Rajesh NathVDMA, Indian Office

Challenges & Opportunities in Indo German Trade

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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)

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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

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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

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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

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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: vdmaindia@eth.net

Mr. Sumit Sharma, Regional Manager Noida Phone 0120-4255029 E-Mail: sh.sumit@yahoo.com

Mr. Srikanth Rajshekhar, Regional Manager Bangalore Phone 080-23657674 E-Mail: srikanth.rajshekhar@gmail.com

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Thank you for your

kind attention!