6 out of 10 German firms plan new investments in India in FY25 over positive economic outlook

NEW DELHI: Driven by political stability and a skilled workforce, India's importance as an investment location for global companies is growing sustainably and at least six out of 10 (59 per cent) of German companies plan to increase their investments in India during the current financial year, according to a new report.

Moreover, 78 per cent of respondents expect rising sales and 55 per cent expect increasing profits for the current financial year, an increase of 7 per cent against the previous year, according to the report by KPMG in Germany and the Indo-German Chamber of Commerce (AHK India).

The top three location factors that make India attractive are low labour costs (54 per cent), political stability (53 per cent) and qualified specialists (47 per cent), revealed key findings of the “German Indian Business Outlook 2024”.

"India continues to show enormous potential. And further to this, it continues to gain in importance as a location for regional production and global development," said Stefan Halusa, Managing Director of AHK India.

Around 45 per cent of German companies want to use India as a production location for both the local and the Asian market by 2029.

Expectations for the next five years are even more positive: 82 per cent expect an increase in turnover and 74 per cent expect higher profits.

"With Prime Minister Narendra Modi's re-election, German companies hope that many structural problems will be tackled. These include the infrastructure deficits in the areas of transportation, energy, information and communication, the complex tax system and the highly varying regional regulations,” explained Andreas Glunz, Managing Partner, International Business at KPMG in Germany.

By 2029, 37 per cent of respondents expect sales growth of more than 20 per cent and 25 per cent of them anticipate profit growth of more than 20 per cent, said the report.

In comparison with other Asian countries, 69 per cent of German companies appreciate the steady growth of India’s economy as a particular advantage and the weakening economy in China compounds this view.

The world's most populated country offers German companies enormous potential. Currently, a third (33 per cent) use India as a production location for the local market. By 2029, 45 per cent of companies are intending to do so, the report mentioned.