Indo-German Bilateral Trade in Goods

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India and Germany have a very long relationship. India was amongst the first countries to establish diplomatic ties with the Federal Republic of Germany after the Second World War. The bilateral relations grew significantly following the end of the Cold War and the reunification of Germany. Since 2001, India and Germany are strategic partners. The Strategic partnership is further strengthened with the Intergovernmental Consultations (IGC) between Indian and German government which allows for a comprehensive review of cooperation and a platform to identify fresh areas of engagement. India is one of the few countries which has such dialogue mechanism with Germany. The fourth IGC between India and Germany was taken place/held in Berlin on May 30, 2017.

Germany, a largest economy in the European Union (EU), is one of the most important trading partner of India. Germany is India’s six largest trading partner in goods whereas India’s significance as a trading partner for Germany is also increasing. Today, India ranks at the 26th position amongst trading partners of Germany, accounting for 0.8 per cent of total German trade in goods. However, India is lack behind China, which is the largest trading partner of Germany in goods, accounted for 8.07 per cent share in Germany’s total trade in goods.

Bilateral Trade in Goods

Bilateral trade between India and Germany is a key priority for both countries. In the past few years, total trade in goods between two countries has increased significantly as depicted in Table 1 below. In 1997, bilateral trade was valued at $4.45 billion, in 2007 it increased to $15.01 and in 2017, it reached to $19.89 billion. Between 1997 and 2007, bilateral trade grew five times. Table 1 also shows that India has a negative trade balance in goods with Germany, which means that India’s imports from Germany are more than India’s exports. The table also shows that although bilateral trade between India and Germany is increasing, Germany’s share in India’s trade in goods is continuously declining. In 2017, the share of Germany in India’s total trade in goods was 2.89 per cent compared to 3.26 per cent in 2007 and 5.83 per cent in 1997.

Table 1: Trends of Trade in Goods between India and Germany

Year Exports
(in US $ Billion)
Imports
(in US $ Billion)
Total trade (in US $ Billion) Trade Balance (in US $ Billion) Germany’s Share in India’s Total Exports (%) Germany’s Share in India’s Total Imports (%) Germany’s share in India’s Total Trade (%)
1997 1.92 2.53 4.45 -0.61 5.52 6.09 5.83
1998 1.85 2.14 3.99 -0.29 5.58 5.05 5.28
1999 1.74 1.84 3.58 -0.10 4.72 3.70 4.14
2000 1.91 1.76 3.67 0.15 4.28 3.48 3.86
2001 1.79 2.03 3.82 -0.24 4.08 3.94 4.01
2002 2.11 2.40 4.51 -0.30 4.00 3.92 3.95
2003 2.54 2.92 5.46 -0.37 3.99 3.73 3.85
2004 2.83 4.02 6.84 -1.19 3.38 3.60 3.51
2005 3.59 6.02 9.61 -2.44 3.48 4.04 3.81
2006 3.98 7.55 11.54 -3.57 3.15 4.07 3.70
2007 5.12 9.88 15.01 -4.76 3.14 3.93 3.62
2008 6.39 12.01 18.39 -5.62 3.45 3.95 3.76
2009 5.41 10.32 15.73 -4.91 3.03 3.58 3.37
2010 6.75 11.89 18.64 -5.14 2.70 3.22 3.01
2011 7.94 15.60 23.54 -7.66 2.60 3.19 2.96
2012 7.25 14.33 21.57 -7.08 2.41 2.92 2.73
2013 7.52 12.93 20.45 -5.42 2.39 2.87 2.67
2014 7.54 12.79 20.33 -5.25 2.43 2.85 2.68
2015 7.09 12.09 19.18 -5.00 2.70 3.17 2.98
2016 7.18 11.58 18.77 -4.40 2.60 3.01 2.84
2017* 7.82 12.07 19.89 -4.25 2.89 2.88 2.89

Source: Export Data Bank, Department of Commerce, Ministry of Commerce and Industry, Government of India, available at http://commerce-app.gov.in/eidb/default.asp

Note: Data in table is given for financial year starting from April and ending on March.

*Data is available from April 2017 to February 2018.

Indian Exports to Germany

India’s exports to Germany mainly consists of raw materials and intermediate goods and a few finished products. Apparel and clothing still accounts for a largest share in Indian exports to Germany (see Table 2). However, in the last few years, exports of some non-traditional items like nuclear reactors, boilers; and aircraft, spacecraft, etc. have also increased significantly.

Table 2: Top 10 Commodities of Indian Exports to Germany

S. No. 2007-08 2017-18 (April to Feb)
Commodities Exports

 (Value in $ Million)

% Share Commodities Exports

 (Value in $ Million)

% Share
1 Apparel & Clothing 1.05 20.5 Apparel & Clothing 1.30 16.6
2 Iron and steel 0.44 8.6 Nuclear reactors, boilers, machinery and mechanical appliances, etc. 1.24 15.9
3 Nuclear reactors, boilers, machinery and mechanical appliances, etc. 0.43 8.4 Organic chemicals 0.51 6.5
4 Organic Chemicals 0.41 8.0 Electrical machinery and equipment, etc. 0.45 5.7
5 Electrical machinery and equipments, etc. 0.31 6.1 Automobile Vehicles (other than railway or tramway rolling stock, and parts) 0.43 5.5
6 Footwear 0.25 4.8 Articles of iron or steel 0.35 4.5
7 Articles of leather, saddlery and harness 0.22 4.3 Articles of leather, saddlery and harness 0.33 4.2
8 Carpets and other textile flooring 0.16 3.1 Footwear 0.32 4.1
9 Tanning/dyeing extracts; paints, etc. 0.15 3.0 Aircraft, spacecraft, and parts, etc. 0.25 3.1
10 Automobile vehicles (other than railway or tramway rolling stock, and parts) 0.13 2.6 Plastic 0.19 2.4
Total (Top 10) 3.56 69.5   5.37 68.6

Source: Export Data Bank, Department of Commerce, Ministry of Commerce and Industry, Government of India, available at http://commerce-app.gov.in/eidb/default.asp

Indian Imports from Germany

India imports from Germany mainly comprise of nuclear reactors, electrical machinery, iron and steel, etc. (see Table 3). There is not much diversification in Indian imports from Germany in last one decade.

Table 3: Top 10 Commodities of Indian Imports from Germany

S. No. 2007-08 2017-18 (April to Feb)
Commodities Imports

 (Value in $ Million)

% Share Commodities Imports

 (Value in $ Million)

% Share
1 Nuclear reactors, boilers, machinery and mechanical appliances, etc. 3.60 29.8 Nuclear reactors, boilers, machinery and mechanical appliances, etc. 3.64 36.8
2 Electrical machinery and equipments, etc. 1.36 11.3 Electrical machinery and equipments, etc. 1.42 14.3
3 Optical, photographic, medical instruments, etc. 1.05 8.7 Iron and steel

.

0.77

 

7.7

 

4 Automobile vehicles (other than railway or tramway rolling stock, and parts, etc.) 0.80 6.6 Optical, photographic, medical instruments, etc. 0.69 7.0
5 Plastic 0.70 5.8 Aircraft, spacecraft, and parts, etc. 0.39 3.9
6 Organic chemicals 0.57 4.7 Organic chemicals 0.38 3.8
7 Misc. chemical products 0.41 3.4 Automobile vehicles (other than railway or tramway rolling stock, and parts) 0.32 3.3
8 Aircraft, spacecraft, and parts, etc. 0.31 2.6 Plastic 0.30 3.1
9 Iron and steel 0.30 2.5 Project goods 0.25 2.5
10 Project goods 0.27 2.2 Misc. chemical products 0.15 1.6
Total (Top 10) 9.37 77.6   8.46 85.6

Source: Export Data Bank, Department of Commerce, Ministry of Commerce and Industry, Government of India, available at http://commerce-app.gov.in/eidb/default.asp

Conclusion

Germany is always top trading partner of India in goods. The bilateral trade in goods between two countries is increasing. However, Germany’s share in India’s total trade in goods is declining. In past one decade, India’s export and import basket has not changed much; and is still very restricted to selected products. Therefore, both countries should diversify their trade basket. Trade relations between India and Germany are certainly not commensurate with existing potential. Therefore, there is a need to rejuvenate the bilateral trade relationship and raise it to new trajectory. More importantly, India needs to develop a more mature relationship with Germany which will help India to cater not only German market but also the wider EU market.