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Soon to be the most populous country in the world:
Indian youths dressed in the national colors
Photo: NARINDER NANU / AFP
China is still considered the workbench of the West. But industrialized countries and investors are looking for new growth markets - and are increasingly coming across India. The state railway company Indian Railways recently ordered 1,200 locomotives from Siemens Mobility for three billion euros, Airbus is facing a billion-euro order for 250 aircraft for Air India. The shipping company Hapag-Lloyd has acquired a 40 percent stake in an Indian terminal and transport service provider. And Apple plans to move another part of its iPhone production to India. For Nils Stieglitz, President of the Frankfurt School of Finance & Management, these reports show what a key role India is likely to play in the search for new markets in the future.
manager magazin: Mr. Stieglitz, with 1.4 billion people, India will soon be the most populous country in the world, but economically it is clearly overshadowed by China. How do you assess the further development?
Nils Stieglitz
: India's role as a key player in the global economy is becoming increasingly important.
The discussion is still strongly dominated by the relationship between the West and China.
But a lot has happened in India in recent years, as the current economic development shows.
But India isn't getting close to China yet, is it?
India hardly compares to China other than the similarly sized population.
The culture, the politics and the economic situation are completely different here.
If you look at the gross domestic product per capita, China is well ahead of India with just over 2,000 euros per capita at more than 12,000 euros.
But the Indian economy will continue to pick up speed.
As early as 2022, India will have overtaken Great Britain as the world's fifth-largest economy and will be in third place by the end of the decade - this shows the great potential.
Many Western companies are reporting major orders from India. Are these still isolated cases or do we already see a trend here?
These are no longer isolated cases, because the structural development is going in exactly this direction.
The orders for Siemens and Airbus show that investments are being made heavily in infrastructure.
The mobile network is also being expanded and 50 percent more motorways are planned.
What we see here first of all is a strengthening of the domestic market, but this is also opening up more and more – India is becoming interesting for other countries as an industrial location.
On the one hand, this has to do with the fact that many multinational companies want to diversify their value chains, and on the other hand with the fact that India has managed to significantly improve the quality of its location in recent years.
So two developments are intertwined that will lead to a new role for India in the world.
To what extent could the collapse of the Adani group jeopardize this development?
I see no fundamental effects here on the long-term development of India and its economy.
However, the country must have a great interest in transparently clarifying the events surrounding the Adani Group and their causes.
Because it is important to further strengthen the confidence of foreign investors and companies in the location.
The case shows once again that politics and business should not be too closely intertwined.
Is India underestimated by the western world?
Hardly any more, because many companies have recognized the potential.
Economically, India has done its homework in recent years, among other things by introducing a national sales tax system or simplifying access to financial services via digital identity.
Corruption, which is widespread, is also on the decline, although the country still ranks an inglorious 85th in Transparency International's latest anti-corruption index.
But we are seeing clear improvements here: While it was often difficult to do business in India in the past, it is now becoming easier and more predictable.
Focusing on its domestic market, India seemed to be isolated economically for a long time. What would a free trade agreement with the EU bring?
This has been a long-standing discussion, but it has recently acquired a certain urgency.
Globalization is under pressure for many reasons, but here is a great opportunity for a free trade renaissance for India and Europe.
A corresponding agreement would bring significant prosperity advantages for both sides.
Incidentally, such a free trade agreement would be perfectly complemented by a mobility agreement that is also being considered, especially against the background of the shortage of skilled workers.
Germany is already the most popular country for Indian students in Europe, as we can see for ourselves at the Frankfurt School and at our Indo-German Center for Business Excellence - so there is also great potential for local companies here.
What can be expected politically from India, which recently took over the presidency of the G20? Will the country's role in the Ukraine war remain so neutral?
While I'm not a foreign policy maker, the idea that India will join any bloc in any way is unrealistic.
Historically, India has always occupied a peaceful intermediate position between East and West.
And that will also be the case in the future – against the background of the strong economic development even with significantly more self-confidence.
The IMF predicts high growth rates for India of 6.1 percent for the current year and 6.8 percent for 2024
.
This puts the country at the top of all major countries and also appears to be permanently trailing China, at least in terms of growth.
If this trend continues, India could become the engine of the world economy and take over this role from China.
All in all, I think this is good news, because with a stronger India, we could geostrategically get out of the bloc thinking that has prevailed lately.
With India, we also get another player on the world map that can help to successfully tackle global challenges such as climate change.
How is India positioned here, what potential do renewable energies have?
A large part of the energy production in India is still covered by coal.
But since the country itself is severely affected by climate change, many steps towards more sustainability have been heralded - India is already the world's third largest investor in solar energy.
The country has also identified green hydrogen as a growth driver.
So the Indian government is taking the issue seriously, because it knows that if India's economic development continues to be strong and if brown energy continues to be used, this could cause serious problems around the world.
But it is also remarkable that India relies just as heavily on nuclear energy, and this contribution to energy production will be expanded in the future.
Which Industries Are Leading the Way in India's Economy?
A lot is happening in the industry.
While we are talking about de-industrialization in Germany, India is moving into the global spotlight here.
Companies like Siemens and Bosch have been active in India for decades, but that mostly had something to do with the domestic market.
Now the qualitatively new possibility arises to produce there for the world market.
In addition, India is now also considered the "pharmacy of the world", especially in the production of generics.
And the third important industry is IT services.
For a long time, India was primarily concerned with producing particularly cheaply, but now innovation plays an important role.
India has become a country of start-ups and now has more than 100 "unicorns", i.e. companies
that are valued at more than $1 billion.
The number shows impressively what is happening in this country.
When you think of Indian companies, Tata immediately springs to mind.
The Tata Group, with activities in 150 countries and more than 900,000 employees, is of course at the top.
The structure of a classic conglomerate is almost typical of India's economy.
The most important part is certainly the IT services and consulting subsidiary Tata Consultancy, but also the car manufacturer Tata Motors and the company Tata Steel, which is important for global heavy industry.
Which other corporations play important roles in the country's economy?
Definitely Infosys Technologies, another IT service provider where we are seeing a strong evolution towards an innovative digital company.
But also Reliance Industries, a conglomerate with over 340,000 employees and main business areas such as petrochemicals and textiles.
The development of Larsen & Toubro with more than 300,000 employees in the classic areas of construction, mechanical engineering and construction is also exciting.
It is crucial that these companies not only become increasingly active abroad, but also continue to operate strongly in the enormous Indian market.
The companies mentioned and a handful more intend to invest more than 250 billion US dollars in the Indian economy over the next five to eight years.
This extent alone shows
