Since the economic reforms and market opening in 1991, India has been Germany's major trading and investment ally. From 2000 to 2022, Germany has poured more than USD 13.6 billion into India, focusing mainly on transportation and electrical machinery.

Today, 1700 German companies are active in India out of which 1000 companies are German subsidiary companies. German companies can benefit from India's booming economy and diverse consumer base through a strategic approach, market research, partnerships, and cultural adaptation.

Let us see in greater detail how the Indian market entry strategy looks at recent positive growth.

Importance of India in the Context of German Investments

●   India’s Possibility to Become a Growing Market in the Future

As per recent data, the Indian economy is expected to face a boom of 8% in the next 5-6 years.  This data enables enough Indian market entry strategy available for German businesses.

Additionally, as per recent reports, the Indian GDP growth rate is projected annually to be 6%. Such potency is always favorable for investors who are trying to use it for opening and sustaining operations in India.

Hence, India is a favorable market that has outperformed global economies like Canada (1.6% economic growth) and China (4.2% growth rate). The gap in terms of development between the top-performing economies and India is huge.

To even lucratively utilize the market, boom the Indian government has declared a program that supports German investments. The direct impact of the demand was the ‘Make in India Mittlestand’ program for developing a market entry strategy for India.

●   About the Make in India Mittlestand (MIIM) Program and its Potency

The MIIM program acts as a local fast-track for German SMEs trying to invest in India. The program currently supports around 72 German SMEs and declared an investment of about 650 million euros.

Such a broad outlook of the project supports 31 new manufacturing plants, 11 expansion projects, and even two short to medium-pilot projects. The popularity of the program is such that after its outlay, 40 companies are at an advanced stage of their market entry into India.

With all these developments it can be stated that the MIIM project is successful in providing Indian market entry strategies for German companies.

●   Improvement of Trade Relations With India

When we are talking about the improvement of trade relations with India, we specifically mean investment and business growth. India and Germany share a strategic partnership with India being one of the important partners.

In May 2022 Indian government in Berlin signed a strategic business partnership for specific sectors. Some of the sectoral opportunities where Germany may penetrate Indian markets are:

1. Automobile and auto components manufacturing.
2. Chemical manufacturing plants in India.
3. Electronic systems with an emphasis on the smartphone industry.
4. Renewable energy sector with 100% FDI allowance.
5. Pharmaceutical industries, etc.

Thus, the Indian and German bilateral ties are on the bright side allowing FDI inflows and allowing prompt Indian market entry strategy development.

Ways to Penetrate the Indian Market

India's role as a key investment destination for German companies is on a sustainable upward trajectory. According to the survey, 78% of these companies are planning new investments in India by 2029, marking a significant 19-percentage point increase from 2024. This trend highlights India's growing importance, with 45% of the firms aiming to establish India as a production hub for both the local and broader Asian markets by 2029, reflecting a 12-percentage point rise from 2024.

Thus, penetrating in Indian market is a lucrative offer for German companies. Some  strategies to penetrate the Indian market are:

• Joint Venture Route: Creating joint ventures with Indian companies reduces the risk of hefty losses while penetrating an overseas market. However, it is expected that both German and Indian companies ensure equal division of responsibilities to prevent such losses. 
• Piggybacking: In this route, one company utilizes the inventory of another overseas company to sell their product. German companies may allow their partners to manage sales in India, while the other focuses on the local German market.
• Greenfield Investment: In this method, a company directly buys all factors of production in another country. If German companies already have a huge financial resource, greenfield investment helps to collect more advantages.

Using the above-mentioned Indian market entry strategy helps Germans in getting a profitable partnership.

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Advantages of Using India to Expand Germany’s Business

There are a few advantages to developing a market strategy for India and starting a business. Some of these advantages are:

1. Strong Manufacturing Base

As per reports, India is planning to go forward by producing 25% of its GDP output from the manufacturing sector. Therefore, German businesses have a greater opportunity to leverage manufacturing goods production.

2. Political stability

The political stability of India as per 2022 report shows that it is in the range of -1.51 - -0.57. This report indicates a relatively larger political stability in the Indian subcontinent.

Such political stability indicates a greater indication for businesses to utilize it effectively. Moreover, greater political stability aids in the Indian market entry strategy effectively. 

3. Low labour cost + Availability of Highly Skilled Workforce

In Asia, India stands out for its competitive salaries, with a daily wage of approximately 2.5 USD (INR 178). This affordability makes India an attractive investment destination, while also allowing for flexibility in wage requirements based on the skill level of the workforce.

Apart from that, the report highlights that the skill level of workers is increasing in the range of 15%-20% on average.

4. Government Schemes Like Make in India to favor local growth and development.

The Make in India plays an important role in increasing the vitality of the manufacturing sector.

This initiative opens India as a manufacturing hub for companies to utilize low-cost labor and upskill them for future industries.

Such initiatives act as a bi-pronged strategy to enable foreign investments in manufacturing and provide jobs to Indian citizens.

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Challenges In Expanding into Indian Market

Multiple challenges bar the unprecedented growth using the Indian market entry strategy are:

●   Complexity of the Legal Structure

One of the key issues in development is legal complications. A survey conducted and reports stated that 67% of the respondents hope for simplified legal regulations and a reduction in corruption in India.

However, in situations like these India Entry Management Consulting firms such as Tecnova can help the German businesses.

●   Challenges in Bureaucratic Systems

As per the reports of the German bi-national Chamber abroad, 53% of the companies in Germany feel bureaucratic challenges.

Additionally, the same reports state that 31% of the companies show regulatory issues as one of the key challenges. Removing challenges in regulations and restricting over-bureaucratic movements in business becomes crucial at this point. 

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Going Forward

The expected Indian market entry strategy available for German business firms is to open manufacturing hubs. This is due to the Make in India program which allows up to 100% FDI in core industries. Additionally, incorporating the Mittlestand program helps businesses to get relaxation from the government of India to pen their industrial base in India.

Moreover, nullifying the restrictive regulations and improving bilateral ties also works well. To receive prompt assistance, seek help from India entry management consulting firms like Tecnova. Their experience in Indo-German business relations, helps firms to perform optimally.

Reference Links

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German Trucking Leader Seeks India Entry Strategy 

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