Why are Indian exports not increasing?

German exports of drive technology and construction machinery to India increased in the first half of 2016. Photo: Port of Hamburg / Peter Glaubitt

The exports of German mechanical engineering companies fell in the first half of 2016. Overall, exports fell by 8.5 percent to 1.35 billion euros, as announced by the Association of German Machinery and Plant Manufacturers (VDMA). The association is anticipating growth in the drive technology, construction machinery, and pumps and systems segments this year compared to the previous year. "All other specialist branches are currently experiencing a difficult environment in India business," said VDMA President Reinhold Festge during a visit to the subcontinent. In 2015, German machine exports to India totaled 2.92 billion euros (plus 14.9 percent). Festge was positive about the Indian deliveries to the German mechanical engineering sector. In the first six months of this year they increased by around 6 percent to 280 million euros.

Despite a gradual reduction in import duties last year, the total import duties into India are still among the highest in the world. Depending on the product group, they can be up to 26 percent. Often other local taxes are also due. Difficulties in customs procedures or in the implementation of tax rules are further obstacles.

Many machine manufacturers are already represented in India. In 2014, direct investments from German mechanical engineering to India reached 800 million euros, almost twice as much as in 2008. The automotive industry is also investing on the subcontinent. ZF Friedrichshafen AG is building its first technology center for software and application development in India in Hyderabad. The aim of the new Tech Center is to support ZF's global R&D network and support local product development, the company announced.

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