Bridge to Berlin: India-Germany agreement can open up opportunities

German Chancellor Olaf Scholz’s visit to India late last week was his third such trip in two years. This might count as a sign of the importance that his coalition government gives to building relations with India. From Berlin’s point of view, there are multiple reasons why this might be of importance. First, to try and create some distance between New Delhi and Moscow, however difficult a task that might appear to be at the moment. Second, to examine the ways in which the Indian economy can be a counter-weight for German industry, which has so far been heavily dependent upon Russian energy and Chinese sub-contractors and markets. And finally — which is perhaps relatively surprising, given the political economy of migration in Europe today — as a source of skilled human capital. While some progress was no doubt made behind closed doors on both the other priorities, it was the third that grabbed the headlines during Mr Scholz’ visit. Prime Minister Narendra Modi said after the two leaders met that the German government had decided to increase the number of work visas provided to skilled Indian migrants from 20,000 a year to 90,000 a year. 

Migration has been a fraught subject in German politics, particularly since Mr Scholz’ predecessor, Angela Merkel, opened the country’s borders to refugees from the Syrian conflict a decade ago. Almost 900,000 applied for asylum in 2015 alone. Incorporating such a large mass of new residents is not an easy task, and the ripple effects on German politics have been profound. The strength of anti-migrant parties like the right-wing Alternative for Deutschland (AfD) in recent provincial elections in Germany has demonstrated that. But the German economy, long the strongest in Europe, is also struggling to wean itself off its addiction to cheap Russian gas. It cannot afford to also have problems sourcing skilled labour. And, the country is, by most standards, behind on the digital transition. It needs more human capital in its information-technology (IT) sector if it is to catch up with its competitors. This has pushed it to try and attract the “proper” temporary migrants — in particular, skilled Indians. 

Two points are of note in this context. First, the German push for Indian workers is not unique in Europe. Some other countries, such as Austria and Denmark, have also signed treaties specific to India on work visas. The flexibility from European countries should be kept in mind when it comes to negotiating the free-trade agreement with the European Union. The second point that is of relevance is that relaxation of this cap of 20,000 may not immediately benefit much, given that for many years even the lower cap was not being hit. Even personal income-tax incentives did not seem to have made much of a difference to the numbers. Indian skilled migrants seem to prefer going to English-speaking countries. German policymakers may have to recognise that the problems with their IT and services sector are deeper — involving the overall business environment and its integration with the English-speaking world — than merely a lack of talent.