9 India-Germany Relations

Professor R.S. Yadav

Structure of the Module

1. Introduction

2. Objectives

3. Historical Perspective

3.2 Relations with Both Germany

4. Contemporary Relations

4.1 Relations with United Germany

5. Conclusion

6. Important Questions

7. Suggested Readings

1. Introduction

India and Germany represent deep cultural, historical and trade ties since colonial times. Their trade relations were age old since sixteenth century, when first Germans visited India. Unlike other colonial powers, German’s were not attracted towards India for economic gains or political dominance; rather they were attracted by Indian wisdom and civilization. German missionaries became eminent Dravidologists and Sanskritologists. Indian epics like Vedas, Gita, and Upanishads were translated into German and first chair in Sanskrit was established in Bonn in 1818, which made Bonn ‘Banaras on Rhine’. Later fourteen more such chairs of Indology were established. German scholars, poets and philosophers during 18th and 19th century had all praise for Indian religion, culture and philosophy. More than that, German scholars like Goethe, Max Mueller, Guendert etc. looked beyond the contemporary mindset in Europe when Britain was engaged in degrading the values of Indian culture. Despite these cultural relations, Germans were indifferent to Indian nationalism and political events. However, some kind of sympathatical approach was pursued by them during the World War-I, because of the rapport established between exiled Indian revolutionaries and the Berlin India committee. Hitler was also initially not sympathetic towards India as he was interested to woo Britain to be its partner against the then Soviet Union. But later on, due to the leadership of Netaji Subhash Chander Bose he supported Indian national movement against Britain. These developments only highlighted the backdrop of relations between the two countries. But independent India’s relations with Germany were influenced by numerous domestic and international developments. Hence, post-independence India’s relations with Germany can broadly be analyzed in terms of interests and compulsions of the two countries in the changed global milieu.

2. Objectives

In this module an effort will be made to analyze and evaluate India –Germany relations during the last six decades. In the beginning foreign policy of both the countries are evaluated in terms of existing regional and global milieu. Here effort is made to understand India’s historical linkages with the state of Europe in general and Germany in particular. At the outset, it is analyzed that why India’s relations remain restricted to Federal Republic of Germany in the first instance, i.e. up to 1972. Though India continues to have good relations with the former Soviet Union, yet it did not develop its ties with the East Germany. Later on during the decades of 1970s and 1980s, India maintained goodwill with both the states. Underlying interests and compulsions of both India and these states have been examined to discern the trends in their relations. After evaluating their bilateral relations in term of their political, strategic and economic it has been found that their relations could not reach the expected heights as it should have. For numerous reasons countries like China, USA and Southeast Asia remained important for Germany and India continue to remain a peripheral state in term of its relation building. However, a major shift in their ties is noticed after the unification of Germany. The main reasons for such change is not the unification of the states, rather this may have been due to initiation of the process of globalization and emergence of new regionalism in the form of European Union.

3. Historical Perspective

3.1 Relations with Federal Republic of Germany (FRG)

India started its relations with the Federal Republic of Germany (West Germany) on the basis of British legacy. Though accredited through the Indian Military Mission to the Allied Four-Power Control Council, which administrated occupied Germany, yet India adopted sympathetic attitude towards people of Germany in their hours of need. In March 1951, an Instrument of Revision of the Occupation Statue promulgated by the Allied High Commission authorized the Federal Republic to establish diplomatic relations with other countries. After that a process of bilateral ties between India and Germany started.

India and Germany began their relations on a positive note as India was the first country to formally call off the state of war with Germany and later, in November, it establish formal diplomatic relations. Though India recognized only one part of Germany, yet it had full faith in the unification of the two parts.

However, to avoid offensive to Bonn India did not recognize the Eastern part till October 1972. Simultaneously, it is also true that despite colonial legacies of the European powers in the third World, Germany is the only power without any colonial past on the Indian subcontinent. Rather German scholars always projected the glorious past of India. In the post-independent era, the exchange of political visits by the high dignitaries on both sides prepared the ground for cordial and warm relations between the two countries. It is because both the countries have faced similar trajectory of problems in their different contexts. On the one hand, if India was recovering from the colonial rule and trauma of partition, then on the other hand, Germany also suffered the consequences of its disastrous defeat during the war. As a result, when India extended recognition to other part i.e. East Germany; it was followed by simultaneous announcement so that this will not affect the right of the German people to peaceful reunification.

Consequently, economic and technological cooperation between the two countries got strong day by day. As a result, industrial collaboration between the two grew tremendous. This was followed by first trade agreement between the two countries in 1950. This laid down the foundations for intensified economic aid to India in the form of credits and grants. Germany extended huge economic assistance in the form of credits which reached to Rs.1029.673 crores in 1971. German loans to India have been very soft in terms of time for refund (25 to 70 years) and interest rate (2.5 to 3 percent). Besides loans, grants were also extended in the form of (i) technical assistance in the form of German experts; (ii) training facilities to Indians in Germany; and (iii) assistance to certain selected projects in India with experts, equipments and material. The important German collaborations in India were- Roukella, Bhadrawati, HMT, BHEL, Gujrat Automobile, agricultural projects in Mandi, the Nilgiris, Alrora and Kangra, and technical institutes like IIT, Madras. Numerous Technical collaborations were also concluded. Out of the total 30 giants projects, 19 were established with the assistance of Germany collaborations in India. Important among them are: BASF, and Bayers in chemicals; DaimlerBenz, MAN and Bosch in trucks and auto ancillaries; Siemans, AEG and Telefunction in electric and electronic equipment; GHH and Bockan Wolfe in mechanical engineering; and UHDF and Lurgi in fertilizers and ignite mining.

Indo-German trade and investments had also been to some extant part of economic activities between the two countries. Due to increasing trade interests, both countries decided to raise the status of their trade representatives to consulates General in August 1970. India’s imports from Germany had been capital goods, machine tools, iron and steel sheets and plates, machine for textile and leather industry, paper and printing machine, electrical-technical goods etc. Indian experts to Germany included mainly tea, jute, raw skin, iron ore, precious and semi-precious stones etc. However, in terms of percentage of trade, India’s contribution was not very unpressured. Besides, India always had adverse balance of trade with Germany. Private investment in India was also not very attractive. However, nearly 30 percent of financial aid funneled to India by FRG directly or through multilateral channels. In 1970, the estimated German investments in India accounted for 6.5 percent of the total foreign investments received in India and were well behind the investments received from the countries like – U.K (40.5), and U.S.A (27.4).

However, it should not be discerned that India – German relations were without difficulties during this period. Rather they faced differences of opinion on number of issues, hence diverged in their foreign policy orientations. It is because due to their different geo-political and security interests, both pursued divergent foreign policy orientations. If India was more engaged with superpowers and Afro-Asian countries of non-aligned movement; then Germany was more inclined towards the countries of NATO and Europe. Besides, though both were democratic, yet they differed on numerous political issues during this tenure. For instance, India shown its resentment to Germany on the sale of Sabre jet aircraft to Iran, which it felt, might be diverted to Pakistan, India also expressed its displeasure on Germany’s guarantee to a consortium of European firms purposing to set up a steel plant in China. Simultaneously, Germany also resented references to German question in the Indo-Soviet communiqué of 16 July 1966. Though both differed on various controversial global issues, yet their differences could not became public as FRG was not member of the UN at that time. As far as question of private investments was concerned, FRG’s marked preferences had been for EEC, USA, Canada, South Africa etc. and the total German investments in India were estimated to be just about one percent of its total overseas investments. That is why, probably India’s defeat during the wars of 1962 and 1965 followed by the successive years of drought and social and political unrest, it got less attention from Germany as the case with other Western powers. Germans, like other European powers, were also infected with the euphoria about China during 1960s, which marginalized former’s interest in India. Emerging Indo-Soviet friendship treaty further alienated Germany from India and brought Germany closer to the United States.

Thus, in the first phase of relationship between the two countries, the scenario was mixed with ups and downs. Through, in the area of economic and technical cooperation both India and Germany developed some sound bases, yet their differences on political issues and divergent orientations on each others’ geo-strategic and security interests continue to exist. Future of their ties, hence, was more influenced by the exigencies of the operational dynamics of their domestic and external milieu.

3.2 Relations with both Germany

This period began with the recognition of German Democratic Republic (GDR) on 8th October 1972 after the normalization of relations between East and West Germany. Two decades of 1970s and 1980s represented “lean years of apathy”, when Germany’s financial and technical assistance towards India remained a very low key affair. However, the political relations between them continue to remain sound. However, significant beginnings in improvement of economic ties between them were noticed only during the period of 1985-1990.

In the beginning there was not much change in the patterns of Indo-German trade. However, Britain’s entry into the EEC as a full member in January 1973, and the consequent withdrawal of concessions available to members of the commonwealth, provided a fresh impetus for further growth in Indo-German trade and economic cooperation. But actual situation changed only after 1985. By 1984-1985, Germany became the number one suppliers for India within the EEC and by 1986-1987 its foremost market within the community. A significant change was noticed only during the later period as it has been a trend setter era in terms of trade items. For instance, the finished products have increased in terms of India’s exports from 15.4 percent in 1970 to 60.27 percent in 1990. Similarly, the export of raw material declined from 24.1 percent to 0.03 percent during this period. In contrast, the corresponding figures for finished goods as percentage of German exports to Indian market increased from 57.78 to 68.19. Thus, Indo-German trade doubled between 1980 and 1985 and crossed Rs. 6000 crore by the year 1990-1991. But the huge deficits in India’s balance of trade became chronic and it began narrow only after 1988.

Though, the total foreign aid received by India from Germany since 1951 reached to Rs. 3848.4 crore, yet it lost the momentum of the eras of 1950s and 1960s. Out of total of 14 percent of German financial aid to developing countries, direct or through multilateral agencies, 5 percent of technical assistance and less than 2 percent private investment was directed to India. Apart from earlier areas of cooperation in the field of steel manufacturing, telecommunication engineering, wagon design, agriculture etc, cooperation in some new areas like geo-seismic research, rocket technology, oceanology etc. was also added to that list.

Since 1985, the Indo-German economic cooperation in the form of industrial collaboration rejuvenated. Now FRG became India’s number one partner in industrial collaboration and premier supplier of capital goods for modernization of Indian Industry. From an average of 56 industrial collaborations per annum in the 1970s, such collaborations have averaged 180 since 1985. This was much more as compared to the collaborations approved from the USA, UK and Japan. These collaborations are in the multiple areas of high technology including information, space, aerodynamics, nuclear, waste disposal, reactor safety, medicine, marine, bio-technology etc. Thus, Germany prominently figured in Industrial collaborations in India.

German interests in the investments also continue to remain low. It may be due to continuity of past relations, as well as, due to lesser overall total overseas investments by Germany. It is evident from the fact that in 1990, Indian received just DM 19 million out of the total overseas investments of DM 29.4 billion by Germany. In its overall programme of investments in third world, it is very negligible amount. Asian region, as well India, comes at number seven in order of priority by the Germany. However, improvement in German investment in India can be visualized in the late 1980s. India was given the honour of being the partner country at the world famous Hannover Trade Fair (1984) and at the Frankfurt Book Fair (1987). In 1989 as well, India was given partner country status at CBIT (Cantre for Bureaue and Information Technology) Forum at Hannover in the Technogerma exhibition in New Delhi.

After a low profile economic relations till mid-1980s and non-existence of sound political relationship both started coming closer to each other after 1985. This is manifested through three fold activities between both the communities. Such activities were mainly cultivates between the two countries by the German-India Society, Stuttgart, with branches in all important German cities, and by a number of Indo-German Friendship Societies in various Indian cities with the Federation of Indo-German Societies at its apex in New Delhi. The declaration of holding of ‘Festival of India’ in Germany and the ‘Festival of Germany’ in India further strengthened those ties. Most important than the two, has been the exchange of visits by the political leaders of both the countries which cemented their bilateral ties. Most important High-Level official visits of the political leaders during the second half of 1980s had been Chancellor Helmet-Khol (1983, 1986), and reciprocal visit by Rajiv Gandhi (1988).

Thus, during the first decade and half, Germany paid scant interest in India. But with the coming of Rajiv Gandhi to power and initiation of the process of liberalization, Germany was more attracted towards India. It was because there lies huge scope for economic and technological cooperation between the two as India represented a stable democracy, with abundance of skilled manpower and strong infrastructure base.

4. Contemporary Relations

4.1 Relations with United Germany

Indo-German relations in the post-cold war era witnessed ups and downs. Divergences on number of issues along with their compulsions and opposite foreign policy orientations did not brought them much closer to each other. The unification of Germany was appreciated by India in a very positive manner as the then External Affairs Minister I K Gujral not only welcomed this change but hoped that it will “be a major force for a batter world in which disarmament, development and peace will acquire new priorities”. Later on, India’s Prime Minister V.P.Singh reiterated the same and expressed confidence that “United Germany will be a powerful global force for peace, stability and development”. It was also expected that Germany will also continue the legacy of strengthening bilateral ties with India.

As a result, India starts developing closer ties with unified Germany. India was attracted towards Germany not only as a unified strong power of the Europe but also as Key to its entry into Europe. Due to disintegration of erstwhile Soviet Union and Eastern Europe, India Lost nearly 25 percent of its market of export and Import, India wish to compensate its economic losses by developing relations with states of European Union. In this context, Germany can play a major role in enhancing its relations towards its future relations with European Union. Besides, India’s economic crisis also compelled it to look towards Germany as major source for economic assistance. In the context of initiation of structural reform, India considered it a source of huge investment to boost up its reform programme. On the other hand, Germany wanted to seize the new opportunities available in India who was busy in opening its economy through structural reform programmes. It chooses to act with the conviction that the liberalization process would endure and would open new opportunities in trade, technology and investments. For Germany, to give manifestation to this idea “Indo-German Consultative Group” (IGCG) was made as a think tank for this purpose. In 1993, an “Asia Policy Paper” was approved which assigned important role to India along with China, Japan and ASEAN. Provisions of annual visits by the foreign minister and head of government were made as part of this process.

As a result, Germany reassured India for its continued commitment of economic assistance. German President Richard Von Weizsaecker came to India on a 5-day visit in February 1991 along with Carl-Diater Spranger, the German minister for economic cooperation. He stressed that India would remain Germany’s number one development partner. He also recommended the new states of eastern Germany as an investment location for those sectors of Indian industry having the competence and efficiency. The idea of Germany as a bridgehead for India to the East European export market was also advanced by German spokesmen. Evidently, a strengthened Indo-German link is expected to act as a linchpin for further expansion in Indo-EU relationship on completion of the community’s internal market.

P.V.Narsimha Rao paid his first visit abroad, just after four months of his government, to inaugurate the “Festival of India” in September 1991. This came at a time when there was balance of payments crisis. Its treasury became empty to the extent that it was forced to sale its gold reserves. But his visit was successful as both countries agreed on the formation of IGCG as envisioned in the Asia Policy paper. But this euphoria of improved Indo-German ties was short lived. German development policy, as enunciated by Carl Dieter Spranger, Federal Minister for Economic Cooperation, was not conducive to the growth of Indo-German relations. Under this new policy, five preconditions were laid down for recipient country seeking German economic aid, these conditions were – (a) respect for human rights; (b) popular participation in political decision making; (c) certainty of law and the rule of law; (d) creation of a “market- Friendly” economic system; and, (e) development orientation of Government activities. Speaking in the context of India, Spranger remarked that assistance to India would be cut down by 25 percent in 1992 because of its “high” defense expenditure.

Therefore, up to 1993 India remained marginal player in Germany’s foreign policy calculations. This change was witnessed in their bilateral relations after the visit of ‘ Inter – Government Cooperation Group’ Helmet Kohl to India in 1993. During his longest ever visit (i.e. five days), he carried a huge delegation of over 20 “personal guests”, consisting primarily of leading German businessmen to discuss issues of economic cooperation with India.

During this visit, both agreed on the “agenda for action”. later on, formal visits by the leaders of both countries continued. However, much improvement was not noticed in their relations till the end of the century.

Indo-German trade marginally increased from DM 5 billion in 1992 to DN 8 billion in 1997, but this increase was not significant in terms of India and Germany’s overall trade. Germany no more remained as principal partner in EU. As far as Germany’s trade in Asia was concerned, the volume of China-Germany trade is four times higher than that with India. The latter ranked only seventh on the list of German export destination in Asia. Moreover, India’s trade patenting remained under-utilized in terms of their bilateral ties.

Similarly FDI flow from Germany to India has been very moderate as from DM 84 million in 1992 it reached to Dm 440 million in 1997. As country-wise also, Germany’s rank dropped from no.2 to number 9. Though some authors appreciate the successful working of Germany’s joint ventures in India, but the overall situation of foreign investments was not comfortable. However, German continued to remain the “second largest partner for technology collaboration agreements.” Similarly, the foreign aid from Germany has been nominal and it was stopped after the Pokhran II explosions in 1998. Even Germany was slow in recognizing India’s potential in information technology.

The reasons for decrease interest of the Germany in India are not very difficult to find out. Basically, Germany’s Asia Policy was more inclined towards China, Japan and ASEAN than towards India. Germany is also busy to develop its lesser developed area of East Germany. Issue of human rights, like with other Western powers, has been a serious matter of differences between the two for some time. Chancellor Helmet Kohl has been a strong votary of nuclear non-proliferation. India’s non- signing of NPT and CTBT might have created a wedge between the two. Even the Track-II diplomacy through the establishment of IGCG was not taken seriously.

5. Conclusion

From the above analysis, it can be concluded that future of Indo-German relations is not bleak. Rather both continue to have convergence of interest on numerous issues. There is ample scope for the development of economic cooperation between these two states. The successful working of Indo-German joint ventures, despite the ups and downs in over all relations, is a proof of it. With the strengthening of economic reforms in India, chances of foreign investments from Germany have also brightened. Both are also developing strong economic ties with the European Union. Strengthening of such ties is automatically going to strengthen their bilateral relations as well. Politically, both are in favour of development of plural world order in the post-cold war era. This became all the more important by taking similar position adopted on the issue of Iraq crisis by both the states. However, it is also fact that India’s opposition to US led war on Iraq was not as critical as that of the Germany. However, in the post-cold war scenario both are in favour for the reconstruction of Iraq under UN leadership rather by any other country. Both also want democratization of the UN Security Council, as they are claimant for the permanent seat in the Security Council. Both are also in favour of liberal democratic values and committed to do away with the phenomenon of terrorism of all kinds.

As a result, despite Germany’s sharp reactions on India’s Pokhran II explosions, it stood by India during the Kargil crisis in 1999, As a result, Germany remarks that Pakistan must end transgression of Line of Control. Later, it also organized its “Festival of Germany” to highlight the emerging cooperation in culture, science and technology and other such fields. However, good relationship between them will be dependent upon two fold factors – one, commitments of Germany’s foreign policy towards third world in general and India in particular ; and second, the success and strengthening of India’s position of economic reforms to attract foreign investments and technological collaborations.

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Suggested Readings

a) Books/Articles

A. Appadorai and M.S. Rajan, India’s Foreign Policy and Relations, New Delhi, 1981.
M.S. Rajan, India in World Affairs, 1954-56, Bombay, 1964.
H.S. Chopra, “India and the Politics of the Major EEC Powers,” International Studies, 17(3-4), July-December 1978.
French Statistics Office, cited in http://www.amb-inde.for/Indo-frenchl.htm.
http://www.meader.nic.in/foreign/ind-france.htm.

b) Web Links:-