German Chancellor Friedrich Merz arrived in India on Monday for a high-stakes two-day visit aimed at significantly deepening economic and security cooperation between the two nations. The trip underscores a mutual desire to navigate an increasingly volatile global landscape shaped by pressures from the United States and China.
Strengthening Strategic and Economic Foundations
Merz began his itinerary with a meeting with Prime Minister Narendra Modi in Ahmedabad. The visit is strategically timed, occurring just two weeks before a planned summit between the European Union and India. A central topic is the long-pending EU-India Free Trade Agreement (FTA), which negotiators are rushing to finalise before EU President Ursula von der Leyen's visit later in January. India's commerce ministry has framed this not merely as a trade deal but as a comprehensive partnership addressing modern economic realities.
The context of this diplomatic push is crucial. Both Berlin and New Delhi are contending with a strained relationship with the United States under President Donald Trump, whose repeated threats to annex Greenland have unsettled European allies. Meanwhile, India faces some of the highest US tariff rates, pegged at 50% on certain goods.
Key Deals on Defence, Minerals, and Healthcare
The Chancellor's visit is expected to yield concrete outcomes across several critical sectors. According to reports, Germany and India are poised to finalise agreements on:
- Defence Collaboration: Central to the talks is a massive submarine manufacturing deal worth at least $8 billion, potentially the largest defence agreement in India's history. German firm Thyssenkrupp Marine Systems GmbH and India's Mazagon Dock Shipbuilders Ltd. are negotiating details, including technology transfer, to help India reduce its traditional reliance on Russian military hardware.
- Critical Minerals Access: Germany is actively seeking to diversify its supply chains away from China and is pursuing improved access to India's reserves of critical minerals and rare earths. A memorandum of understanding on this issue is likely to be signed.
- Healthcare and Skilled Labour: To address acute labour shortages hampering its economic growth, Germany is set to sign a deal that eases barriers for Indian healthcare professionals seeking to work there.
- Semiconductors and Business: Deals covering semiconductor development and broader business collaboration are also on the agenda.
Merz is accompanied by a powerful delegation of German business leaders, including CEOs from Siemens, DHL Group, Infineon Technologies, Uniper, and Airbus Defence and Space. The delegation also features executives from numerous small and mid-sized Mittelstand companies, the backbone of German manufacturing.
A Robust Partnership with Growing Stakes
As the world's third- and fifth-largest economies, Germany and India share a robust partnership. Bilateral trade volume stands at nearly $50 billion, making Germany India's most crucial economic partner within the European Union. Over 2,000 German companies operate in India, while more than 700 Indian firms have investments in Germany.
Beyond economics, the leaders are expected to discuss India's relationship with Russia in light of the Ukraine invasion. While India initially increased oil imports from Russia, it has scaled back following US sanctions on major Russian energy producers.
On Tuesday, Merz will travel to Bangalore to visit a Bosch facility, highlighting the focus on technology and manufacturing. The outcomes of this visit will set the tone for the upcoming EU-India summit and signal a decisive step towards a more strategic Indo-German alliance in an uncertain world.
