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Guten Abend lieber Besucher von BNA GERMANY®, heute ist der 19.01.2020 :: Deutsch ::
Sie befinden sich hier: India / Allgemeine Informationen / Economy / 

India: Strong Growth - Weak Infrastructure

Since in 1991 introduced economic reforms, which was triggered by a massive financial crisis, India is reckoned as one of the world's most promising markets. With an average annual growth from six to seven percent, India is one of the fastest growing market economy and can even overtake China, which showed a growth of merely four percent last year. Yet, if the market wants to grow further, it has to invest heavily in the infrastructure. 


Because, apart from the bureaucratic hurdles, which demand a lot of time and patience from a foreign investor, also many foreign companies shy away due to the bad infrastructure: the old railway network and airports, inadequate road connectivity and bad roads, as well as the over burdened electric lines and power supply are not exactly the inviting conditions for the future investors.


Building infrastructure is the topmost Priority

The Indian Prime Minister Manmohan Singh too wants to address this problem strongly: he is firmly going on with the market economy reforms and wants to carry forward with privatization. The expenditure on Education should be raised and the infrastructure should be strongly strengthened. For the airports in New Delhi and Mumbai, already the private operating agencies are being sought. The German firms like Frankfurt Airport Organization Fraport, the Munich Airport or the Construction company Hochtief too are competing among others for the contract. A decision for one of the ten applicants will be taken by the end of this summer. In the recent years, some work has already been done in the area of local traffic, as Siemens has built the first signal tower at the Bandra Station in Mumbai already in 1975. Since then, no more technical problem has occurred there. Probably a reason, therefore that Siemens got recently the contract of electronic upgrading of 101 trains. For this, the task volume amounts to 168 Mill. Euro. This also shows, that the German Company has a good name in India, as the Company would also be signing a  contract by the end of June, to build a new gas- and turbine Power-plant in Gujarat by the Indian Torrent Power Generation.


USA and Japan capture the indian Market for themselves

However, the overall investment of Germany in India is rather low in comparison to the other countries. On the top of the direct investment are above all the USA, Japan and Korea. The USA is investing mainly in the field of IT and Software. For example, IBM is  planning to recruit yet 14,000 employees in India, however at the same time relieving 13,000 employees in Europe and USA. As the reasons given for the transfer of jobs, above all are the good number of experts in India and the low salary costs. An IT specialist in India earns only a sixth of what an American expert would earn. Due to these reasons, the Chip manufacturer Intel too is planning to establish a testing plant worth 400 Mill. dollar in India.  


The Japanese and Korean, on the other hand, estimate India above all as the coming world wide most important location for the automobile industry. No other country, promises in long term a stronger growth in the automobile market than India. The leading economist too agree to that. So the Japanese motorbike manufacturer Yamaha is setting up soon its third unit, and thereby investing about 90 Mill dollar. The automobile manufacturer Nissan has already started its business activities in India in February this year. Nissan is already supplying to the five independent agencies in Mumbai, Chennai, New Delhi, Bangalore and Hyderabad. Also, Toyota together with its sister concern Daihatsu is establishing new unit near its existing units in Bangalore. The South Korean  car manufacturer Hyundai as well has announced to expand its production in India and to set up a new unit.


German investment is far below its capabilities

Europe's entry into the Indian car market didn't do well in the first place, one of the reason for this might be the sale of European car brands like Mercedes, BMW or Audi in the subcontinent is not good. Here, first of all the cheap small cars are marketed. It's true that V W had planned to set up a factory in India this year, but this plan firstly got into the cold storage due to the corruption scandal and this can also lead to, that Germany loses the assignment in the automobile sector soon. Though India being promising not only in the spare-part market but also as a production location. That's why the French car manufacturer Renault wants to build and sell the Logan in India. In collaboration with the Indian manufacturer Mahindra & Mahindra, the French company has set up a joint venture for this purpose. Mahindra is also setting up another joint venture with the American LMV- manufacturer Navistar to make LMVs and small buses.


For all that or just due to the dominance of the American and Japanese, the German companies should not miss their opportunity to enter the market, urged Indian Finance Minister Palaniappan Chidambaram. Above all, the middle class should feel to meet with a good response: "In order to lower the costs, capture new markets and to keep up with their competition many more middle class entrepreneurs should extend their production centers to India." The Finance Minister promised, at the same time, to remove the administrative hurdles through faster licensing procedures.


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