Germany's Friedrich Merz eyes India business, defence deals in first Asia trip

During Merz’s two-day visit, Germany and India are expected to sign agreements on business cooperation, semiconductor development and defense projects. Bloomberg

• Germany and India to sign business, defense, and semiconductor agreements
• Merz seeks to boost economic ties amid strained relations with China and US
• Submarine deal worth $8 billion under negotiation between Germany and India

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German Chancellor Friedrich Merz will seek to expand business and defense ties with India in his first trip to Asia, aiming to bolster Europe’s biggest economy as tensions with its main trading partners China and US grow.

Merz met his counterpart, Narendra Modi, on Monday in the western city of Ahmedabad, located in the Indian prime minister’s home state of Gujarat. The two leaders visited the Sabarmati Ashram — Mahatma Gandhi’s former home and a center of India’s struggle for independence — before attending a local kite festival.

“This human legacy unites Indians and Germans as friends in a world that may more than ever be in need of Gandhi’s teachings,” Merz wrote in the guest book at the ashram’s memorial site.

The high-profile visit is an opportunity for the two leaders to showcase stronger economic and security ties amid strained relations with the US under President Donald Trump. The US leader’s repeated threats to annex Greenland has shocked European allies, while India remains saddled with one of the highest US tariff rates of 50%.

During Merz’s two-day visit, Germany and India are expected to sign agreements on business cooperation, semiconductor development and defense projects. Germany also hopes to gain better access to critical minerals from India with the two sides expected to sign a memorandum of understanding on the matter. Berlin is struggling to reduce its supply chain dependencies for rare earths and other raw material from China.

Both sides are also expected to ink an agreement to lower the hurdles for Indian health care workers to come to Germany where labor shortages in many sectors of the economy are holding back economic growth.

Merz is accompanied by a large group of German business leaders, including the chief executive officers of Siemens, DHL Group, Infineon Technologies, Uniper and Airbus Defence and Space. There are also managers from several small- and medium-sized companies from the so-called Mittelstand that forms the backbone of Germany’s once powerful, but now struggling manufacturing sector.

Both nations also aim to deepen cooperation in the pharmaceuticals sector and between defense companies, with senior managers from Boehringer Ingelheim and ThyssenKrupp Marine Systems traveling with Merz.

Merz will likely use his meeting with Modi to speed up negotiations between the European Union and India on a free-trade agreement. Negotiators are rushing to finalize a deal by the time EU President Ursula von der Leyen heads to India later in January, with talks stuck on a few key issues like steel and automobiles, Bloomberg News previously reported.

As the fastest-growing economy in the G20, India is a key economic partner in the Indo-Pacific region for Germany. More than 2,000 German companies are doing business in India, and more than 700 Indian companies invest in Germany. With a bilateral trade volume of almost $50 billion, Germany is India’s most important partner in the European Union.

On his second day in India on Tuesday, Merz plans to visit a Bosch facility in the business hub of Bangalore.

In the defense sector, Germany and India are currently hammering out the details of a submarine manufacturing deal worth at least $8 billion — the largest-ever defense agreement for New Delhi, Bloomberg News reported last week.

Germany’s Thyssenkrupp Marine Systems GmbH and Indian state-owned Mazagon Dock Shipbuilders Ltd. are negotiating the details of an agreement that would include technology transfer for submarine production, people familiar with the matter said.

It’s unclear if the agreement will be announced during Merz’s visit.

India’s navy operates about a dozen aging Russian submarines and six new French-made models. The South Asian nation remains reliant on Russia for military equipment, and Germany sees the submarine deal as a chance to reduce that dependence.

India’s ties with Russia, which invaded the eastern European nation of Ukraine in 2022, will likely also come under discussion during Merz’s visit. India increased oil purchases from Russia since the Ukraine invasion, although it’s reduced buying in recent months after the US sanctioned major energy producers from that country.