Despite the tumultuous international geopolitical situation, a new defence partnership between Germany and India has emerged. German Chancellor Olaf Scholz’s recent visit to New Delhi emphasised the will of both nations to develop their economic and diplomatic ties further. Although the two countries have strong trade and diplomatic ties going back to the second half of the twentieth century, their bilateral collaboration on matters of defence has been limited, until now.
Indo-German relations
During the colonial period, while European domination overseas was a preeminent force in international geopolitics, Germany and India had little to no bilateral relations, as India was ruled by the British. After the German defeat in 1945 and Indian independence in 1947, both nations emerged as ‘new countries’. As the new Germany sought to rebuild itself in the aftermath of the fall of the Nazi regime, India was one of the first countries to establish diplomatic ties; a then unexpected bond between a country that retained close relations to the USSR despite its non-alignment, and a state subordinated to the Western block, to whom it was forbidden to have any diplomacy outside of business.
After the fall of the Berlin Wall and the dissolution of the Warsaw Pact, the globalisation of trade and the vast economic potential of both countries prompted them to fuel their trade balance. While Germany started to significantly increase its exports during the 1990s, even claiming the title of the world’s biggest exporter between 2003 and 2008 before being surpassed by China, India’s foreign trade started its ascension around the year 2000 – and has not stopped since. Two rises of such magnitude were bound to lead the two parties to cross paths. In 2008, then German Chancellor Angela Merkel made an official visit to India, which led to the signing of several agreements on the expansion of bilateral cooperation in trade, technology and science.
Over the past decade, economic interactions between the two countries have increased significantly. In 2022-23, Germany’s bilateral trade with India was valued at $26 billion, making Germany India’s top trading partner in Europe. Indian exports to Germany totalled around $10.1 billion and included, among others, electrical machinery and equipment, engineering goods, pharmaceuticals and drugs as well as organic and inorganic chemicals. Germany’s exports to India included aircraft and spacecraft, medical and scientific instruments, electrical machinery and automotive components.
Over the past decade, economic interactions between Germany and India have increased significantly. In 2022-23, Germany’s bilateral trade with India was valued at $26 billion, making Germany India’s top trading partner in Europe. Germany’s exports to India included aircraft and spacecraft, medical and scientific instruments, electrical machinery and automotive components
There are currently more than 200 Indian companies operating in Germany, totalling an investment of more than $7 billion in sectors such as IT, automotive, pharmaceuticals and biotech. Thanks to the financial power of some of these companies, they were able to make considerable acquisitions in Germany and other Western countries. TCS fully acquiring Postbank Systems AG from Deutsche Bank AG is one key example.
In parallel, German investments in India have also been expanding. Companies like Volkswagen or the logistics giant DHL are also planning to increase their investment share in India, with the latter considering investing half a billion euros by 2026, as a proactive reaction to the rapidly evolving e-commerce market.
In spite of the expansion of economic ties, the two countries have nevertheless been in dispute on the issue of Russian gas, which India has continued to purchase, leading to accusations that the country has been fuelling the Russian war effort in Ukraine. However, Philipp Ackermann, German ambassador to India, said that, given India’s history and geographical location, it is understandable that the Indian perception of the Ukrainian conflict may somewhat differ from that of the great European power – the relationship therefore seems to remain unstained. The willingness to put such contentions aside is a good example of German Realpolitik, which aims to build strategic partnerships based on the realities of geopolitics rather than on ideals. It is a recurrent dilemma for Scholz’s left-leaning coalition: focus on spreading progressive values or act solely according to geopolitical realities.
It is also noteworthy that Germany has recently been acquiring a large amount of gas from Kazakhstan via a pipeline that crosses Russian territory. When asked about this, Stefan Meister, member of the German Council on Foreign Relations said: “On one hand we support Ukraine. On the other, our businesses need resources.” The concept of Realpolitik reflects well the country’s ability to face economic imperatives when necessary.
During Scholz’s last visit to New Delhi from October 24-25, Prime Minister Modi, addressing the Asia-Pacific Conference of German Business, seems to have perfectly summarised the spirit of both countries and soon-to-be partners: “This is the right time to join India’s growth story. When India’s dynamism meets Germany’s precision, when Germany’s engineering meets India’s innovation, when Germany’s technology combines with India’s talent, a brighter future is envisioned for the Indo-Pacific region and the world.” It appears that the industrial and manufacturing ties between New Delhi and Berlin have gained significant momentum.
This statement mirrors the German spirit towards India. On October 16, the German Cabinet adopted a document titled “Focus on India”, which recognises India as a strategic partner and sheds light on the future direction of bilateral trade relations, the cooperation in the field of academic research and underlines the necessity to step up defence partnerships to reinforce regional stability.
“This is the right time to join India’s growth story. When India’s dynamism meets Germany’s precision, when Germany’s engineering meets India’s innovation, when Germany’s technology combines with India’s talent, a brighter future is envisioned for the Indo-Pacific region and the world,” said Prime Minister Modi at the Asia-Pacific Conference of German Business
Indian and German defence ties
Historically, Indo-German defence ties have been minimal, except for West Germany providing four HDW-class submarines to India in the 1980s. After reunification in 1990, Germany’s arms export industry took off cautiously, with the country mostly selling to other European countries, before slowly opening up to the MENA region at the beginning of the 21st century. Nevertheless, the German government under Angela Merkel was reluctant to sell weapons to India. But since the arrival of Olaf Scholz as Chancellor, this strategy seems to have changed – the new German head of state has been actively encouraging arms manufacturers to seek out partnerships with India.
India has been the world’s biggest arms importer for some time now, and has largely relied on Russian weapons exports, which until a decade ago represented up to 76 per cent of all Indian arms imports. In recent years, this number fell to approximately 36 per cent as the Indian government has been diversifying the sources of its weapons imports and has made it clear that indigenous production is a long-term goal. Indigenous production is part of Prime Minister Modi’s “Make in India” initiative, which aims to facilitate direct foreign investment, foster innovation and reinforce manufacturing infrastructure; this initiative is one of the country’s main strategic priorities.
To counter China’s rapidly expanding submarine presence in the Indian Ocean and Pakistan’s growing naval capabilities, India has launched Project-75 (India), or P75(I), aiming to build six modern submarines with an Air Independent Propulsion (AIP) system in collaboration with a foreign manufacturer. The project involves the development of a vast manufacturing programme in India itself.
Seizing this opportunity, the German naval vessel manufacturer TKMS (ThyssenKrupp Marine Systems) has entered the competition, presenting its Type-214 models. As the only manufacturer possessing an already operational and field-tested AIP system, a key requirement of the Indian Navy, TKMS has emerged as a prominent contender for procurement.
Germany is currently competing with Spain’s Navantia, with their S-80 class design. However, its AIP system is not expected to be operational before 2026, which might turn the tide in favour of Germany, a country more than willing to deepen its ties with India.
Global power plays at stake
On October 21, India and China were said to have reached a new agreement regarding their border dispute along the Line of Actual Control (LAC), which had reached its peak intensity during the 2020 clashes. This will possibly usher in an unprecedented era of global détente in South-East Asia and, at the very least, boost business ties between the countries and ease the tensions, much to Germany’s benefit – so far, they have had to tread cautiously given their strong economic ties with China.
India has launched Project-75 (India), or P75(I), aiming to build six modern submarines with an Air Independent Propulsion (AIP) system in collaboration with a foreign manufacturer. Seizing this opportunity, the German naval vessel manufacturer TKMS (ThyssenKrupp Marine Systems) has entered the competition, presenting its Type-214 models
Although Germany had seemingly aligned itself with EU and US policies regarding China, its economy and trade balance is inextricably linked to China, who, until 2024, was Germany’s biggest trading partner. Given China’s reluctance to abandon its territorial claims in the South China Sea and its tendency to use its economic weight to achieve its political goals (similar to the US), Germany has tried to adopt a new strategy towards China, encouraging its companies to reduce their links with the PRC. However, this sentiment was not shared by some of Germany’s biggest companies and manufacturers, whose businesses are still very China-dependent. For example, the German chemical giant BASF is closing its factories in Germany and moving production to China, due to decreased profitability.
For now, Germany must face a stark reality: if it wishes to remain the EU’s factory, it cannot do so without the global factory: China. Unless a new global manufacturing hub emerges, India appears poised to claim this title, leveraging its vast talent pool and solidifying its position as the world’s leading demographic powerhouse. India’s recent agreements with China show signs that both nations view multipolarity through a diplomatic lens rather than a confrontational one. This balanced posture demonstrates the willingness of economic powers to find peaceful solutions based on interests and mutual benefits, which can far exceed those brought on by a confrontation based on ideological principles. An approach that Germany could leverage in its interest.
–The writer is a defence and security industry consultant with varied experience of working with medium and large companies majorly in European market. The views expressed are of the writer and do not necessarily reflect the views of Raksha Anirveda
