59% Of German Firms Eye Expanded Investments In India This Year: Survey

India is increasingly becoming a magnet for German companies, with nearly six out of ten planning to boost their investments in the country this fiscal year. Moreover, 78 per cent of these firms anticipate growth in sales, while 55 per cent foresee enhanced profitability. Optimism remains high, with 82 per cent anticipating revenue growth over the next five years and 74 per cent expecting increased profits.

These insights were highlighted in the "German Indian Business Outlook 2024," unveiled on Friday. The survey, conducted by KPMG in Germany and the Indo-German Chamber of Commerce (AHK India) from April 9 to May 20, 2024, focuses on the business outlook of German companies operating in India.

The companies anticipate robust growth rates: By 2029, 37 per cent of respondents project sales to increase by over 20 per cent, with 25 per cent expecting profit growth exceeding 20 per cent. The significance of the sub-continent is underscored by current corporate investment intentions.

According to the survey, 59 per cent of companies surveyed plan to expand their investments this year, marking a 23 per cent point increase from 2021. India continues to be a crucial investment destination for German firms.

Looking ahead five years, the commitment is even more pronounced: three-quarters (78 per cent) of companies aim to increase their investments, representing a doubling from 2021 (36 per cent). Conversely, only 7 per cent of respondents are contemplating reducing their investments in 2024.

Andreas Glunz, Managing Partner of International Business at KPMG in Germany, highlights, "German companies are increasingly diversifying and regionalising their business operations across the globe, engaging with new locations. In Asia, they prioritise India as one of their preferred locations for new investments due to the size of the population, political stability and sustainable growth prospects."

The top three factors that make India attractive as a business location include low labour costs, political stability, and availability of skilled professionals.

When asked about India's key advantages, 54 per cent of German companies prioritise low labour costs, followed closely by political stability at 53 per cent. Coming in third, respondents highlight the presence of highly qualified specialists, noted by 47 per cent of participants—an increase of 12 percentage points compared to the previous year.

In addition, companies anticipate a decline in the cost advantage related to labour over the next five years. By 2029, only 36 per cent of companies expect India to maintain its favourable position in this regard.

Compared to other Asian nations, 69 per cent of German companies appreciate India's stable economic growth as a significant advantage, especially amidst China's economic slowdown.