Trade and trade barriers – a look at India and Germany

Our figure of the month 06/2025

30.05.2025

The current trade policy challenges, particularly with regard to trade with the USA, are intensifying the call for the rapid ratification or conclusion of free trade agreements. Due to its rapid economic development and large population, India is seen as having great potential as an increasingly important sales market in the future. Foreign trade between India and Germany can currently still be classified as low: With € 17 billion in exports and € 14 billion in imports, Germany does have a foreign trade surplus with India. However, the export share is very low at 1.1%. [1] Significant growth is needed to even begin to compensate for the possible export losses due to the USA's tariff policy with increased exports to India, for example.

One way to increase trade between India and Germany is to reduce or abolish tariff trade barriers. The higher the barriers, the more likely it is that their abolition will have a significant positive impact on trade. For this reason, it is worth taking a look at the current tariff rates that exist between India and Germany. The World Bank's WITS dataset provides a good first impression of this [2]. The tariff rates are already weighted according to the import volumes of the respective trading partners.
 


 

The average customs duty on German goods in India is 12% and has risen since 2010. The reciprocal duty rate for Indian imported goods is 5%. This means that German exports are subject to around twice as much duty as Indian export goods. Major differences can be identified at product level. Very high tariffs of over 50% are levied on foodstuffs in India. Transportation goods – including aircraft, ships and trains as well as vehicles – are also subject to very high tariffs of 24% on average. Machinery and electronic goods are subject to an average duty rate of 8%. Germany charges lower customs duties than India across all product groups. However, the import duty on foodstuffs is also the highest in Germany.

A free trade agreement with India would have high export potential for Germany. High import duties are currently in force in India, particularly in the strong export product group – the transportation group. Significant cost advantages could be achieved by reducing them. Although the dismantling of trade barriers should make it easier to enter the Indian market, it is not a sure-fire success. Export-oriented companies must also always be familiar with the local market in order to be able to offer demand-specific products.
 


[1] Federal Statistical Office (2024): Aus- und Einfuhr (Außenhandel): Deutschland, Jahre, Länder. GENESIS-Datenbank.

[2] World Integrated Trade Solution (WITS) (2025): Belgium Product Imports from India 2022. https://wits.worldbank.org/CountryProfile/en/Country/BEL/Year/2022/TradeFlow/Import/Partner/IND/Product/all-groups, retrieved on 30.05.2025.

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