German Chancellor Friedrich Merz’s two-day visit to India marked a significant milestone in the bilateral relations. Accompanied by 23 CEOs of German companies from various sectors, Merz landed in Ahmedabad 12 January. Having spent a full day in multiple events, in the company of Indian Prime Minister Narendra Modi, the Chancellor flew to Bengaluru. The intent and composition of the delegation were reflected in the signing number of MoUs and Joint Declarations of Intent, which aimed at strengthening economic, technological and security cooperation between the two countries.
For Chancellor Merz, it was his first trip to India and Asia as the Head of the German Government. Merz chose India for his first Asian trip as Chancellor, indicating a shift in strategy among European leaders, who previously focused on China. New Delhi is also preparing to receive the EU leaders as guests in the ensuing Republic Day parade. Soon after, the French President Emmanuel Macron will visit India.
The New Year seems to be starting with bonhomie between the Indian and the European leadership. German Chancellor suggested that India and the EU could conclude the FTA by the end of January. Germany, being the largest economy in the Union, Merz’s voice carries considerable weight. The strategic shift in German foreign and trade policy could be detected in the Chancellor’s poignant remarks that the world is experiencing “a renaissance of unfortunate protectionism” that harms Germany and India. He did not name any country, but the reference was obvious.
While the United States has imposed heavy tariffs on trading partners, China in troduced export controls on minerals used in auto manufacturing, causing months of supply chain disruption last year. This has badly affected German car makers. Germany has signalled diversification of its trade and search for alternatives to Chinese exports and market. More than once, the German lead ership have revealed its preference for India as a democratic alternative to the Chinese authoritarian state.
That said, Germany has not been able to divert its trade away from China, with its bilateral trade pegged at 287b USD in 2024-25, compared to 50b USD with India in the same year. The delay in German disinvestment from China and in deepening trade and economic ties with India may be attributed to the strategic divergence between India and Europe that includes Germany on the war in Ukraine.
However, Germany is yet to take a concrete call on its attitude towards China, if Bonn wants to have a strategic partnership with New Delhi. The geo-political approach has to be matched with trade and economic strategy.
The visit underscores the growing importance of India-Germany relations, with Germany emerging as India’s strategic and trade partner. Strengthened bilateralism between India and Germany automatically leads to deepening India-EU ties. Faced with the capricious US trade and security policies, mainly diluting NATO and the traditional trade ties with Europe, Germany and the European Union are looking for new partners. While China remained for a long time the strongest trade partner of Germany and the EU, this may no longer be the case for at least two reasons: one, the growing trade and strategic rivalry between the US and China, and the ‘systemic threat’ posed by Beijing.
Germany and the EU will have no other option than giving up their China obsession while correspondingly reducing their trade with the country. In that scenario, India emerges as the strongest candidate for an alternative to China.
In India-EU exchanges in the past, China was the elephant in the room, but now it is Russia, and the US as well. So, the eyes of the world powers will be focused on the India-EU Summit later this month. New Delhi is certainly bracing up for it and should not let this opportunity slip out of hand.
The writer is a Professor of Practice, NIIS Group of Institutions.