Why India
India is the fastest-growing major economy in the world, and the IMF expects it to stay that way. In dollar terms it currently ranks sixth, after a weaker rupee and a revision of its national accounts. On the IMF’s own projections it returns to fourth place by 2027 and overtakes Germany for third by 2031. For German industrial companies the question has stopped being whether India matters. It is whether you build your position while partnerships are still open, or buy your way in later at a premium.
There is a second reason the calculation has changed: supply-chain risk. German boardrooms are actively reducing their concentration in China, and India is the only market of comparable scale on the list of alternatives. “China plus one” is no longer a slide in a strategy deck — for many Mittelstand suppliers it has become a customer requirement.
What follows is not a country brochure. It is what a German company actually has to decide, and what actually goes wrong.
The case, in numbers
Each figure carries its date and its source on the same line. No statistic goes live undated.
Real GDP growth projected for India in 2026, the highest among major economies.
IMF, World Economic Outlook, April 2026German–Indian goods trade in 2025, a record. German trade with China in the same year: €251.8 billion.
GTAI, 2026; Destatis, 2026German machinery exports to India in 2025, the largest single category.
GTAI, 2026Share of EU goods exports to India on which tariffs are cut or removed once the EU–India agreement is in force. Indian duties on machinery, up to 44% today, fall to zero for almost all machines.
European Commission, January 2026German companies active in India.
Indo-German Chamber of Commerce, via Embassy of India, Berlin, 2025German companies in India using it as a production base for the regional market, up 14 points in a year.
KPMG / AHK India, German-Indian Business Outlook 2026China plus one, concretely
What the requirement looks like when it arrives from a customer rather than from a consultant: dual sourcing, qualification timelines, the cost of a second line.
The request rarely arrives in a strategy workshop. It arrives in a supplier audit or a sourcing letter. A German OEM or Tier-1 customer asks where your second source for a critical part sits outside China, and when it will be qualified. For many Mittelstand suppliers this question now comes up in the annual negotiation, and “we are looking at it” is no longer an answer the customer accepts.
In practice it means three things.
Dual sourcing. The same part, to the same drawing and tolerance, made at a second location that your customer can audit on its own terms.
Qualification. A second line goes through your customer’s approval process again, from first samples to production part approval. In automotive, aerospace and medical work this is measured in quarters, not weeks. It must be planned before the customer sets a deadline.
Cost. A second line runs below capacity in its early years. Its unit cost is higher than the Chinese line it backs up, and someone has to agree who carries that premium: you, your customer, or the Indian partner.
India suits this requirement for two reasons. In several clusters, suppliers in components, castings, forgings, machining, electronics assembly and chemicals already work to German customer standards. And the EU–India trade agreement will remove most of the tariff cost once it takes effect.
India is not a simple copy of the China line, though. The sub-tier supplier base is thinner. Some inputs are still imported from China. A line qualified in India can still carry Chinese content your customer does not want, so the bill of materials needs checking as well as the factory.
What we do: find Indian manufacturers able to take a qualified second line or a contract-manufacturing role, check their customer audits and certifications, and structure the arrangement so that your drawings, tooling and process know-how remain yours.
What “relationship-based business” actually means
The section that carries this page. What happens in the room when a German firm sits across from an Indian family conglomerate; why the third meeting matters more than the first; what a German negotiator reads as agreement that was not agreement; how decisions travel inside an Indian group.
Every guide to India says business there is relationship-based. It is true, and almost useless as advice, because it does not say what a German company should do differently on Monday morning. Here is what it means in practice.
The first meeting is not a negotiation. When a German delegation meets an Indian family-owned group for the first time, the German side usually arrives with a presentation, a term sheet in mind and a wish to leave with next steps. The Indian side has a different purpose. They want to judge who you are, whether you are senior enough to matter, whether you will still be there in five years, and whether the person across the table has the authority to commit the company. Technical detail is heard politely. It is not what is being assessed.
This is why the first meeting often feels warm and inconclusive to a German visitor. Both impressions are correct.
The third meeting matters more than the first. By the third meeting, the Indian side has checked you through its own network: bankers, customers, other German companies, sometimes former officials. The questions get sharper and the right people start to appear. If the promoter or a family member joins at this stage, the discussion has become real. If the same middle managers keep appearing, it has not, however friendly they are.
A German firm that sends a different team each time loses ground. So does one that sends a junior team after senior people opened the talks. Continuity of people signals commitment more clearly than any document.
An agreement that was not an agreement. German negotiators take a “yes” in a meeting as a commitment. In an Indian meeting, “yes” can mean “I understand your point”, “I see no immediate objection”, or “I do not want to disagree in front of my colleagues”. Phrases such as “this should be possible” or “we will look into it positively” are usually signs of goodwill, not acceptance.
Direct disagreement in a group setting, especially with a senior person present, is avoided. A German negotiator who presses for an explicit yes or no in the room often gets the yes and loses the substance. The real position usually comes out later, privately, and often through an intermediary.
The practical rule: treat nothing as agreed until it is written down, sent, and confirmed back in writing by the person with authority. Send a summary after every meeting. How the other side corrects it will tell you more than the meeting did.
How decisions travel inside an Indian group. In a family-controlled group, the organisation chart is a partial guide at best. Final decisions on anything strategic sit with the promoter and, often, a small family circle. Around them there is usually a trusted lieutenant, sometimes the group CFO and sometimes a long-serving adviser, whose opinion carries more weight than their title suggests. Professional managers run the business well and can recommend, but they rarely decide a partnership or joint venture.
Two consequences follow. Your proposal will be judged by people you may meet only once or twice, so it must make sense to them without a long explanation. And the fastest route to a decision is not pressure on the manager in front of you. It is making sure the right person has heard about you from someone they trust.
Time runs differently, not slowly. German companies often conclude that Indian partners are slow. The early phase is slow because trust is being built and the family is taking its time. Once the decision is made, the Indian side often wants to move faster than the German side can: contracts in weeks, a factory in months. Many German firms are caught out by this second phase, when their own approval committees become the bottleneck.
What German companies get right. German firms have a strong reputation in India for engineering quality, reliability and staying power. Indian partners value a German counterpart who does what was agreed and remains for the long term. Being direct is not the problem. The problem is being direct in the wrong setting, or reading warmth and hospitality as a commitment that has not been made.
What this means for how we work. We prepare the ground before the first meeting, so the right people are there and know why. We attend the meetings, and afterwards we tell you what we think was actually said. We find out who decides and how to reach them properly. And we keep the same principals on both sides from the first conversation to the signature, because in this market that continuity is part of the proposition.
How Indian government and defence procurement actually decides
Indian defence procurement is governed by written procedure, and the procedure matters more than most foreign companies expect. Capital acquisitions follow the Defence Acquisition Procedure. Revenue procurement, meaning spares, maintenance and sustenance, follows the Defence Procurement Manual 2025.
The operative document is still DAP 2020. The draft DAP 2026 raises the minimum indigenous content under Buy (Indian-IDDM) from 50% to at least 60%, and for the first time requires 30% indigenous content from foreign vendors supplying under Buy (Global). The draft was released in February 2026 and was still under final review in August 2026. Any German supplier planning an Indian programme should plan against the draft now.
The sequence. A requirement starts with the user service, which drafts the qualitative requirements. The Defence Acquisition Council then grants Acceptance of Necessity, and the procurement category is fixed at that point. The category decides who may bid. DAP 2020 sets five categories in order of priority: Buy (Indian-IDDM), Buy (Indian), Buy and Make (Indian), Buy (Global – Manufacture in India) and Buy (Global). A foreign manufacturer bidding on its own is at the bottom of that list.
After that come the request for proposal, technical evaluation, field trials, staff evaluation, commercial negotiation, and approval by the competent financial authority. Each stage is documented and each stage can be delayed. Once technical compliance is established, the lowest compliant bid normally wins. German companies that expect superior engineering to earn a price premium are often surprised by this.
Where the real decision is made. The most important decisions come before the request for proposal: how the qualitative requirements are written, and which category is chosen. A company that first engages at the RFP stage is bidding against a specification others have shaped. Engaging earlier is legitimate and expected, through technical presentations, trials, requests for information and industry consultations.
What this means for a German company. Almost every realistic route runs through an Indian partner who can carry the indigenous content and, increasingly, own or co-own the design. Some routes are closing: the six positive indigenisation lists together reserve 5,417 items for Indian industry. Others are opening. The iDEX innovation route now includes 676 start-ups and innovators, and it suits German technology companies partnering with Indian start-ups. The budget is real: in FY 2025-26 the Ministry signed capital contracts worth ₹1,82,492 crore (₹1,824.9 billion) and spent its full ₹1.86 lakh crore (₹1,860 billion) capital budget for the first time.
Foreign investment in defence manufacturing is permitted up to 74% through the automatic route, with higher shares requiring government approval. German export authorisation from BAFA is needed alongside all of this.
How we help. We map which programmes fit your product, which category they are likely to fall under, which Indian partners can realistically carry the indigenous content, and how long each stage takes in practice. We are advisers, not agents. We do not represent clients before procurement authorities, and we take no fee tied to the award of a contract.
Which states deliver
Incentive promises against incentive delivery, state by state, from experience rather than from investment-promotion literature.
Every Indian state promises incentives. The differences show in what happens next: how quickly land is allotted, whether power and water connections arrive on time, and whether subsidies are actually paid. The large published incentive packages matter less than the officials who process your file. Three states account for most German industrial activity, and each works differently.
Maharashtra: depth. Maharashtra received US$18.4 billion in FDI equity in FY 2025-26, more than any other state. For German companies its main strength is Pune. Germany’s consul-general has put the number of German companies in Pune at 300, and the Chakan and Talegaon belts have supplier and engineering depth that no other Indian region matches in automotive and machinery. The trade-offs are higher land and wage costs, and congestion around Pune. Maharashtra suits companies that need an existing supplier base and German-experienced engineers from the start.
Gujarat: speed on large projects. Gujarat’s reputation is for fast decisions and ready industrial land when the state wants a project. Semiconductors are the clearest recent example. Micron opened its assembly and test plant at Sanand in February 2026 and Kaynes Semicon followed in March, while the Tata Electronics fab at Dholera is targeted for completion by 2028. Gujarat suits large, capital-intensive projects with port access. A mid-sized German supplier gets less individual attention than an anchor investor, and should plan for that.
Tamil Nadu: execution and export manufacturing. Tamil Nadu has the strongest record for turning investment into export output. In FY 2026 its electronics exports rose 36% to US$19.9 billion, a 42% share of India’s total. It also has a long-established automotive base around Chennai and a skilled, relatively stable workforce. There is a new political factor. Vijay’s TVK party formed a coalition government after the 2026 election, and it has announced a new industrial policy and an Investor Promotion Commission. Commitments made under the previous government should be confirmed with the new administration before they go into a business plan.
What we tell clients. Choose the state for its supplier base, workforce and logistics first, and treat incentives as a bonus. Get every incentive commitment in writing, with the disbursement timeline, before you commit capital.
The challenges
Each risk sits on the left. What we do about it, and which service does it, sits on the right of the same rule.
The wrong partner. The partner is the biggest single factor in success or failure. Presentations and directories do not reveal ownership structures, related-party dealings, disputes, or whether a company has honoured previous foreign partnerships. Many German firms find out too late, after the joint venture is formed and their technology is already with the partner.
We identify candidates through our own networks, then check registrations, filings, ownership, litigation and reputation in their own market. We speak to people who have worked with them. We tell you what we could not verify and what we would want to know before signing ourselves.
Partner Search and Vetting →Approvals, registrations and compliance. Forming a company and running it involves central, state and local rules, several registrations and a demanding annual compliance calendar. Rules change often. India’s four Labour Codes took effect on 21 November 2025, replacing 29 central laws, and they change how payroll costs are calculated. Late or incorrect filings bring penalties and delays.
We plan the sequence of approvals before you start and deliver formation and compliance through named partner firms, under our coordination. You have one point of accountability rather than several advisers answering separately. We keep the compliance calendar and tell you in advance when something changes.
Entity Setup and Compliance →Losing control of a joint venture. Many German–Indian joint ventures fail on governance, not on the product. Board composition, deadlock, veto rights, dividends, related-party purchasing and exit routes are often left vague at signing. Relations are good in year one. By year four the parties disagree, and the documents do not say how to resolve it.
We design shareholding and governance before commercial pressure sets in: reserved matters, deadlock resolution, transfer restrictions, exit mechanisms and related-party controls. Uwe Sellmer leads the structuring; Sanjay Iyer leads the Indian side. We negotiate in the room with you and stay involved until signature.
Joint Venture and Transaction Structuring →Incentives that do not arrive. State incentive packages look generous on paper. In practice, disbursement can take years, conditions are interpreted narrowly, and a change of government or official can reopen commitments you thought were settled. A business plan that depends on a subsidy arriving on time is exposed.
We assess states by what they have actually delivered, not what they advertise. We check the practical conditions and disbursement record, and ensure commitments are written down with timelines. The assessment tests your plan with and without the incentive, so the decision does not depend on it.
Market Entry Assessment →Intellectual property leakage. Technology shared with a partner or contract manufacturer can end up in a competing product, sometimes through the partner and sometimes through staff who leave. Enforcing IP rights in Indian courts is possible but slow. Once drawings, process parameters or software have been handed over, they cannot be taken back.
We structure what is shared, when and on what terms: staged transfer of technology, retained core know-how, licensing rather than assignment, and audit and termination rights. We check the partner’s past conduct with other technology owners. Where appropriate, specialist IP lawyers in our network register and protect your rights.
Joint Venture and Transaction Structuring →Disputes and slow enforcement. Commercial litigation in India can take many years, and a contract that looked clear in German eyes may not be enforceable as intended. Many foreign companies discover this only when a dispute starts. By then, the choice of law, forum and arbitration seat has already been made, often without much thought.
We make sure dispute resolution is designed at the start: governing law, arbitration seat and institution, interim relief and enforceability. Where a client requires it, terms can provide for neutral governing law and arbitration. The contracts themselves are drafted by qualified lawyers from our network, disclosed to you in advance.
Joint Venture and Transaction Structuring →Defence cycles that outlast budgets. Defence and dual-use programmes in India can take years from requirement to contract. Categories, indigenous-content rules and trial requirements change during that period. Companies that commit resources without understanding the cycle often withdraw before contract award, after most of the cost has already been incurred.
We map the programme, its likely category, its realistic timeline and the Indian partners who can carry the indigenous content. We help you decide early whether to proceed and how much to commit at each stage. The practice is led by a former Defence Attaché; we act as advisers, never as agents.
Defence and Dual-Use Market Access →Where to start
Most German companies start with a Market Entry Assessment: four to six weeks, fixed fee, ending in a recommendation you can put in front of your board. Before that, a thirty-minute conversation with both principals costs nothing.