In 2010, India's growth rate moved into the double digit range for the first time and was higher than that of its neighbour - China. This is good news both for the domestic companies as well as for German companies. The crisis has bottomed out and the country is now back at a level of the high growth, we saw before the crisis. The remarkable thing about this news, however, is that the result is based on an atypical growth model for Asia. Even if the forecasts for the coming years are similarly high, the extent to which the model is sustainable is open to question. What developments can we expect in the medium to long term and how can we contribute as foreign investors to make this as positive as possible? These are difficult questions to answer. This growth model is forecast in the Asian as well as in the global context, but as it is unique and not previously tested there are possibilities of deviation.

The typical path to move from being producers of lower priced consumer goods to becoming manufacturers of more capital intensive products, by outsourcing of cheaper production processes to other less developed Asian countries is a path that India has not followed. Rather, India as a country has supported the development and expansion of its service sector right from the beginning. This strategy was not planned, but is rather the result of different reasons: One of them is certainly the late opening of the country's economy at the beginning of the 90s and the then-rising demand for services. India's well educated middle class was the backbone for promoting the service industries specifically while expanding – as we know – into many areas such as IT and software with great success and worldwide recognition.

But even the traditionally poor physical infrastructure contributed to this unique development. Lack of adequate transport infrastructure in the country made it difficult, at that time, to base its growth target solely on the expansion of the industrial sector, and unlike its East Asian neighbours could not support its growth on the basis of export oriented production activity.

For several years, India has been in the process of catching up – not only in the infrastructure sector, whose expansion however can not keep pace with the dynamic growth. The government has therefore adopted an aggressive approach to expand the industrial sector and make up for the missed industrialization process in a certain way. One of the primary motives for doing so is certainly to generate sufficient jobs for the many workers released from the agricultural sector.

While East Asian countries, especially China, has been for a long time focusing on the production of export goods for developed countries, India has been driven from the start by the growth of domestic consumption and thus has tuned output for the domestic market. This focus on domestic consumption and the consequent degree of self-sufficiency has also led the country through the crisis relatively unscathed. A growing middle class with consumption patterns similar to those of western standards is going to make sure that this trend continues.

But even here India catches up development of its neighbours: The integration with the global economy and therefore external demand is increasing – probably also due to a focus on the industrial sector in recent years and the resultant potential for export goods. The number of bilateral free trade agreements which India is signing is an indication of the breakdown of the insulation of trade – examples include the recently concluded agreements with Japan and the last round of negotiations for agreement with the EU.

Special fact about India's development is that it has also taken place from the outset, under democratic structures. This has certainly slowed the development of the economy quite significantly, but at the same time, the constantly successful settlement with India's diverse groups and ethnicities in the context of decision-making processes, this can be viewed as a sign of stability.

How will India continue to develop against this background, and how can German companies benefit from it while also ensuring that they contribute to the stability of the development? It is clear that India has made up for in the "skipped" phases of its development in recent years. A large number of reform steps are certainly necessary to create the required structures for sustainable economic growth – from the cutting of red tape to the further opening of the market to foreign investors.

However, at the same time, India has in many areas a comparatively favorable starting position. This will have a positive influence on the further development of the process:

Supported by large base of entrepreneurial thinkers who work independent of the government sector and the private sector which has operated successfully since the liberalization process now drives the growth of the country. Conglomerates like Tata have been able to establish their reputation worldwide. It is noteworthy that the Indian private sector is already active - in numerous cases - in areas actually reserved for the much slower acting government sector. Thus goals that benefit the population can be achieved faster. An example of this is in the field of education. In this respect India stands out from among its East Asian neighbours, whose state-owned companies dominate markets even today.

Quite certainly, the existing federal structure and the resulting competition between the individual states will have positive effect on development. The individual states are trying to establish an attractive environment for economic development and incentives are being given out to local and foreign companies in order to attract as much investment as possible.

The demographic dividend is worth mentioning, especially in comparison to giant neighbour China. With an average age of 25 years and currently almost 600 million people of working age, India has an advantageous and above all sustainable labor market situation. The big challenge will however be to qualify this theoretically large pool of labor suitably, and to be able to provide enough jobs in the formal sector.

The domestic market in India remains the focus of interest for German companies. In addition to the sales of traditional industrial products such as machinery, a growing middle class has ensured that in recent years Western consumer goods are increasingly in demand. The objective of relocation of production to India is therefore mostly to meet domestic needs, with rather less consideration towards production for export. In the wake of increasing environmental pollution and climate change, we also observe an increase in German-Indian cooperation in the fields of renewable energy and energy efficiency.

But let us not forget that there are many other areas where India has a strong pent-up demand and this offers a good field of activity from the German economy's perspective. The urgently needed expansion of infrastructure depends largely on private investors and German architects and planners offer great potential.

German know-how is also welcome in the field of education and training, particularly as far as the training of skilled workers is concerned. There is already some agreement on a political level as well as between German and Indian universities, but our companies located in India are also investing heavily in training their employees. The German model of dual training is already used on a small scale and in cooperation with German companies in the country.

The potential is enormous and the fields of activity are varied. I am sure that India has taken the right path of development and we have a future of closer cooperation – to some extent politically, but mainly at the economic level – that can only benefit everyone involved. But then, we should not just look at existing opportunities. We must also recognize and be prepared to take responsibility in future areas of development. Only then will it be possible to make India's growth stable and sustainable.

I wish all readers of Business Guide an entertaining and interesting reading and good luck with their Indian ventures!