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Germany Embraces 'Positive Realism' in India Strategy, Betting on Supply Chain Diversification

After years of China-focused Asia policy, Berlin formally elevates India to a cornerstone of German statecraft—signaled by Chancellor Merz's inaugural Asia trip and a framework prioritizing security, trade, and geopolitical autonomy.

Germany has formally repositioned India from a secondary economic partner to a central pillar of its strategic architecture. In October 2024, the German government adopted a "Focus on India" strategy paper—the first dedicated policy document Berlin has released on India in decades—marking an explicit break from the China-centric Asia approach of the Merkel era. The framework reflects Berlin's pivot: as tensions with China mount and the global order fragments, Germany sees India as essential ballast in the Indo-Pacific and a hedge against supply chain concentration in East Asia. Chancellor Friedrich Merz's January 2026 visit to India, his first Asian trip since taking office, operationalized this shift. Merz brought 23 leading German CEOs and signed 19 memoranda of understanding and eight major announcements covering semiconductors, critical minerals, defense cooperation, green hydrogen, and skilled labor migration. The bilateral trade relationship reached $50 billion as the two countries marked 75 years of diplomatic ties and 25 years of formal strategic partnership. The reframing goes beyond trade. Germany is signaling a willingness to be India's security partner in ways the Merkel government was not. The two countries agreed to co-develop military hardware and pursue defense industrial cooperation, moving away from the traditional "buyer-seller" model. Germany will deploy a liaison officer to India's Information Fusion Centre in the Indian Ocean Region, joining the United States and France in monitoring Indo-Pacific security. Germany also committed to participating in Indian naval exercises—MILAN, the Indian Ocean Naval Symposium, and the TARANG SHAKTI air combat exercise—embedding German military presence in India's regional operations. "Positive realism," as analysts have framed Berlin's approach, rests on three converging interests. First, strategic diversification: with China increasingly viewed as a competitive threat rather than primarily a commercial opportunity, India offers German manufacturers an alternative manufacturing and investment base in South Asia. Kiel Institute research suggests an EU-India free trade agreement—expected to conclude by early 2026—could significantly expand trade volumes and reshape supply chains for German automotive and industrial sectors. Second, labor arbitrage and demographic complementarity: Germany faces an aging workforce; India has 1.4 billion people with a growing middle class and engineering talent pool. A newly signed Migration and Mobility Partnership aims to facilitate skilled worker transfers to Germany in healthcare and renewable energy. Third, geopolitical alignment on liberal democratic values and "rules-based international order"—a rhetorical commitment both leaders emphasized, though India's foreign policy autonomy, particularly on Russia, remains a tension point that Berlin has learned to tolerate. Yet implementation challenges abound. Bureaucratic friction between Brussels and New Delhi, complex local tax regimes, regulatory divergence, and infrastructure deficits in Indian logistics corridors pose real friction costs for German capital. German companies remain heavily embedded in China; the "Focus on India" paper explicitly acknowledges that Berlin must work to shift corporate perception of India as a viable alternative. The success of positive realism ultimately hinges on whether Berlin can sustain diplomatic attention and corporate follow-through as the relationship shifts from strategy papers to operational reality.