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Rajesh NathVDMA, Indian Office
Challenges & Opportunities in Indo German Trade
.
CONTENTS
Macro Economic Overview
Doing Business in India- Opportunity & Challenges
Indo German Trade
Formation of Company in Germany
VDMA India
Macro Economic Overview
INDIA - Snapshot
Arunachal PradeshDelhi
Rajasthan
Gujarat
Maharashtra
Karnataka
Andhra
Pradesh
Tamil
Nadu
Orissa
Uttar
Pradesh
West
Bengal
Madhya Pradesh
Kerala
Jammu &
Kashmir
Bihar
Punjab
Haryana
Mizoram
Manipur
Sikkim
Assam Nagaland
Goa
Chattisgarh
Tripura
Meghalaya
Himachal Pradesh
Uttaranchal
Jharkhand
Key Statistics
Population: Over 1.20 billion (2009)
Annual Population Growth: 1.9 % (2010)
21 Official languages - Major languages: English, Hindi
Unemployment rate: 10.7% (2009)
Employment: 465 million
28% urban households in India
India’s GDP depends heavily on Agriculture
-- 57% of country’s total working population was agriculture dependent
-- Monsoon also plays major role due to India’s dependence on Agriculture
Key economic indicators
Currency: Rupee
Exchange Rate (9th Aug. 2010): 1 Euro = INR 60.82
US$1=INR 46.15
GDP approx.: € 0.94 trillion
GDP growth – 6.5% (FY 2009-10)
GDP Forecast – 8.4% (FY 2010-
11)
GDP splits: (2009)
Services – 58.4%,
Agriculture – 15.8%
Industry – 25.8%Per capita income – € 702 per annum (approx)
Industrial Growth – 9.1%(FY 2009)
Industrial Growth splits:
- Manufacturing – 43%
- Mining – 27%
- Electricity – 30%
Foreign Institutional investors (FII) : € 45.76 billion (in 2009)
Foreign Direct Investments (FDI): €18.14 billion(2008-09)
page 4
Strongest Impulses for the GDP growth from the tertiary sector
Agriculture; 17%
Coal and steel industry; 3%
Manufacturing industry; 16%
Gas, water and electricity; 2%
building industry; 7%
Trade, tourism, transport,
communication; 27%
Sector of banks and insurances;
14%
Community and welfare
institiutions; 14%
Services Industry
Agriculture
India EvolvingIn
dust
ry s
cena
rioM
acro
eco
nom
ic f
acto
rs
1991-92 1995-97 2002 2004 1999-00
Economy Liberalized
Foreign investments
Shift in political scenario
• 3 govt’s in short period• Investor confidence low• Initial experience of investors – moderate
• Trade barriers removed• Currency devaluation• Foreign investments encouraged
Economic slowdown
• Pro reforms govt. established• Renewed thrust on foreign investments• Interest rates brought down • Policy to ramp up infrastructure
• Govt. unseated • Reforms to continue• Thrust on attracting
foreign investments
• Strong FDI growth
Entry of global auto majors
Mobile telephony growth
IT services, Offshoring boom
Dot com bust
Dot com boom
• Period of early entrants to India • Wait and watch policy • Foreign investments in select
sectors • Growth in manufacturing
• India as a sourcing hub for components, engineering products
Manufacturing growthComputing industry evolves
Engg industry revival
• Investor’s confidence in liberalised India high post 1999• Strong thrust on FDI by successive govts.
Favorable policy direction to attract foreign investments
Lower tariff barriers
Doing Business in India
Advantage India
Young Demographic Profile
Increasing Purchasing Power
Abundant availability of skilled Human Resources
Adequate natural resources and raw materials
Large and growing domestic market
Established rule of law and vibrant three tiered democracy
Moreover there are challenges to cope with
Internal policy
Improvement of the social indicators: illiteracy and poverty
Infrastructure Improvement
Improvement in quality and efficienty of the local authorities.
Independence of the manufacturing industry from unionism
Improvement of the production level
External policy
Further opening of the market
Reducing import tariffs
Liberalise conditions for the FDI
Foreign direct investments in India lower than in neighbour countries
Internal security: relationship with Pakistan
What is „typically Indian“ in the business world ?
Desire for appreciation and gratification
Acceptance of the superior colleagueswithout protest
Strong hierarchical order in families as in companies
Avoiding conflicts
Aversion of making own decisions
insufficient autonomy and own initiative
More flexibility than the German collegues
Punctuality is less important: „Indian Standard Time = Indian Stretchable Time“
If an Indian says „No Problem,“ the problems are just beginning
Prejudices of the German Expectacions / Culture of Indians
Thus: Do not underestimate the differences!
German Indian
Negotiation Try to convince Try to win others over
Conflict behaviour
Searching for agreements, for new alternatives and for the solutions of the conflict
Conflicts are not going to be solved with discussion about the matter, but first of all with personal dialogues.
Contacts Oriented by the matter Contact more important than the matter
Creativity Creativity in the problem identification
Permit the others to be creative (Motto: Things are never as bad as they seem)
Indo German Trade
German Mechanical Engineering Industry: future
Future challenges:
Reduce costs and maintain profitability Increased competition from low cost countries Customer base ( OEM’s) moving to low cost countries European market is mature
...and chances:
Our industry has still solutions for the forthcoming global questions Energy saving systems Renewable energy Mobility for people Hybrid technology…. Environment safety solutions
…. we have to drive innovations
India is more than nine times bigger than Germany
Cities / Villages: 3.800 cities,
36 cities with more than 1 Mio. citizens;
More than 500.000 villages
North-South : over 3200 Km
East-West : over 2800 Km
India 3.3 Mio. sq.km = 100% Austria 84 Benelux 75 Finland 338 France 544 Germany 357 Ireland 70 Italy 301 Portugal 92 Spain 505 Euroland 2.4 Mio. sq.km = 73%
India & Germany
Parameters India Germany
Area –
No. of States -
Population –
Population Density -
Annual Population Growth –
GDP Growth –
GDP Splits –
Agriculture -
Industry -
Services -
Investment –
Inflation Rate –
Industrial Production Growth Rate –
Unemployment Rate -
32,87,000 sq. km
28
Over 1.2 billion (2009-10)
357/ sq. km
1.9 % (2010)
6.5 % (2009-10)
15.8 %
25.8 %
58.4 %
32.3 % of GDP (2009)
10.9 % (2009)
8.2 % (2009)
10.7 % (2009)
3,57,022sq. Km
16
Over 82 million (2009-10)
229/ sq. km
-0.061 % (2010)
-5 % (2009-10)
0.9 %
26.8 %
72.3 %
17.9 % of GDP (2009)
0.3 % (2009)
-11 % (2009)
7.5 % (2009)
German Mechanical Engineering Export to Asia 2009
* Middle East not included
Share in %
China48%
India 11%
Korea10%
Japan7%
Singapore6%
Taiwan4%
Others7%
Thailand2%
Hongkong SEZ3%Malaysia2%
altogether : 23,6 bn. EUR*Source: Federal Statistical Office Germany , VDMA
Formation of Company in Germany
Investment to Germany The Legal Forms: Corporations
A corporation is a Legal person, meaning that the holder of rights & obligations is not the individual shareholder, but the company itself. The company itself concludes contracts, possesses assets & must pay taxes.
Following are the forms of corporations under German Law :
Private Limited Liability Company (GmbH) Limited Liability Entrepreneurial Company (“Mini GmbH”) Stock Corporation (AG) Partnership Limited by Shares (KGaA)
Private Limited Liability Company (GmbH)
The GmbH is the most widely used legal forms for corporation.
The minimum share capital required to established a GmbH is EUR 25000.
It is established by founding shareholder(s) executing a deed of formation & Articles of Association in the presence of a Notary..
The GmbH must be entered into the commercial register.
At the time of registration, at least half of the minimum capital (i. e. EUR 12,500) is required.
Limited Liability Entrepreneurial Company (“Mini GmbH”)
As a result of the reform of the GmbH a new category of colloquial Mini-GmbH was established.
It requires a minimum capital of less than EUR 25,000.
The company has to retain a quarter of its annual profit to accumulated the minimum shareholder capital of an ordinary GmbH (EUR 25,000).
The accumulated capital can be converted into share capital & the Mini-GmbH changed into a standard GmbH.
Except the above specification others procedures are similar with GmbH.
Stock Corporation (AG)
An AG can be established by any individual.
An AG must have a minimum share capital of EUR 50,000.
Articles of association need to be certified by a notary.
AG must be entered into the commercial register.
The application must be signed by the founding shareholders, supervisory board members & management board before a Notary.
The AG must be registered with the local trade office.
Partnership Limited by Shares (KGaA)
The KGaA can have an unlimited number of capital investors.
Investors have more or less the same legal rights.
At least one partner, General Partner has to be liable for debts & liabilities of KGaA.
The KGaA must be entered into commercial register & registered with the local trade office.
The KGaA is not a frequently used legal form of Germany.
VDMAYour Competent Industrial Partner in India
VDMA India Office
page 29
Largest Industry Association
in Europe
More than 3.000 members which stand for (all figures: 2009)
920.000 Employees 160 billion Euros production 70% export rate roughly
39 special sectors
Representative offices
in Berlin, Brussels, Tokio, Beijing, Kolkata
and Moscow
VDMA - The German Engineering Federation
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Our specialised industriesOne stop for diversity
Agricultural technology Air-handling technology Building control and management Cleaning systems Compressors, compressed air
and vacuum technology Construction equipment and
building materials machines Equipment for metallurgical plants
and rolling mills Fire fighting equipment Fluid power Food processing & packaging machinery Foundry machinery Garment and leather technology Industrial communication Lifts and escalators Machine tools and manufacturing systems Materials handling and logistic technology Micro technology
Recognise, analyse and canvass markets
Mining equipment Municipal Equipment Plastics and rubbers technology Power systems Power transmission engineering Precision tools Printing & paper equipment and supplies Process plant and equipment Productronics Pumps + Systems Robotics + automation Safes and strongrooms Software Testing technology Textile machinery Thermo process and waste
treatment technology Valves Weighing technology Welding Woodworking machinery
Activities and Services
Acts as a “bridge-head” between the German and Indian industry
Organizing symposia and similar presentations of German technology in India
Participating in and servicing bilateral programs, such as those in existence, with governmental participation between Germany and India
Furnishing of information about the complete product programs of the German Machinery industry to assist Indian companies to identify right partners for mutual business relationship
Providing information on market trends, prospects, future development, new projects and tenders
Facilitating Tie-Ups / Joint Ventures / Collaborations between German and Indian companies for mutual benefit
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VDMA in India
VDMA Office in Kolkata, Delhi & Bangalore promote the Indo-German trade in mechanical engineering machinery.
Mr. Rajesh Nath, Managing Director
German Engineering Federation GC-34, Sector III, Salt Lake City,
Kolkata-700106, IndiaTel. 0091-33-3219522Fax 0091-33-3217073E-Mail: [email protected]
Mr. Sumit Sharma, Regional Manager Noida Phone 0120-4255029 E-Mail: [email protected]
Mr. Srikanth Rajshekhar, Regional Manager Bangalore Phone 080-23657674 E-Mail: [email protected]
34
Thank you for your
kind attention!