Despite the positive economic outlook, the German companies surveyed also see challenges in India. About 64 per cent of firms surveyed consider the bureaucratic hurdles to be particularly burdensome. A report by KPMG in Germany and the Indo-German Chamber of Commerce (AHK India) stated that this corresponds to an increase of 11 percentage points compared to the previous year. This is followed by corruption at 39 per cent, although this is considered less relevant compared to the previous year (47 per cent).
The report stated that the third biggest challenge is the tax system. More than one in four German companies (27 per cent) cite this as a problem. "The 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," explained Stefan Halusa, Managing Director, AHK India.
Rising import duties are seen as a further risk by 52 per cent and non-tariff trade barriers by 43 per cent. When asked about exogenous risks, 40 per cent of German companies put possible cyber-attacks at the top. 37 per cent perceive the high level of air pollution in India's major cities as a risk. Increasing protectionism and bloc formation are named by 36 per cent as further significant risks.
Eyeing India's booming economy, nearly six in ten German companies are planning to increase their investments in India during the current financial year, the report added. The 'German Indian Business Outlook 2024' study revealed that 78 per cent of companies expect rising sales and 55 per cent forecast higher profits. It stated that 82 per cent expect an increase in turnover and 74 per cent expect higher profits.
By 2029, 37 per cent of respondents expect sales growth of more than 20 per cent and 25 per cent of them anticipate profit growth of more than 20 per cent.
The relevance of the sub-continent is demonstrated by the current investment plans of companies. A total of 59 per cent of the companies surveyed are planning to expand their investments this year. That is 23 per cent-points more than in 2021. This proves that India is and remains an important investment destination for German companies, it added.
This is even more obvious with a five-year perspective as three-quarters (78 per cent) of companies want to increase their investments, a doubling compared to 2021 (36 per cent). Only 7 per cent of respondents are considering reducing their investments in 2024.
"German companies are increasingly diversifying and regionalising their business operations across the globe, engaging with new locations. In Asia, they prioritise India as one of their preferred locations for new investments, due to the size of the population, political stability and sustainable growth prospects," explained Andreas Glunz, Managing Partner International Business, KPMG in Germany.
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