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India-Germany trade to double by 2011

Bilateral trade between both countries would double in five years to exceed euro 20 billion from the current euro 10 billion, says a report.

business Updated: Sep 16, 2007 09:32 IST

Bilateral trade between India and Germany would double in five years to exceed euro 20 billion from the current euro 10 billion, says a FICCI-KPMG report.

With new initiatives to boost greater investment flows and business based on an aggressive roadmap, trade between India and Germany is poised for a major paradigm shift, says a report brought out by the Federation of Indian Chambers of Commerce and Industry (FICCI) and KPMG.

With trade touching euro 20 billion by 2011, Germany would become India's second largest trade partner after the US, from its current fourth position after the US, Britain and Japan.

Apart from sectors such as engineering, automotives, chemicals and pharmaceuticals, where both the countries are actively cooperating, new and emerging areas of infrastructure, construction, logistics, transportation, renewable energy, nano-technology, biotechnology, retail, financial services and defence should be explored to accelerate bilateral trade, the report said.

The report also said joint ventures between local partners of both the countries would also turn out to be instrumental in enhancing India-Germany trade. In order to encourage more such partnerships, issues such as local regulation and taxes need to be addressed.

According to the report, German companies are upbeat about investing in India due to the country's galloping economy and burgeoning foreign direct investment portfolio coupled with skilled manpower availability at competitive costs.

German investors also find the Indian market lucrative due to its strategic location, providing access to the entire South Asian market and a fast-growing, English-speaking and increasingly affluent middle class.

The reasons why Indian investors are becoming bullish about Germany, says the FICCI-KPMG report, include highly sophisticated infrastructure, largest economy in Europe with a 22 percent share of Eurozone GDP, access to 454 million consumers, a liberal and stable social market and excellent financial services.

The report, however, noted, "Indian and German companies from various sectors continue to grapple with non-tariff barriers and unreasonable requirements relating to investments."

Excessive bureaucracy, lack of transparency in classification of products and services impeding clarity on their importability and taxability, and administrative burden of loading value-added taxes under several different classifications are said to be some of the problems faced by German firms in India.

Indian companies face issues such as social security, wage tax, unemployment insurance and health insurance deductions meant for short-term expatriate employees along with other crucial problems of business visa availability and work permits.