Photo : Reuters
Germany is keen to strengthen its ties with India as relations with China deteriorate, viewing the South Asian nation as a key partner for trade and geopolitical support. Chancellor Olaf Scholz is set to embark on a significant three-day visit to India, beginning Thursday, accompanied by a sizable delegation of ministers and business executives. This visit aims to forge a strategic partnership with Prime Minister Narendra Modi, with the two leaders scheduled to meet on Friday morning for discussions and a joint cabinet meeting.
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The backdrop for Scholz's visit is critical, as he navigates a challenging landscape for the German economy, which has been negatively impacted by the ongoing war in Ukraine and increased competition from China. Modi will have just returned from the BRICS summit in Russia, where he engaged with President Vladimir Putin, highlighting the intricate geopolitical dynamics at play. Notably, India recently signed a border agreement with China, easing tensions that had persisted over the past four years.
One key issue on the agenda is India's plan to procure six new submarines as part of its strategy to counter China's growing naval presence in the Indo-Pacific region. German defense contractor Thyssenkrupp AG is vying for this substantial order, valued at approximately 400 billion rupees (around $4.8 billion). However, a German government spokesperson refrained from commenting on whether a decision regarding this contract would be reached during the visit. Notably, Spanish Prime Minister Pedro Sanchez is also scheduled to visit India later this month to inaugurate an Airbus SE plant in Gujarat, with Spain's Navantia also competing for the submarine contract.
India's desire to diversify its sources of military hardware has intensified since Russia, its primary arms supplier, invaded Ukraine in 2022, prompting Western sanctions that have complicated the relationship. Despite these shifts, India continues to maintain its historically close ties with Russia. Scholz intends to discuss the situation in Ukraine with Modi, particularly in light of India's involvement in discussions with both Putin and Xi Jinping. Germany's ambassador to India emphasized the significance of Modi's position, stating that India is well-placed to engage with both sides of the conflict and has shown renewed interest in addressing the situation.
The issue of trade is also central to the discussions. The German government is actively encouraging its companies to reduce their dependence on trade with China, and some analysts suggest that India, as the world’s fifth-largest economy, could serve as an alternative partner. Currently, Germany is India's largest trading partner in Europe and ranks seventh globally, with bilateral trade reaching $22 billion in the 2020-21 fiscal year. Scholz is expected to seek assistance in navigating the challenges faced by small and medium-sized German firms operating in India, particularly regarding bureaucratic obstacles and protectionist measures that have been identified as significant hurdles by over 60% of German businesses, according to a recent Indo-German Chamber of Commerce survey.
As part of his visit, Scholz will travel to the port city of Vasco da Gama on Saturday, where he plans to visit two German navy ships that recently transited the Strait of Taiwan, marking the first such occurrence in 22 years despite warnings from China.
An additional area of focus for Germany is addressing labor shortages, as the country anticipates a decline of approximately 7 million workers over the next decade due to an aging population. Current labor shortages are estimated to cost the German economy around $54 billion this year. To counter this trend, Scholz’s government has relaxed immigration laws to attract skilled migrants. Labor Minister Hubertus Heil, part of the visiting delegation, noted that India is viewed as a particularly vital partner in this regard.
This partnership could be mutually beneficial, as Modi faces pressure to create jobs for India’s youthful population, which constitutes over half of the country's 1.4 billion residents. The Indian government has already established mobility agreements with other countries experiencing similar demographic challenges. Currently, about 137,000 Indians work in Germany, which is projected to need approximately 400,000 migrant workers annually to stabilize its workforce, according to government estimates.
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