Significantly higher sales and profit expectations and an intact trend in new investments in India: as a complement to China, more and more German companies are entering India in order to participate in the dynamic and sustainable growth expectations there. These are some of the key findings from the German-Indian Business Outlook, which we have once again compiled together with the Indo-German Chamber of Commerce. According to our Business Climate Survey 2024, the subcontinent is increasingly becoming the focus of the German economy - however, there are also complex challenges to overcome locally in order to exploit the growth potential.
Andreas Glunz
Managing Partner International Business
KPMG AG Wirtschaftsprüfungsgesellschaft
Five remarkable figures in a compact overview
78% – expect sales to increase in the current financial year.
59% – want to invest in India in the current financial year.
54%– currently consider the low labor costs to be the greatest locational advantage. In the next five years, however, many expect wage cost increases, so that only 36% still consider this to be a locational advantage.
35% – want to operate a global competence center or shared service center in India in the next five years - despite or precisely because of the AI trend.
67% – hope that the re-elected President Narendra Modi will improve the regulatory environment and legal certainty.
German-Indian Business Outlook 2024: The most important results
Positive business expectations: India's importance is growing
78% of the German companies surveyed expect sales to increase and 55% expect profits to rise in the current financial year. This is an increase of seven percentage points in each case compared to the previous year. Expectations for the next five years are even more positive: 82% expect sales growth and 74% expect higher profits. 59% of companies are planning to expand their investments in India in the 2024 financial year. By 2029, 78% of companies are planning new investments - an increase of 19 percentage points.
Location factors: Labor market and bureaucracy particularly in focus
The companies surveyed named India's low labor costs (54 percent), political stability (53 percent) and qualified specialists (47 percent) as the most relevant advantages. However, companies expect labor costs to rise: Looking ahead to 2029, only 36 percent still see cost advantages. Due to the impressive sales potential in India - a market with over 1.44 billion consumers - 45% of respondents want to use India as a production location for the local market by 2029, twelve percentage points more than in 2023. According to the participants, the biggest challenges at the location are bureaucratic hurdles (64%), corruption (39%) and the tax system (27%).
What companies expect from the newly elected government
Prime Minister Narendra Modi was recently sworn in for his third consecutive term in office. Modi says that the government wants to focus on the country's economic development, among other things. Compared to other Asian countries, 69 percent of German companies see India's steadily growing economy as a particular advantage. At +7.8 percent, the growth rate in India in 2023 was also higher than in China at +5.2 percent. Respondents now expect Modi to improve the regulatory environment and legal certainty (67%), better infrastructure (55%) and trade facilitation (48%).
What the creators of the study say
"German companies are increasingly diversifying and regionalizing globally. In Asia, companies prioritize India as a preferred location for new investments due to the size of the population, political stability and sustainable growth prospects. With Modi's re-election, German companies hope that the structural problems will be addressed, including infrastructure deficits in the areas of transportation, energy, information and communication."
Quote from Andreas Glunz, Head of International Business at KPMG in Germany.
"India offers a unique combination of market size, market potential and talent pool for German companies. However, bureaucratic and regulatory hurdles are still the biggest problem. A more efficient administration, the further reduction of corruption and a simplified tax system would make India even more attractive for German companies."
Quote from Stefan Halusa, Managing Director of the Indo-German Chamber of Commerce
Business climate survey: the methodology
A total of 85 companies took part in the survey conducted by KPMG AG Wirtschaftsprüfungsgesellschaft and the Indo-German Chamber of Commerce. The survey took place between April 9 and May 20, 2024. Managers from Indian subsidiaries of German corporations and companies with Indian activities in Germany were surveyed.
