Germany voices concern over lack of stable policies and high tariffs that can dampen the next wave of investments from Europe

Germany is voicing its concern over lack of stable policies and high tariffs in India that could dampen the next wave of investments from Europe.

Most big companies are already present in India. But the next, and for the Indian economy’s healthy growth, the more important influx of small and medium enterprises (SMEs) might not be as large as anticipated unless India gets its act together, say officials of IHK, the chamber of business and industry of Munich and Upper Bavaria, one of the six leading regional industrial engines of Europe.

Terming Asia Pacific as the most important powerhouse over the next couple of decades, IHK’s Johannes Huber points to emerging competition from Indonesia, Vietnam, Myanmar and Russia which could draw away investments meant for India.

Mr. Huber feels there is still time for India to get its act together because of drawbacks in each of these countries. But independent analyst Alexander Struve refers to certain advantages these countries have that could offset the disadvantages.

Lack of skills

The first issue is the lack of highly skilled workers in India. Traditional powerhouses like Siemens, Audi and BMW — all incidentally based in Munich — have got around the problem by ramping up in-house training programmes.

For SMEs, that is not an option because of limitations of size and resources.

A delegation will be visiting India in the middle of February to size up the issue, including efforts by the two governments to kick-start an ambitious vocational training programme. Then there is the issue of a ‘lot of bureaucracy’. German SMEs complain of applications being rejected and permissions delayed because they filled the wrong form or didn’t know that yet another form — among the hundreds they have to complete — had to be submitted.

“We have seen growth in China. But development in India is not as fast as in China. I am not being positive or negative.

“In China, everything happens fast because it is not a democracy. This is not possible in India just as it is not possible in Germany because both are democracies. The difference is that SMEs are already present in China whereas they are not there in India,’’ he reasoned.

Of the potential competitors, Myanmar is not yet on the map because at present it is the target for big players.

The same is the case with Vietnam which is extremely attractive for the big players but not for SMEs due to the absence of local supply chains. Indonesia too is in a similar situation.

Russia too is making massive investments in infrastructure and education but remains cold to SMEs. But all this could change if the Indian economy remains opaque especially for SMEs which don’t have deep pockets.

“It is very important for India to make investment regulations easier and faster. This will make India a little bit more attractive,” says Mr. Huber.

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