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This week's edition covers how German businesses leverage India hubs for innovation and growth, why global PE firms start leading from India, OECD lifts GDP growth expectations, and more must-know news.

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The number of employees working in India technology hubs of German companies.

The German economy faces mounting pressure from multiple directions: growth has slowed, global competition has intensified, and technological developments are accelerating. A new report by Zinnov in collaboration with the Indo-German Chamber of Commerce examines how German companies are leveraging their India hubs to address these challenges and drive innovation globally.

German Global Capability Centres (GCCs) are India-based technology service hubs of companies headquartered in Germany that deliver strategic functions by tapping into India's talent pool and established ecosystem. These are dedicated innovation hubs owned and operated by the companies themselves, enabling them to drive internal developments end-to-end with global impact. Contrary to common perception, they function as far more than cost reduction measures.

The data reveals that German GCCs are generating above-market value from their India operations:

German companies established their first GCCs in India three decades ago and now form the third-largest cohort globally, after the US and UK. While the automotive, industrial, and chemicals sectors, along with large multinationals, continue to dominate, Germany's Mittelstand is substantially expanding its GCC presence and now represents approximately one-third of all German GCCs in India.

The German Mittelstand, Germany’s SME backbone, and home to the market-leading, privately owned businesses known as “Hidden Champions”, are especially under pressure to reinvent themselves. Their export-driven business model is being challenged by geopolitical shifts, while talent shortages in cutting-edge technologies are forcing a reconsideration of sourcing strategies. India's mature tech ecosystem offers a viable pathway to address both challenges.

At a growth rate of 108% over the past 5 years, the German Mittelstand is accelerating its commitment to drive innovation from India for the following reasons:

Beyond operational benefits, India as a market is gaining strategic importance for German businesses. India’s economy is experiencing a strong growth momentum across all sectors at a GDP growth rate for FY 2025-2026 between +6.5 to 6.9%, while Germany’s is still stagnating at around +0.3%.

GCCs enable German businesses to address their current challenges through three key mechanisms:

Many SMEs from the US or the UK have already done so, and it’s a positive sign that also Germany’s Mittelstand (and European businesses in general) shows increasing interest in taking action. Zinnov’s report, to which I contributed in my role as strategic advisor to the company, confirms what we experience in our day-to-day collaborations. This model not only supports global innovation but simultaneously provides market access to the world's fastest-growing major economy.

Sources: Zinnov, Indo-German Chamber of Commerce

India is evolving into a core investment market in Asia, with a growing number of global asset managers now basing their private equity leadership for the entire Asia region in India, particularly in Mumbai. This trend reflects India’s growing importance in global financial markets, and confirms the many opportunities ahead.

A pattern that began with investment banks is now extending to global asset managers. Firms such as KKR or Blackstone started to shift their focus towards India and with funds being redistributed, their organisational structures started to follow. Established regional teams from Brookfield Asset Management, PAG, or TA Associates now manage global strategies from India, marking a significant departure from traditional Asia-Pacific hub models.

The capital flows underscore this strategic reorientation. In 2025, India has captured approximately 41% of all capital inflows to emerging and growth markets, while China's share has declined to 34%. This represents a notable reversal: China accounted for 44% of such flows in 2024 and 66% in 2018. For Blackstone, which manages a USD 50 Billion private equity and real estate portfolio in the country, India is the top performing market worldwide.

Several structural factors are driving accelerated private equity interest in India:

Such organisational changes are also reflected in a growing footprint. According to Sobia Khan of The Economic Times, Blackstone just leased 450,000 sqft from Prestige Group for a new office in Bengaluru to support all business functions globally.

From technology to financial sectors, a growing number of international businesses shift their focus towards India. While numerous European firms have already made similar moves, current developments suggest a sustained momentum that may provide strategic diversification as other markets face challenges.

Sources: The Business Times, The Economic Times

India is widely expected to remain the fastest growing major economy for the foreseeable future. Despite potential tariff headwinds, the OECD (Organisation for Economic Co-operation and Development) has updated its global GDP growth projections with a notably positive outlook for India's economy.

According to Statista, the OECD raised its global GDP growth expectations to 3.2%, representing a 0.3% increase from its June projections. This upward revision reflects improving global economic conditions and resilient growth in key markets.

India’s GDP is now projected to grow by 6.7% year-over-year, 0.4% higher compared to the OECD’s forecast from June. This is reportedly mainly supported by fiscal and monetary policy by the Indian government and in line with other organisations. The US agency Fitch just recently shared updated expectations of a 6.9% GDP growth rate for the FY 2025-2026 (see India Rising issue 26).

In contrast, Europe's largest economy continues to face stagnation. Germany's GDP is expected to grow by just 0.3% this year, a downward revision from the OECD's June projections.

Several structural factors continue to constrain German economic performance:

India's economic profile offers a contrasting dynamic through its robust domestic market, substantial infrastructure investment, and expanding consumer base. However, as previous issues have explored, capitalizing on these opportunities requires businesses to establish meaningful local presence and operational commitment rather than peripheral engagement.

Sources: Statista

In a discussion with The Economic Times, the Executive Director of VDMA (German Engineering Federation) Thilo Brodtmann provides insights on the state of the European machinery manufacturing sector.

125 years old VDMA is the largest network and voice for mechanical and plant engineering in Europe and represents over 3,600 member companies.

You can find some additional information in the announcement with The Economic Times.

Your random facts and stories about India and the Indo-European friendship.

This week: The Power of Jugaad and the fit with German working culture.

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