India Import Export

Why the Subcontinent Is Becoming So Important for German Companies Right Now

Do you import from China? Do you export to the USA? Then you probably know how unpredictable these markets have become. Trump’s tariff policies create constant uncertainty, China is buying fewer German products while simultaneously flooding Europe with cheap goods.

Many companies are now asking themselves the same question: Where should I focus next?

The answer lies 6,000 kilometers southeast of Germany: India.

The subcontinent is emerging in 2025 as the most important new trading partner for German import and export companies.

What was still a niche strategy just a few years ago has now become a necessity. India offers exactly the alternative that German companies need right now.

German-Indian trade reached a new record value of $33.4 billion USD in 2024.

Even more impressive are the current figures from the first seven months of 2025: Germany traded goods worth over €18.2 billion with India during this period.

The numbers reveal two things:

1. First, India is still a significantly smaller trading partner in direct comparison to China and the USA.
2. Second, this is precisely where the enormous growth potential lies. While relations with China and the USA are marked by problems, the partnership with India is only at the beginning of its possibilities.

In this article, you’ll learn why India has become so relevant for your company, what specific advantages trade with the subcontinent offers, and what you should pay attention to when importing and exporting.

The New Trade Reality: Why German Companies Are Seeking Alternatives

Germany faces a fundamental challenge in foreign trade in 2025. Its two traditionally most important partners have become problematic relationships.

The USA under Donald Trump is pursuing unpredictable tariff policies. In July 2025, EU Commission President von der Leyen had to agree to a framework agreement on Trump’s golf course that subjects European goods to US tariffs of at least 15 percent. For India, Trump imposed tariffs as high as 50 percent, with threats of 100 percent if India continues buying Russian oil. The EU also committed to purchasing $750 billion worth of liquefied natural gas, oil, and nuclear energy products from the USA by 2028, plus an additional $600 billion in investments in strategically important US sectors.

The situation with China is even more problematic. Current figures from January to July 2025 clearly show the structural problem: Germany imported goods worth €96.1 billion from China during this period, but only exported €48.4 billion there. The trade deficit amounts to nearly €47.7 billion—Germany imports about twice as much as it exports.

This massive imbalance makes Germany vulnerable in many areas. China is reducing its imports of German goods while simultaneously flooding Europe with cheap products, especially electric vehicles and green technologies. German automakers are increasingly losing market share in China to local competitors.

This situation has forced Germany and the EU to develop a comprehensive diversification strategy. The concept is called “open strategic autonomy”—as open as possible, as autonomous as necessary. It’s about de-risking, not decoupling—minimizing risk without complete separation. For your company, this means: the search for alternatives is no longer an option, but a necessity.

India as a Strategic Partner

In the context of this diversification strategy, India has emerged as an important partner. The German federal government even published its own “Focus on India” in 2024, developing an ambitious agenda for deepening the strategic partnership.

The reasons for this prioritization are compelling. India offers a unique combination of factors:

With 1.4 billion inhabitants, the country has a similarly large population to China, but with a significantly younger demographic structure.

The Indian economy is growing consistently at over five percent annually.

According to forecasts, India will rise to become the world’s third-largest economy by 2027. Numerous international organizations such as the International Monetary Fund (IMF), the World Bank, and leading investment banks expect that India will increase its gross domestic product to over five trillion US dollars by 2027, thereby surpassing Japan and Germany (!).

For your company, this makes India both an attractive sales market with a growing middle class and a potential production location.

This dual role is a major advantage: On one hand, India is intended to serve as an alternative production site to China. Many German companies looking to reduce their dependence on Chinese suppliers are evaluating India as a location for relocating or diversifying their production.

India has a well-educated workforce, growing technical expertise, and—unlike China—a democratic constitutional order that is politically more aligned. On the other hand, India itself is a huge and growing sales market. The growing Indian middle class is developing purchasing power and demand for consumer goods, industrial products, and technology.

For German companies that are increasingly losing market share in China, the Indian market offers a compensatory opportunity. Unlike smaller markets in Southeast Asia or Africa, India has the potential—due to its size alone—to actually generate significant trade volumes that carry quantitative weight.

Trade Between Germany and India Today

A Balanced Trade Relationship with Potential

From January to July 2025, Germany traded goods worth €18.2 billion with India. German companies exported goods worth €9.3 billion to India and in return imported goods worth €8.9 billion. Trade is thus nearly balanced—a fundamental difference from other major trading partners.

Compare this with China: There, Germany buys about twice as much as it sells. The deficit amounted to almost €48 billion in the first seven months of 2025. With the USA, the situation is reversed—Germany sells significantly more there than it purchases. These one-sided dependencies carry risks. India, however, offers a balanced relationship.

The following table shows a comparison of the three most important trading partners at a glance.

Trade with India is still significantly smaller compared to the USA and China. But that’s precisely where the opportunity lies. The existing economic relations between India and the European Union already form a substantial foundation.

What Germany Exports to India

Machinery is the backbone of German exports to India. It accounts for over a quarter of all exports. Indian companies purchase German pumps, compressors, gearboxes, and other precision machinery. The value amounted to nearly $5 billion USD in 2024.

Chemical products follow with just under $3 billion USD. German industrial chemicals and plastics are in demand in India. Aircraft and aircraft parts also play an important role—Indian airlines are expanding their fleets and increasingly purchasing from European manufacturers that also produce in Germany. Electrical engineering and measurement and control technology round out the portfolio.

What Germany Imports from India

Chemical products and machinery also dominate imports. India has established itself as a significant producer of pharmaceutical products and is often referred to as the “pharmacy of the world.” German companies source generic drugs and active pharmaceutical ingredients from India.

The development in electronics is particularly exciting. German imports from India increased by 62 percent in 2024 to $1.1 billion USD. India is developing into an important production location for smartphones. Apple already has 14 to 15 percent of its iPhones manufactured there, with an upward trend. By 2028, this share could grow to 25 to 30 percent.

In addition, Germany traditionally imports textiles, clothing, and shoes from India. Food products such as coffee are also increasingly being purchased.

The diversity of India’s export range shows: The country is evolving from a pure low-wage location to a diversified industrial site with growing technological competence.

Close to Completion: The EU-India Free Trade Agreement

The central lever for intensifying trade relations is a comprehensive free trade agreement between the EU and India, which is currently being intensively negotiated.

Current negotiations have been ongoing since 2022, after a longer interruption in previous years. The stated goal is to successfully conclude these negotiations by the end of 2025.

The urgency is underscored by a remarkable diplomatic move. In February 2025, Commission President Ursula von der Leyen traveled to New Delhi with the entire college of EU Commissioners. Such a trip by the complete Commission is extraordinary and signals how important the EU considers this agreement. In September 2025, India’s Trade Minister Piyush Goyal stated that two-thirds of the agreement had already been negotiated.

The free trade agreement is expected to bring tariff reductions for 90 percent of goods. For your company, this means specifically: If you export machinery, automotive products, or other German quality products to India, these goods would become significantly cheaper. The EU has formulated several priorities. At the top of the list is reducing India’s high automotive tariffs, which currently exceed 100 percent.

These tariffs make it nearly impossible for European automakers to be competitive in the Indian market. Given the size of the Indian market and its growing prosperity, however, this would be an attractive sales market for the German automotive industry, which is increasingly under pressure in China. Other European priorities concern market access for agricultural products as well as pharmaceuticals.

India, for its part, has its own clear priorities in the negotiations. The country is already a significant exporter of pharmaceutical products and wants to further expand this sector. India is often called the “pharmacy of the world” because many generic drugs are produced there at competitive prices. Another focus is on textiles, a traditionally strong Indian industry.

Particularly important for India, but also particularly delicate in the negotiations, is so-called Mode 4 mobility. This concerns the temporary posting of skilled workers. India wants Indian IT specialists, engineers, and other professionals to be able to work more easily on projects in Europe. This is a sensitive topic for Europe due to labor market policy reasons, but it is a central concern for India.

Beyond traditional trade in goods, another dimension of cooperation has developed. The EU-India Trade and Technology Council was established to deepen cooperation in future technologies.

The focus areas are strategically important sectors: In semiconductors, Europe and India are working together to build manufacturing capacity and reduce dependence on Asian manufacturers. Clean tech, meaning clean technologies for the energy transition, is another focus area. Artificial intelligence, green hydrogen, and battery recycling round out the portfolio.

If negotiations can be concluded as planned by the end of 2025, the ratification process would still follow. Realistically, the agreement could therefore enter into force at the earliest in 2026 or even 2027. Tariff reductions would typically be implemented in stages over several years. For your company, this means: Now is the right time to set the course and prepare for the Indian market.

Practical Considerations for Your India Trade

If you want to start trading with India now or expand your existing activities, there are some practical aspects to consider. Logistics plays a crucial role. India’s infrastructure in many areas is not yet at the level necessary for highly efficient international trade. Ports, roads, and supply chains are being expanded, but challenges remain.

For your transport planning, this means: You need a reliable logistics partner with experience in the India business. The choice of the right mode of transport depends on your specific requirements.

Sea freight between India and Germany is ideal for large quantities and heavy machinery when price is more important than time. Pure ocean transport takes about 20 to 30 days, but door-to-door you should expect 28 to 45 days.

Air freight between India and Germany is recommended for urgent, high-value, or sensitive products. It typically requires 2 to 10 days door-to-door, depending on the service selected. Express services often cover the route in 2 to 4 days.

Important: Building functioning supply chains is a long-term process. For German companies looking to relocate production to India, practical questions arise. You must qualify suppliers, establish quality standards, and adapt production processes. This requires time, patience, and significant investment.

Detailed information on all transport options can be found on our overview page for transport between India and Germany.

Customs Notes

As with any trade with third countries, there are some basics to keep in mind regarding customs.

For every shipment, you need basic documents such as the commercial invoice and packing list.

Depending on the mode of transport, a transport document is added—for ocean freight, the bill of lading; for air freight, the air waybill. Additional documentation is required for certain goods.

The certificate of origin certifies the country of origin and is necessary when requested by buyers, banks, or authorities.

Currently, there are no preferential agreements between the EU and India, which is why no EUR.1 is issued.

For food imports to India, the Indian importer needs an FSSAI license from the Indian food safety authority.

For pharmaceuticals and medical devices, CDSCO approvals from the Indian drug and medical device authority are required.

Organizationally, you need an EORI number for imports and exports in the EU as well as an IEC number for companies importing or exporting in India. Wood packaging such as crates and pallets must be heat-treated and marked according to ISPM-15. In practice, importers and exporters grant their freight forwarder or customs agent written power of attorney for clearance.

Incoterms determine who handles transport, documents, costs, and risks. With FOB, for example, the seller arranges export and loading onto the ship, while the buyer handles ocean transport and import. The chosen clause thus influences which party provides which documents.

Another practical challenge is cultural differences. Indian business partners often place importance on personal relationships and flexible arrangements, while German companies prefer precise, legally watertight contracts.

These differences can lead to misunderstandings. Companies that ignore cultural nuances risk contract disputes and business failures. Invest time in building personal relationships and be willing to find compromises.

Industry-Specific Opportunities

Opportunities in India trade vary by industry. Here’s an overview of the most important sectors and their potential:

Mechanical Engineering: Infrastructure Boom as an Opportunity

For German mechanical engineering, India is one of the few bright spots in a difficult global market environment. India’s infrastructure investments continuously create demand for German machinery and equipment. In the current state budget, India continues to focus on infrastructure investments. Where structural reforms take hold and investments are made in infrastructure projects, machinery and equipment manufacturers can benefit from growing demand.

Chemicals and Pharmaceuticals: The Pharmacy of the World as a Partner

In the chemicals and pharmaceutical industry, India offers a dual opportunity. On one hand, India itself is a significant producer of pharmaceutical products and chemicals. German companies can act as suppliers of specialty chemicals or as partners in research and development. On the other hand, the Indian market for high-quality pharmaceuticals and specialty chemicals that German companies can export is growing.

Automotive Supply: Growing Market with Potential

For automotive suppliers, the growing Indian market offers considerable potential. Indian automakers are expanding their production capacity, and international manufacturers are increasingly investing in Indian locations. German suppliers can both serve the local market and use India as a production base for exports to other markets. However, high automotive tariffs are currently still an obstacle—this is where the free trade agreement would bring a decisive breakthrough.

Textiles and Apparel: Tradition Meets Quality

In the textile and apparel sector, India is traditionally strong. German importers can benefit from the competitive prices and high quality of Indian textile products. German imports in this area recently recorded increases. At the same time, demand in India itself is growing for high-quality European textiles and fashion items among the emerging middle class.

Electronics: From Assembly Location to Tech Hub

In electronics, India is rapidly developing into an important production location and evolving from a pure assembly site to a location with more in-house development. This increases opportunities for suppliers to electronics manufacturers and for machinery manufacturers that supply production equipment.

Set the Course Now

India is not a short-term tactical option for German companies, but a long-term strategic decision. The country’s role as a central partner in German and European trade strategy will develop over the next five to ten years. Political decisions are being made now, but economic realities will only change gradually.

Current figures clearly show the potential: While Germany has a trade deficit with China of nearly €48 billion (January-July 2025) and with the USA has a surplus but a politically uncertain relationship, trade with India is balanced and has room for development. Total trade of €18.2 billion in the first seven months of 2025 may seem modest in comparison, but that’s precisely where the opportunity lies.

No other single partner offers a comparable combination of factors like India:

• India has the size of a continental market with 1.4 billion people and a growing middle class.
• The country possesses technological competence in areas such as IT, pharmaceuticals, and increasingly in electronics manufacturing.
• India offers a democratic constitutional order that is politically more aligned than authoritarian systems.
• The country has the ability to actually serve as an alternative production base to China.

If cooperation with India succeeds and the hoped-for potential is realized, this could actually reduce dependence on China to a significant extent.

Successful conclusion of the free trade agreement by the end of 2025 would be an important milestone that would lay the foundation for a deepened economic partnership. For your company, this means: The coming years are a formative phase. Those who begin now to build relationships, establish supply chains, and understand the market will benefit when the free trade agreement further improves the framework conditions.

A professional logistics partner is a decisive success factor. The challenges of the Indian market—from complex infrastructure to different customs regulations to cultural particularities—are best mastered with experienced partners who know both markets. More information on the various transport options between India and Germany can be found on our website.

The transformation of German trade relations is in full swing. India will play a key role in this. The question is not whether trade with India will intensify, but how quickly and how comprehensively. Companies that act now are positioning themselves for this future.