

India has a conducive foreign investment environment that

provides freedom of entry, investment, location, choice of

technology, production, repatriation of capital, dividends etc. which is specifically aimed at

enhancing flow at FDI.

Government has done away with the complex pre-entry approvals.

FDI can enter India in most sectors through automatic route.

Source- http://indiainbusiness.nic.in

19

12

7

6

5

5

4

4

4

3

0 5 10 15 20

Services Sector

Construction Development

Telecommunication

Computer Software and Hardware

Drugs and Pharamaceuticals

Chemicals

Power

Automobile Industry

Metallurgical

Hotel and Tourism

SECTOR WISE % SHARE OF INVESTMENT


ATTRACTIVENESS OF THE INDIAN MARKET

India has the Best licensing

regime |KEARNEY

India is the most favoured democracy for

the global investors | KEARNEY

India was rated among the most

favourite investment

destinations| UNCTAD,

JETRO, JBIC, Deutsch Bank,

EIU etc.

6th most attractive

investment destinations |KEARNEY Business

Confidence Index, 2003

Major destination for foreign venture

capital funds |Far Eastern

Economic Review


TOP 10 COUNTRIES INVESTING IN INDIA

Country (Rank wise) FDI inflows

August ’91 – Mar ’12 (in US $ million.)

% share of total inflows

Mauritius 67,777 37.1

Singapore 17,496 9.6

UK 16,567 9.1

USA 13,014 7.1

Japan 9,146 5.0

Netherlands 7,737 4.2

Cyprus 6,425 3.5

Germany 5,293 2.9

France 3,207 1.8

UAE 2,254 1.2

SOURCE-www.indien.ahk.de QUAD BUSINESS SOLUTIONS | GURGAON, INDIA | +91 124 4930776

WWW.QUADGROUP.IN

GERMANY IN INDIA


ECONOMIC STATUS

• From -0.6% in 2012, the GDP showed growth of 0.1% in Q1 ‘13. Ernst and Young has forecasted a growth of 19% by 2014

• The industrial production on a rise, at 1.8% in April 2013.

• Demand from US to increase the exports from the Euro Zone. The total FDI outflow- $ 66.8 Billion in 2012.

• Structural gaps in the government budgets due temporary nature of social security fund surpluses.

• Confidence in real markets will improve further over the course of the year. This will give businesses an incentive to invest and hire additional workers. | Ernst & Young

EUR/USD Exchange Rates

Source- http://www.oanda.com/currency/historical-rates/


GERMANY AND INDIA

German companies in India have earned an excellent reputation, on the strength of their high technological standards, efficient business execution and long term commitment.

In 1867, Siemens laid the first telegraph connection. Bayer started local operations in India in 1896.

Germany is India’s fourth largest trading partner (after US, UK and Japan).

From $15,006.36 million in 2007-8, trade increased to $24,218.35 million in 2011-12.

Most investments from Germany to India were from the large German manufacturing corporates. The service industry and the German Mittelstand have seen great success too.

In the financial services sector Deutsche Bank is a major international player and Allianz Insurance with its Bajaj Allianz joint venture is the largest foreign insurer in India.


CURRENT SCENARIO

In 2012, FDI equity inflows from Germany was 38,830.57 million

2nd largest partner for technology collaborations

8th in the list of top ten investing countries since 1991

More than 1,800 German companies & 600 JVs between India and Germany in operation

German FDI inflows since August 1991 to March 2012 is nearly US $5.3 billion

1,620 financial collaborations have been approved for Germany since 1991 (7.8%)

Government of India signed BIPA with The Federal Republic Of Germany for the Promotion and Protection of Investments


GERMAN INVESTMENT INFLOWS SINCE 2000

With $1096 Billion in 2008, the amount of investments abroad increased to $1315 Billion in 2010

Germany, today is the 4th largest trading partner

65% of German companies surveyed by KPMG said they are looking to expand their India operations further.

**Financial Year followed Source- http://indien.ahk.de/

0

200

400

600

800

1000

1200

1400

1600

1800

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Total Investment Inflows from Germany**

Total Investment inflowsU

S$

in m

illi

on


GERMAN FDI EQUITY INFLOWS SINCE 2000

Year FDI equity inflows from Germany*(US$ in million)

2000 86.39

2001 133.05

2002 138.11

2003 78.80

2004 158.15

2005 83.34

2006 312.70

2007 343.16

2008 788.78

2009 599.93

2010 197.66

2011 1484.26

*Calendar Year followed QUAD BUSINESS SOLUTIONS | GURGAON, INDIA | +91 124 4930776

WWW.QUADGROUP.IN

SECTOR WISE FDI EQUITY INFLOWS

71%

5%

4%

3%

3%

2% 2%

2% 1% 1%

6%

1 2 3 4 5 6 7 8 9 10 11

Sector % share

1 Miscellaneous mechanical & Engineering Industries

71.04

2 Services Sector 5.45

3 Construction Development 3.95

4 Industrial Machinery 2.83

5 Telecommunications 2.47

6 Automobile Industry 2.07

7 Chemicals (other fertilisers) 1.96

8 Boilers & Steam generating plants

1.95

9 Trading 1.40

10 Electrical Equipments 1.08

11 Others 5.8


TOP 10 GERMAN FDI EQUITY INFLOW CASES

Name of the company Industry

MHM HOLDING GMBH MFG PRINTING INKS/PKG INKD, RESINS,ENAMELS ADHESIVES

DKY INIL HEALTH HOLDING MANUFACTURE OF POWER CAPACITORS

ALLIEANZ SE INSURANCE CARRIERS, LIFE

METRO CASH & CARRY INTERNATIONAL GMBH

TRADING

OIL TANKING INDIA GMBH(JV) CONSTRUCTION AND MAINTENANCE

DEEREE AND CO. INTERNET SERVICES

LANXESS DEUTSCHLAND GMBH MANUFACTURE OF CHEMICAL PRODUCTS

DEUTCH BOARSE A.G. SECURITIES DEALING ACTIVITES

Source- http://dipp.nic.in/ QUAD BUSINESS SOLUTIONS | GURGAON, INDIA | +91 124 4930776

WWW.QUADGROUP.IN

REGION WISE FDI INLOWS FROM GERMANY

• The RBI regional office in Mumbai(Maharashtra, Dadar & Nagar Haveli, Daman & Diu) received the maximum FDI inflow of 37% in 2010-11.

• The Delhi region(Delhi, part of UP and Haryana) received the maximum FDI in 2009-10.

• Top 3 investment locations: Maharashtra - 39% Delhi (incl. UP & Haryana)-17.8% Karnataka-14.2%

73

.91

21

.82

21

.47

18

.2

10

.3

8.5

8

4.3

2

2.4

2

1.4

4

0.7

2

0.3

1

0.0

4

0.0

3

0.0

3

36

.15

US

$ I

N M

ILL

ION

REGIONAL OFFICES

For April’10- March’11


SMALL AND MEDIUM INDUSTRIES

• SMEs in Germany are strong in areas of auto components, machine and hand tools, toys and pharmaceuticals

• Mittelstand companies account for nearly 50 per cent of the country’s GDP employing about 70 per cent of the nation’s workforce.

• SMEs constitute 99.7 per cent of the companies in Germany

• German companies face challenges like red tapism, corruption, poor infrastructure and requirement of number of licenses to start a business.

Break-up of SMEs in India


INDIA ADVANTAGE

Labour costs in India are

considerably low.

Availability of skilled

manpower

Rich natural resources at competitive

costs

Regular reforms in the

financial sector.

Access to the vast domestic

and South Asian market

Growing consumerism and growing middle class

Growing working age population

Source-http://www.ibef.org


CONCERNS AND OPPORTUNITIES

Opportunities

• Large talent pool and the low cost of operation. • Increased demand due to the growing middle class. • Hub for Global outsourcing, Manufacturing and design • The software IT parks, BPOs, SEZs instrumental in the growth • Untapped rural market

Concerns

• Lack of stable policies, High tariffs and Bureaucracy • Study shows SMEs find it difficult to train employees • Infrastructure growth hasn’t kept pace with the growth of the

Economy. It makes the deliveries of the services difficult and costly.


PROMOTION OF INDO-GERMAN TIES

• Indo-German Chamber of Commerce The IGCC is one of the most important institutions promoting Indo-German trade relations. Founded in 1956, It is now the largest German chamber abroad with more than 6500 members. IGCC is headquartered in Mumbai with branch offices in New Delhi, Chennai, Kolkata, Bangalore and Düsseldorf and liaison offices in Hyderabad and Berlin.

• Indo–German Joint Economic Commission The IGJEC deals with matters of bilateral trade and investment The main Indo-German economic agreements: • Agreement for the Avoidance of Double Taxation, which came into force on Dec 19, 1996 • Agreement for the Promotion and Protection of Investments, which came into force in July 1998 • Agreements on co-operation in scientific research and technological development of 1971 and 1974

Source- http://www.ibef.org QUAD BUSINESS SOLUTIONS | GURGAON, INDIA | +91 124 4930776

WWW.QUADGROUP.IN

ROAD AHEAD FUTURE OUTLOOK


EDUCATION AND RESEARCH

The Education sector in India is on the rise. The literacy rates have increased to 67%. The Indian government plans to open up 70 new universities for further studies by 2020.

Education will emerge as an attractive investment theme in India, with the population’s median age below 25 years, and with a visible shift in mass mindset towards spending for education.

India and Germany to spend €3.5 m each on research and innovation


INSURANCE

Munich Re has entered the Insurance sector and has signed a number of joint ventures in India covering Non-life Health Insurance (their subsidiary DKV launched a joint venture with Apollo Group); Non-life (Non Health) Insurance (their subsidiary ERGO signed an agreement with HDFC) by way of a joint shareholding (26%) in HDFC.

Allianz and CARE agreed to become partners for micro-insurance in India for the tsunami-affected people in Tamil Nadu.

An MoU has been signed between General Insurance Council of India and the German Insurance Association on April 3, 2008 to promote cooperative relationship, mutual understanding and exchange views and information on matters and activities of common interest.


TECHNOLOGY

The technological partnership of India and Germany is very crucial for development of further trade relations and corporate alliances.

Germany's leading news magazine Der Spiegel has cited India as the No.1 destination for offshore development by German software companies.

Cooperation with Germany in the field of Information Technology, biotechnology, auto components and renewable energy is increasing.

Indian Government has accorded approval to the Special Incentive Package Scheme to attract investments for setting up semiconductor fabrication and other micro and nanotechnology manufacture industries in India.


FUTURE OUTLOOK

The trade between India and Germany is expected to reach Euros 20 billion

According to a recent study by KPMG more than 80% of the German companies see India with tremendous growth potential.

Despite challenges that the German companies face, especially the SMEs, they remain quite bullish about the Indian Market.

Harsh Pati Singhania, President, FICCI highlighted two main forces which would stimulate Indo-German ties in future.

• First, the mutually reinforcing link between economy and technology in the bilateral relations.

• Second, the trend of bilateral investment and third, is a partnership in the global arena on concerns of global impact such as poverty, disease, environment and climate change, energy security etc.

The German pharmaceutical industry has seen tremendous growth and Generics constitutes one-fifth of that growth. Germany has developed affordable generic medicines and now collaboration with India will make them available to Indian SMEs.

Indonesia, Vietnam, Myanmar and Russia are the emerging markets which could draw away investments meant for India.


FOR PROSPECTIVE INVESTORS

A large market size, and population having

varying tastes, the German companies

should look to have a wider portfolio of

customized products

Indian market is price sensitive. Pricing of the

products should be done keeping in

mind the local mindsets.

German SMEs have difficulties in procuring talent. SMEs typically do not have the funds

or resources to conduct training

sessions.

The companies setting up business in India should lay focus on

quality, technology and after sales support.

It can prove beneficial for

German companies to find

a local partner. Doing business is

easy and entry becomes

convenient too.

Due to large market size,

company encounter lower

volumes and larger business

cycles. Thus, it is crucial to have a reliable vendor.


CONCLUSION

• India has expertise in knowledge based industries. The R&D centres and BPOs make India an attractive destination.

• The efficiency of the policies and the lack of proper infrastructure makes the trickle-down effect difficult.s It is difficult for corporates to tap the potential of Indian market in absence of proper procedures and innovative systems to reach the heart of India.

• The working age population is on the rise and the dependency ratios are lower. This means, the strain on the public finances is going to decrease, having a positive impact on the deficits and growth of the economy.

• Although, the growth of the middle class in India is a boon to the companies, but the income levels are still lesser than those in developed countries making it imperative for business’ to price their products sensitively.

• India does have an edge over other countries when it comes to the supply of resources and skilled manpower. India is a hub for outsourcing.

• According to a survey, tapping into new sales markets (66 percent) and sources of supply (49 percent) were the main motives for SMEs to operate internationally. Apart from this, 34 percent mentioned "access to knowledge“, 23 percent "skilled workers" and "low-cost labour" was a motive for another 9 percent.


german investment in india report

Business

quad business

large market

growing middle

german companies

indian market

german ties

current scenario

european union