- The new episode in strengthening the alliance began with German Chancellor Olaf Scholz attending the German Asia-Pacific Business Forum, which was the first summit India hosted in 12 years.
- The India-Germany Green Hydrogen deal is a notable agreement, which is very important as the German government recently unveiled a new strategy focused on green energy and strengthening cooperation with India.
- Spain is currently the most positive-performing economy in Europe, with the highest growth output among Western European countries.
- The growing economic interest between India, Germany, and Spain also raises expectations for a Free Trade Agreement (FTA) between India and the European Union, as several rounds of negotiations have already taken place.
In recent days, European and Indian diplomatic relations have been at the forefront, with Germany and Spain—two major European economies—seeing their heads of state visit India. This began with German Chancellor Olaf Scholz attending the German Asia-Pacific Business Forum, marking the first time in 12 years that India hosted this summit. The event aimed to strengthen economic ties and boost business opportunities between India and Germany.
During the forum, Chancellor Scholz and Indian Prime Minister Narendra Modi addressed business communities from both countries, discussing potential areas for enhanced cooperation. Bilateral talks were also held, resulting in the signing of several Memorandums of Understanding (MoUs). Several significant agreements were signed between India and Germany, including a pact to protect classified information shared between the two countries. Another notable agreement is the India-Germany Green Hydrogen deal, which is especially important as the German government recently unveiled a new strategy focused on green energy and strengthening cooperation with India. Additionally, the two countries signed a Mutual Assistance Treaty in legal matters, which aims to facilitate collaboration on legal issues.
Significantly, the German Navy’s port call in Goa highlighted growing defence ties between the two nations. Among the notable outcomes of the talks, Germany announced that India would be granted preferential status for defence exports from Germany. Additionally, the German government increased the visa quota for Indians from 20,000 to 90,000 per year, a move that will support workforce needs in Germany and further strengthen the partnership between the two countries.
It is important to note that this was German Chancellor Olaf Scholz’s third visit to India in the past year, underscoring the growing importance of India for Germany. Understanding why Germany has increased its focus on India is essential, as Germany is seeking to strengthen its business relationships with other countries, especially amid challenges facing its economy.
Germany, the largest economy in Europe, is currently dealing with a severe economic crisis and has slipped into a technical recession. Its growth forecast for the upcoming year has been revised downward to -0.2% from 0%. Investors in Germany are increasingly hesitant to invest domestically due to multiple factors affecting the economy. A primary issue is Germany’s energy costs; it has replaced cheaper Russian energy with more expensive alternatives from the United States due to the geopolitical tensions with Russia and the ongoing Ukraine war. Additionally, Germany has faced technological challenges, which have impacted innovation and productivity.
Another significant factor is China, historically a major trading partner for Germany. However, China has recently adopted protective measures, limiting imports of German products, which has contributed to Germany’s economic stagnation. To address this, Germany is considering India as a potential alternative to replace its reliance on China. India’s large, young, and vibrant workforce is especially attractive to Germany, which faces a workforce shortage due to an ageing population. The German government hopes that young Indian talent can help fill this gap, improving efficiency and boosting the economy.
Beyond economics, there are also geopolitical reasons for Germany’s interest in India. India’s strategic location in the heart of the Asia-Pacific region is valuable, especially as Germany seeks to expand its presence in this increasingly significant area. Chancellor Scholz emphasized the importance of India’s aspirations in the Asia-Pacific during his address to the business communities. With rising tensions between the United States and China and China’s growing influence in the Asia-Pacific, the U.S. encourages its European allies, including Germany, to establish a stronger presence in this region. Consequently, Germany’s engagement in the Asia-Pacific is crucial, with India playing a pivotal role in this broader geopolitical strategy.
This week, Spain’s Prime Minister Pedro Sánchez made his first official visit to India, where he was warmly welcomed by Indian Prime Minister Narendra Modi. Several Memorandums of Understanding were signed between the two countries, with one of the most significant agreements being the joint venture between Tata and Airbus to establish a C295 military aircraft manufacturing plant in Vadodara. This project positions India to become one of the largest exporters of military aircraft globally and represents a major milestone for India’s “Make in India” defence initiative. The Indian government sees this as a critical step toward transforming India into an economic powerhouse, with defence exports playing a significant role in reducing India’s import dependency.
India and Spain have signed agreements on railway transport and customs matters. Both countries have also agreed to designate 2026 as the year for India-Spain cultural exchange. Additionally, the International Monetary Fund (IMF) has projected that the Spanish economy will grow at 2.9%, which is three times faster than the entire Eurozone’s growth rate. The Spanish Prime Minister stated that Indian businesses seeking profits can trust Spain. Both countries also agreed to open new consulates in Barcelona and Bengaluru, respectively.
Spain is currently the most positive-performing economy in Europe, with the highest growth output among Western European countries. Its geo-economic presence in Europe has significantly increased, and Spain is seeking to diversify by strengthening its relationship with India, a move that would be mutually beneficial for both India and Spain.
Strengthening ties with both Spain and Germany is important for India, as the country has been actively working to deepen its trade balance with Europe. Additionally, the geopolitical tensions between Europe and China place India in a strategic position, where it stands to benefit from the European Union’s growing interest in the Indo-Pacific region. Enhanced cooperation with Europe will likely bring increased business and economic opportunities to India, further advancing its international trade and strategic goals.
The growing economic interest between India, Germany, and Spain also raises expectations for a Free Trade Agreement (FTA) between India and the European Union, as several rounds of negotiations have already taken place. With strengthening bilateral relations between India and major European economies, there is optimism that an FTA may soon be finalized. However, India needs to approach this agreement cautiously to avoid repeating mistakes made in its trade agreements with Japan and ASEAN, which have not delivered the expected benefits. India should ensure that its growing relationship with the European Union supports fair and mutually beneficial trade without creating over-reliance on any single partner.
(Aayush is a post-graduate student in International Relations at Kalinga University, Raipur. The opinions expressed are the author’s own)
Balaji Subramanian 
Palak Dogra