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covestro.com
Perspective on India - Germany Trade Relations and the way forward
Ajay Durrani04.10.2018
Forward-looking statements
March 2017 │ Innovation Excellence│ Innovation Culture │ © Covestro AG 20182
This presentation may contain forward-looking statements based on current assumptions and forecasts made by Covestro AG.
Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. These factors include those discussed in Covestro’s public reports, which are available on the Covestro website at www.covestro.com.
The company assumes no liability whatsoever to update these forward-looking statements or to adjust them to future events or developments.
Potential and Diversity of the world‘s largest Democracy
3
• 28 member states
• Approx. 4.3 Mio. km2
• Approx. 0.5 Bn.
inhabitants
• 24 official languages
• Voter turnout European
Elections 2014: 42.54 %
• Voter turnout
German Elections
2017: 75,6 %
approx. 3,200 km
approx. 3,000 km
• 29 Federal states
• Approx. 3.3 Mio.
km2
• Approx. 1.3 Bn.
Inhabitants
• 23 official
languages
• Voter turnout 2014:
66.38 % (highest
ever
3 years of Modi Government – An economic balance
4
Economic Indicator 2014 2017
GDP growth (annual) 7.5% 6.7%
Inflation rate (annual) 5.8% 3.6%
FDI in-flows amount in billion US$ 36(FY 2013-14)
60(FY 2016-17)
Government budget deficit in % of GDP -4.5% -3.5% (2017)*
Revenue budget in billion US$ 0.278(14/15)
0.330(plan 17/18)
Current account in billion US$ -8.226 (Oct-Dec) -13.465 (Oct-Dec)
Key interest rate 8.00% 6.00%
Exchange rate INR/US$ 59.93 (April) 64.12 (December)
* Annual value for fiscal year is a forecastSource: Trading Economics, GTAI, RBI, Department of Industrial Policy & Promotion, Govt. of India, Money Control, IMF, May 2018
German investment into India compared FDI inflows (total in billion US$)
5
Year
Country
2014-15 (April –March)
2015-16 (April –March)
2016-17 (April –March)
April 2000 -Dec. 2017(Cumulative)
Germany 1.1 0.9 1.0 10.71
Total FDI inflows from all countries* 45.1 55.6 60.1 532.6
% share of Germany 3.6 2.4 2.5 3
Germany (year-on-year change, in %) 8.4 -12.4 8.4 -
Total FDI inflows from all countries (year-on-year change, in %)
26.5 29.3 8.7 -
*(Includes inflows under NRI Schemes of RBI),
Note: Year-on-year changes refer to the amount in US-Dollar
Source: Department of Promotion, Govt. of India, May 2018
India is the third largest economy and ahead of Germany
2,33,00,783
1,93,90,604
94,48,659
55,62,82241,93,923
0
50,00,000
1,00,00,000
1,50,00,000
2,00,00,000
2,50,00,000
China USA India Japan Germany
GDP (Purchasing power parity) in billion USD 2017
Source: World Bank, August 20186
3.84
4.823.80
7.86 7.92
9.28 9.268.61
3.89
8.4810.26
6.645.62
6.647.24
8.20 7.116.70 7.30 7.50
7.50
3.87
2.171.010.72
2.33 1.703.24 3.02
0.43
-4.52
2.091.55
-0.88-0.26
1.152.04 1.80 2.40 2.10 1.70
1.50
-6
-4
-2
0
2
4
6
8
10
12
GDP growth (annual, %) India vs. Euro Area
India Euro Area
Economic growth: India vs. Euro Area
*Estimation by World BankSource: World Bank, August 20187
Reforms and economic growth
0.00
2000.00
4000.00
6000.00
8000.00
10000.00
12000.00
Jahr 1(78/91)
Jahr 6(83/96)
Jahr 11(88/01)
Jahr 16(93/06)
Jahr 21(98/11)
Jahr 26(03/16)
Jahr 31(2008)
Jahr 36(2013)
Economic growth after the introduction of reforms(China 1978 & India 1991)
Indien China
GD
P in U
S$ (
billions)
Source: World Bank, December 2017*GDP of India is adjusted according to inflation of US$8
Per capita income
1983.00
44550
9895 106088643
6180
9304
3876
10512
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
BIP je Einwohner (US$) 2015
Per capita income in 2017 (in USD)
Source: Knoema, August 2018
India IndonesiaBrazil China South Africa
Russia Mexico TurkeyGermany
9
Inflation in India
Source: IMF, World Economic Outlook, August 2018
4.4
6.76.2
9.1
11
9.5 9.510
9.4
5.8
4.94.5
3.6
5 5 4.8 4.8 4.9
0
2
4
6
8
10
12
10
Strong currency reserve
0
50
100
150
200
250
300
350
400
450
500
0
50
100
150
200
250
300
350
400
450
500
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
In bn US$
External debt stocks, total (DOD, current US$) Total reserves (includes gold, current US$)
Source: World Bank, Indian Ministry of Finance, August 2018
Total reserves as on August,3rd 2018 (includes gold, current US$): 404.14 Billion US$
11
How the heavyweights will shift until 2060
30.1 29.8 29.7 28.3 27.3 26.1 25.5 25.7
8.3 7 6.4 5.2 4.2 3.6 3.3 3.2
26.323.2 22.1
19.917.8
16.7 16.4 16.3
20.2
17.416
14
11.710.2 9.3 8.8
4.8
6.47.1
8.5
11.113.8 16.2 18.2
10.316.2 18.7
24.1 27.9 29.6 29.3 27.8
2000-07 2010 2016 2020 2030 2040 2050 2060
SHARE OF REAL WORLD GDP (PPPS IN %)
China
India
Euro Area*
United States
Japan
other countries
Source: OECD
*GDP Share of Germany will shrink from 3.5% in 2016 to 2% in 206012
Bilateral Trade
13
Source: IGCC
German Imports from India 2017
2,427 2,501 2,5222,616
3,0003,407
4,175
4,721
5,2535,105
6,193
7,5026,994 6,892 7,039
7,539 7,652
5,300
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Mio
. E
UR
8,456
*2018- till July
Volume of German imports from India
14
German Imports from India 2017
Source: Statistisches Bundesamt
Textiles24%
Chemistry14%
Electrical engineering6%Leather and shoes
10%
Metal7%
Agricultural Products10%
Machines9%
Automotive6%
Pharmaceutical3%
Synthetic5%
Consumer goods4%
Others1%
15
Volume of German exports from India from 2000 to 2017
German Exports to India 2017
2,085 2,307 2,421 2,4413,200
4,174
6,364
7,354
8,191 7,997
9,253
10,87110,383
9,189 8,924
9,752 9,783
10,692
6,846
0
2,000
4,000
6,000
8,000
10,000
12,000
Mio
. E
UR
Source: IGCC *2018- till July16
German Exports to India 2017
Quelle: Statistisches Bundesamt
Electrical engineering14%
Machines32%
Chemistry13%
Metal7%
Optic and photographic devices
8%
Automotive6%
Synthetic7%
Consumer goods3%
Aircrafts4%
Paper, cardboards and printed material
2% Others2%
17
India: main trading partners
Source: Indian Department of Commerce, December 2017
0
10000
20000
30000
40000
50000
60000
70000
80000
China USA UAE Saudi Arabia Switzerland Germany Indonesia Singapore Hong Kong
Total Trade in US$
2012 - 2013 2013 - 2014 2014 - 2015 2015 - 2016 2016 - 2017
18
Relatively low German investment in India
Mauritius34%
Singapore16%
U.K.8%
Japan7%
U.S.A6%
Netherlands6%
Germany3%
Cyprus3%
France2%
UAE1%
Others14%
Direct investments from 2000 to December 2016
19
More than 1000 German companies in India
Source: IGCC, May 2017
Mumbai/Pune41%
Others17%
New Delhi/ Gurgaon14%
Banglore13%
Chennai8%
Kolkata5%
Hyderabad2%
20
German Companies in India
Source: IGCC, May 2017
100% Subsidary companies
46%
Branches2%
Representations4%
Liason Office5%
License agreements
10%
Joint ventures13%
Technical JVs20%
21
Major highlights of German engagements in India
Around 1800 German companies operate in India with their own production/Joint Venture orcollaboration agreement
The biggest companies are Siemens and Bosch but also almost all DAX-companies are represented
in India
Despite a slight decline of profitability, the German enterprises in India were highly profitable inrecent years and could in many cases finance their expansion from own resources or from the liquid
capital market or bank loans
604 German companies in India employed a rising amount of 301,000 permanent employees in 2016(in 2012: 254,000 employees) and 300,000 employees in form of exclusive agents, franchise partners,
and exclusive suppliers and contract manufacturer
22
Way Forward for Indo-German Trade Relations
For Indian Organisations• Germany is the world’s third largest chemical market, being surpassed only by China and USA in
terms of revenues.
• The attractiveness of Germany as a production location for the chemical industry is based on specific strengths of innovation and research environment, productivity and resource efficiency.
• Germany’s chemical complexes are served by excellent logistics networks – from road and rail to waterway and pipeline. Well connected across EU region.
• Chemical clusters and chemical parks have helped Germany to strengthen its position in the chemical market.
• Numerous trade fairs in the chemical sector in Germany providing excellent business opportunities for Indian exporters. Visitors also have the chance to learn more about the latest state-of-the-art innovations and developments in the sector.
23
For German Organizations -
• Chemical Industry is an important contributor to the Indian economy sustaining a variety of downstream industries such as textiles and pharmaceuticals.
• Indian textiles, chemicals and leather products continue to be the most sought-after products in Germany, emerging as the top three exports to Germany in 2016.
• India’s exports of chemicals is largely dependent on the performance of the organic chemicals – Opportunities
for Large scale EU giants
• Germany is one of the top destinations for India’s organic chemical exports and continue to show a positive trend.
• In order to be more competitive at a global level, India will have to address the key issues pertaining to inadequate infrastructure and lack of availability of low cost feedstock for production.
• Immense opportunities for growth exists in the fields of specialty chemicals, polymers and agrochemicals industries as ‘Make in India’ initiative further facilitates growth and investment.
• Industry body like IGCC alongwith Department can form a desk which will aid organisation from both the side to for speedy clearances
Way Forward for Indo-German Trade Relations
24
