Germany’s Zeitenwende has elevated India from an economic partner to a central pillar of Berlin’s security, trade, technology, and demographic strategy in an increasingly fragmented global order
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When former German Chancellor Olaf Scholz visited India in November 2024, Prime Minister Narendra Modi proclaimed, “Alles klar, Alles gut”. This perhaps remains the most accurate characterisation of the current state of the India-Germany strategic partnership, established in 2000.
The “Focus on India” paper issued by the German Foreign Office during Scholz’s tenure acknowledged India’s growing international heft and laid out an ambitious agenda for engagement. Building on this groundwork, Chancellor Friedrich Merz has pushed the goalposts further by making India his first Asian destination since assuming power in May 2025.
Under the framework of the 8th Intergovernmental Consultations, India and Germany have inked 19 MoUs spanning defence, green energy, technology, education, and people-to-people ties.
Even while economics remains the mainstay of the partnership, security and defence have emerged as key new drivers of cooperation.
The German Zeitenwende following Russia’s war in Ukraine resulted in a relaxation of previously stringent arms export rules and licensing requirements. Coupled with India’s easing of regulations for foreign defence entrants, these developments are ramping up the defence component of the partnership,
The €8 billion deal between Germany’s Thyssenkrupp Maritime Systems (TKMS) and India’s Mazagon Dock Shipbuilders Limited to co-produce submarines in India would offer several advantages. For New Delhi, the deal, touted as India’s largest Make in India defence initiative, would advance the country’s defence modernisation and indigenisation goals while enabling advanced technology transfers. For Berlin, it is about capitalising on India’s lucrative defence market and reducing India’s military dependence on Russia. At the same time, it could also help shore up Germany’s domestic defence industry as part of Europe’s rearmament initiative, given that the cost of constructing submarines in India would be cheaper than in Europe. TKMS has alluded to plans to make India a global manufacturing hub for submarines, given their rising demand. The 37-point Joint Statement agrees to strengthen the bilateral defence industrial partnership through a “roadmap for long-term co-development and co-production of military platforms”.
The German Zeitenwende following Russia’s war in Ukraine resulted in a relaxation of previously stringent arms export rules and licensing requirements. Coupled with India’s easing of regulations for foreign defence entrants, these developments are ramping up the defence component of the partnership, as evident in 2024, when India was the third-largest recipient of German arms in the first half of the year.
Security cooperation is also expanding beyond weapons deals. This involves increasing German deployments in the Indo-Pacific, such as the frigate Baden-Württemberg’s port call in Goa in 2024, joint military exercises between the two armed forces (including the upcoming TARANG SHAKTI and MILAN exercises), a logistical support agreement, and the posting of a German liaison officer at the Information Fusion Centre–Indian Ocean Region (IFC-IOR). India and Germany see each other as key partners in stabilising the Indo-Pacific region, central to global trade and maritime routes, where China’s aggressive posturing has raised concerns.
India and Germany see each other as key partners in stabilising the Indo-Pacific region, central to global trade and maritime routes, where China’s aggressive posturing has raised concerns.
As Berlin becomes an important security partner for India, it is this emerging security dynamic that is driving fresh momentum in Indo-German relations and enabling a more ‘strategic’ partnership.
Trade and investment continue to remain important, given Germany’s status as the EU’s largest economy and India’s largest trading partner in Europe, accounting for 25 percent of India’s total trade with the EU. Naturally, German businesses are eager for the EU-India Free Trade Agreement (FTA), negotiations for which are likely to be concluded in time for the upcoming EU-India Summit in New Delhi.
China has traditionally remained the primary focus of German foreign policy and of German businesses in Asia, given the extent to which both are intertwined with and dependent on the Chinese market. However, amid escalating EU-China trade tensions arising from Beijing’s unfair trade practices and the large trade deficits that many EU member states, including Germany, run with China, attention towards India has increased, particularly as the German economy narrowly avoided a third consecutive year of recession. While Germany’s close commercial engagement with China is likely to continue, Berlin is simultaneously diversifying its trade partners, with India’s emergence as an alternative manufacturing and business hub likely underpinning Merz’s first choice of destination in Asia.
With over 2,000 firms already present in India, German companies are expanding their investments in the country, and, like his predecessor Scholz, Merz arrived with a large business delegation that included 23 top German CEOs. Yet, trade figures tell a stark story: Indo-German bilateral trade in goods and services was valued at around US$50 billion in 2024, while Sino-German bilateral trade stood at approximately US$275 billion in the same year. At the same time, Merz’s upcoming visit to China — and whether he will attempt to rebalance Berlin’s trade ties with Beijing or position himself in line with wider EU interests — will be watched closely.
However, amid escalating EU-China trade tensions arising from Beijing’s unfair trade practices and the large trade deficits that many EU member states, including Germany, run with China, attention towards India has increased, particularly as the German economy narrowly avoided a third consecutive year of recession.
On critical and emerging technologies, Joint Declarations were signed in the areas of semiconductors, critical minerals, telecommunications, and digitalisation to strengthen economic resilience and technological sovereignty. After visiting Modi’s home state of Gujarat, the second leg of Merz’s visit was to India’s tech capital, Bengaluru, where Germany has made notable investments in clean energy, engineering, and other technologies. Cooperation in green energy and sustainable development has been in full swing under the ambit of the Green and Sustainable Development Partnership, under which Germany has earmarked €5 billion out of its €10 billion commitment for sustainable development projects in India, as well as a green hydrogen roadmap.
Mobility and migration have emerged as key areas of synergy, with India’s skilled workforce well placed to address labour shortages arising from Germany’s ageing population. According to estimates, the German economy needs 400,000 skilled workers annually from abroad. In 2022, the two countries signed a Migration and Mobility Partnership Agreement (MMPA), allowing for greater mobility of Indian workers to Germany, with the quota of German visas increasing from 20,000 to 90,000. This partnership also carries the dual advantage of addressing unemployment in India.
The Indian diaspora in Germany, numbering around 300,000, is largely skilled, comprising IT and STEM professionals, healthcare workers, students, and researchers. Following Merz’s visit, Germany will offer visa-free transit for Indians and also expand skilled legal migration under the MMPA. A Global Skills Partnership, particularly focused on healthcare, will also be established. However, managing growing domestic resentment towards immigration will remain a challenge for Merz, given the country’s current political environment, particularly the popularity of the far-right, for whom immigration is a key mobilising issue.
Following Merz’s visit, Germany will offer visa-free transit for Indians and also expand skilled legal migration under the MMPA. A Global Skills Partnership, particularly focused on healthcare, will also be established. However, managing growing domestic resentment towards immigration will remain a challenge for Merz,
On the education front, an Indo-German roadmap on higher education will lead the way. Indian students, numbering around 60,000, comprise the largest group of international students in Germany, a figure that is likely to rise further given increasingly restrictive US policies towards international students.
India is the world’s fastest-growing economy and is poised to overtake Germany as the third-largest global economy. Germany, with its advanced technological capabilities, is in turn perceived as a key partner in India’s industrial transformation and growth story. Matching Germany’s technological prowess with India’s modernisation needs, its demographic deficit with India’s demographic dividend, and Germany’s desire to engage the Global South with India’s prominent position within it presents a clear win-win proposition.
Germany’s internal shifts have complemented positive developments in the Indo-German partnership. The Zeitenwende has prompted Berlin to rethink its traditional security and trade dependencies while shedding its post-war reticence towards hard power. Moreover, Merz’s constitutional debt brake reforms have enabled the conditions for increased defence investment. Should Germany realise its goal of spending 3.5 percent of GDP on defence, it could well emerge as a cornerstone of European defence and security.
Matching Germany’s technological prowess with India’s modernisation needs, its demographic deficit with India’s demographic dividend, and Germany’s desire to engage the Global South with India’s prominent position within it presents a clear win-win proposition.
Meanwhile, the broader geopolitical environment has injected renewed urgency into strengthening Indo-German relations. US President Donald Trump’s second term has disrupted not only the transatlantic alliance but also the previously smooth trajectory of US-India ties. In this context, EU-India relations, as well as India’s ties with key member states such as Germany, are increasingly viewed as stabilising anchors in an increasingly fragmented world order. A more consolidated Indo-German partnership could therefore serve as a strong foundation for deepening EU-India relations.
Shairee Malhotra is Deputy Director - Strategic Studies Programme at the Observer Research Foundation.
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Shairee Malhotra is Deputy Director - Strategic Studies Programme at the Observer Research Foundation. Her areas of work include Indian foreign policy with a focus on ...
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