Importance of Modi-Merkel meet in the changing global scene

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TOPIC: General Studies 2

• Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests
• Effect of policies and politics of developed and developing countries on India’s interests

PM of India recently signed eight major agreements with German Chancellor. India is looking at outcome oriented momentum at India-Germany ties and quantum jump especially in economic ties. German Chancellor has long cultivated relations with India and stresses that Germany and EU must compete with new emerging economic giants. She has also said that Germany cannot completely depend on traditional allies like USA and Britain in age of new US president and Brexit.

Importance of India and Germany today

• The people of both nations have displayed that desires of both governments is to develop ‘middle power cooperation’.
• It is a time when USA is becoming unpredictable and China more assertive, and hence a lot of other countries in middle are thinking of stepping up into gaps created.
• Germany is the most powerful and wealthiest of the EU nations and India being dominant player in South Asia and Indian Ocean region are looking to work with each other more intently.
• Germany needs to look elsewhere apart from traditional allies. It has also mentioned that china insisted Germany to endorse OBOR initially and then later on disagree with certain agreements.

Trade and investment-

• India and Germany are a win-win proposition for both countries by coming together in several of initiatives taken by GoI like Make in India, Skill India, Smart cities, infrastructure, Digital India etc. where Germany has great competence.
• There have been problems between two nations regarding bilateral trade and investment negotiations which started in 2007. At that time, it was thought to conclude negotiations in two years. But they are still on. Thus, there is a need to conclude these agreements as soon as possible considering the fact that both the nations now need each other to develop themselves.
• Bilateral investment treaties have also been cancelled by India and new draft submitted by India is not found acceptable by EU. Hence, these critical aspects of trade relations between two nations need an energetic boost.
• However, now India has initiated reforms with GST, bankruptcy code, is also a largest recipient of FDI and its fast growing nature economy. This will help developed countries to look at India as an attractive investment destination.
• At present, 1600 German companies are working in India and 60 joint ventures with India. 25 working groups are operational. With their interactions and deliberations, there is a lot of potential in future.
• The investment opportunities are also high in India. The German MSMEs had traditionally five radius mile concept which they have not looked beyond. This can provided fillip to develop the relationship.
• Also, uncertainty about America can be motivation for Germany.

Security

• France, UK, Germany have suffered from terrorist attacks and India has been a victim of terrorism.
• Thus, there is a need for two countries to cooperate and collaborate to deal with the menace of terrorism.

Strategic partnership

• As Germany gets disillusioned with Trump’s America, it is looking around for partners. India has also been looking around for development and sustainable partners since a while and is closely related to Japan, Australia etc.
• Thus, it is an opportunity where middle powers can get together.
• India and Germany have been on same wavelength, whether it is about Indian Ocean region, South China Sea, in terms of freedom of avigation, importance of award by UNCLOS.
• A strategic relations doesn’t exist for now between both countries. Take for example Japan. Japan has now made a committed official decision across its parties and government to try and build up India as an economy and as an Asian power for strategic reasons. It is for them about balancing china and other issues. They are investing millions of dollars to build infrastructure, develop projects with India in third countries, Japanese companies have come here even if not making a profit.
• Germany in many ways is similar to Japan- WWII legacy, has a pacifist constitution, generally being reluctant to play global role. Thus, Germany can also follow the footsteps of Japan or walk on similar lines.
• With Germany, Indian government is hoping to transform the relation. Germany is sceptical about India somewhere as India is a reluctant free trader. Due to large population and need to create jobs, many times India has taken two steps forward and one step backward. This is the reason why RCEP has not yet borne fruit. The concept of proving jobs, getting up the manufacturing ladder from 17-18% to 25% etc. is finding a difficult terrain in India. If the markets will be opened, then Make in India project will suffer the most.
• Thus, there are all these issues to deal with. China is more attractive as far as Europe is concerned. Germany was never really interested in India and India had own problems in region. Now, going forward, India has an opportunity to develop a partnership with Germany. The OBOR initiative has been termed as ‘new colonial enterprise’ as it is sino-centric road arrangement. It means that all belts and all roads lead to china.

Climate change

• With US withdrawing from it, India and China are looked as future strong partners to uphold the paris agreement.
• India has ambitious programmes in renewable energy. In this area, India and Germany have a bright future.
• German companies are looking forward to India’s large market with USA and China’s stand on globalisation.

Germany in India

• The paradox of indo-German relationship has been, despite hardly any political problems, the trade remains modest at 17 billion USD whereas with China it is 10times.
• This limits the degree of interest which Germany has on the trade and economic front.
• The Germans are keen to have government to government defence procurement agreement like with France. But with India there are certain challenges-
  • The Germans have been reticent in transfer of technology
  • Offset clause
  • The German export control regime which has statutory restrictions about transfer of weaponry to conflict prone areas.

Civil nuclear cooperation

• Nuclear safety is an area where both countries can have equal cooperation with each other.

Conclusion

The relevance and importance of Germany has grown in the eyes of India considering the state of EU today.

German chancellor has bright prospect in winning the election. Indian PM has tried to give a nudge to India-EU FTA but it is still not moved forward. But there are positive hopes in the direction as Germany and India are both in favour of globalisation and keeping trade open.

Indo-German development is more of an incremental type of progress than transformative.  In the era of unspecified times, all the major players are simultaneously engaging all major players. Each relationship is going to have its own dynamism and momentum. With Germany, it is important to maintain slow and steady consolidation and keep on emphasising that India is a strong opportunity.

Connecting the dots:

• India and Germany have been not natural partners but they have immense opportunity to grow together in the present times considering the global scenario in regarding various aspects. Discuss the potential growth areas for both the nations.