Austria-India Relations: Nurturing Innovation, talent migration & Startup ecosystems

In an exclusive interview with India Business & Trade (IBT), Hans-Joerg Hoertnagl, the Austrian Trade Commissioner, provides a nuanced perspective on the evolving economic dynamics between Austria and India. Hoertnagl reflects on India’s remarkable economic growth, emphasizing its status as one of the world’s fastest-growing economies.

He underscores the positive trajectory in Austria-India trade relations, revealing that bilateral trade reached an all-time high of EUR 2.7 billion in 2022. Hoertnagl explores key sectors of interest for Austrian companies, shedding light on their strengths in technology niches and their substantial contributions to sectors such as railways, smart cities, and automotive industries in India.

As the interview unfolds, the Trade Commissioner articulates his vision for the future, emphasizing the potential for deeper collaborations in emerging sectors like smart cities and the energy transition. This insightful conversation provides a comprehensive overview of the current state and future possibilities in the Austria-India economic partnership.

India Business & Trade (IBT): What is your view of the Indian economy in your stint of two years so far, and the business opportunities for Austria?

Hans-Joerg Hoertnagl: Austria recognizes India’s growing economic potential and its evolving role in the global landscape, particularly when compared to around five years ago. India has made significant strides in economic development, becoming one of the world’s fastest-growing major economies. The economic reforms and liberalization measures have attracted both domestic and foreign investment, further fueling its economic growth.

From Austria’s perspective, India holds substantial promise as a strategic trade and investment partner. The Austria-India trade relationship has seen positive developments during this period. Bilateral trade has been on the rise, thanks to collaborative efforts. There is also a growing recognition of the untapped potential in sectors such as smart and green cities, energy transition, and space exploration, which align with the initiatives of both governments. As such, Austria views India as an increasingly important player in the global economic landscape and a significant partner in fostering trade relations. India is not only an interesting market for Austrian state of the art technologies but becomes more and more a valuable sourcing market and a potential partner for new forms of cooperation like technology tie ups.

Around the year 2004, we had only 60 Austrian companies established in India. This number had reached 150 by 2012. The bilateral between India and Austria reached in 2021 an all-time high of EUR 2,7 Billion in 2022 and India is Austria’s 3rd biggest export market in Asia. Austrian exports to India are centered around quality, high tech and sustainability, where a large share is machinery and transport equipment (40%), manufactured goods (22%) and chemical products (16%). Austrian exports in railway, hydro energy and smart city solutions have particularly benefited from investments into modern infrastructure in India. Furthermore, companies providing the newest manufacturing and testing technologies saw their sales increase significantly.

In terms of the goods exported from India to Austria, the biggest and most important shift is a continuous increase of engineered goods, while for example textiles and garments – a large share in the past – is decreasing.

For instance, Bajaj is a major stakeholder in KTM. It develops KTM models here and exports to Austria. India’s smartphone exports to Austria also grew from 0 to € 120 million in one year, thanks to the PLI Scheme.

IBT: What are some of the major sectors of interest for Austrian companies?

Hans-Joerg Hoertnagl: So we are not so strong in consumer products. Internationally, we have two companies – one is the energy drink maker Red Bull and the other is Swarovski. The rest are all technology niche areas, all different kinds of areas.

At the Austrian Federal Economic Chamber, we have 540,000 companies members, 540,000 and 80% do not have more than four employees. They only focus on their niche area, their technology, where they are typically world leaders. They provide you the latest state of the art of technology. They’re very flexible. They give you financing, and that’s all – not more, not less. So that means they are not major investors and not involved in consumer products.

Setting up a beverage plant is much easier than for manufacturing a machinery. That’s very complicated. Austrian companies don’t have the capacity, personnel and investments to venture into consumer products. So they say it’s also not necessary. In economics, we say every country is focusing on what you know best and you exchange. So these are the basics of international trade. So it’s not always necessary to manufacture.

In India, Austrian investments have indeed made remarkable strides in sectors such as railways, smart cities, and automotive industries, thanks to the synergy between the two nations’ strategic initiatives. A prime example of Austrian success in India is Plasser India, which has become a cornerstone of railway infrastructure development in the country. They specialize in manufacturing cutting-edge, high-performance machinery for track maintenance, track laying, and track renewal within the railways sector. Notably, Plasser’s achievements are emblematic of the untapped potential and future opportunities that Austrian companies can explore in India.

Besides these established sectors, there are several emerging areas where Austrian businesses can aspire to increase their presence significantly, capitalizing on the supportive initiatives by both the Austrian and Indian governments. Notably, the promotion of smart and green cities presents a vast untapped market in India. As urbanization continues to accelerate, there is a growing need for innovative solutions in areas like sustainable urban planning, energy-efficient technologies, and integrated urban infrastructure. Austrian companies specializing in smart city solutions and eco-friendly technologies have substantial untapped potential in this regard.

The energy transition sector is another promising avenue for Austrian businesses. With India’s commitment to transitioning towards renewable energy sources and increasing the shift from coal- to a gas-powered economy, there are vast opportunities in multiple areas in the energy sector. Austrian expertise in renewable energy technologies, as well as our decades of experience with hydro energy, can play a pivotal role in helping India achieve its clean energy goals.

IBT: Interesting and quite comprehensive. But let’s say if we take a longer term view of five, six years down the line, so how does Austria envision its economic relations with India?

Hans-Joerg Hoertnagl: We have been always a very flexible, reliable technology provider and would like to do that, of course, in the future. As we all know, India will be the third largest economy in the world by end of this decade, fuelling trade growth. The planned India-Europe Corridor announced at the G20 is a pivotal step. It is expected to reduce the transit time for goods by 40%. And of course, we are under negotiations for the India-EU Free Trade Agreement. That will also be a major boost, of course for all member countries of the European Union and India definitely.

Collaborative initiatives and partnerships are pivotal in strengthening economic ties between India and Austria. The government and trade and investment promotion bodies have a crucial role to play in this regard. Here is my vision for enhancing economic relations between our nations:

Government Initiatives: Both governments can actively promote bilateral economic ties through strategic policies and agreements. This includes facilitating trade negotiations and reducing trade barriers, like the ongoing Free Trade Agreement (FTA) negotiations between the European Union and India. Closer coordination on economic policies, such as taxation and investment protection, can provide a more favorable environment for businesses.

Trade and Investment Promotion Bodies: Trade and investment promotion bodies, such as Advantage Austria and their Indian counterparts, can foster partnerships and collaboration between businesses in both countries. They should continue organizing trade missions, business forums, and seminars to encourage knowledge exchange and networking. Additionally, these bodies can offer support to businesses seeking market entry and expansion, serving as a valuable resource for navigating the nuances of each other’s markets.

Cultural and Educational Exchanges: Cultural and educational exchanges should be promoted alongside economic collaboration. These exchanges foster a deeper understanding of each other’s cultures, values, and educational systems. For instance, promoting skilled labor exchanges can lead to a win-win situation, providing Austria with access to India’s skilled workforce while helping India enhance its professional capabilities. Our Austrian cultural forum in New Delhi, has organized multiple events and is actively promoting cultural and educational exchanges.

Innovation and Startups: Encouraging innovation and startup exchanges is vital. These initiatives facilitate connections between Austrian and Indian innovators, creating a dynamic ecosystem for developing cutting-edge solutions. By nurturing a culture of innovation and entrepreneurship, we can tailor solutions to the specific needs of both countries and make significant strides in the digital age. Initiatives like “Go International” by the Austrian chamber of commerce provides funding and expertise to Austrian companies, from startups to corporates, that wish to expand abroad. We expect a strong increase in such developments.

By aligning government initiatives with the efforts of trade and investment promotion bodies and emphasizing cultural, educational, and innovation exchanges, we can build a robust, enduring partnership that benefits both Austria and India in the rapidly evolving global landscape.

In the coming years, my vision is to foster deeper collaboration between startups in focus sectors, encouraging knowledge exchange, partnerships, and cross-border investments to drive innovation and address global challenges. This winter we are already planning to host another startup delegation coming to India. We also have an Innovation Officer here in our Delhi office, who is actively promoting deeper relationships between our startup ecosystems.

IBT: What is your view of the CBAM issue that is being discussed between India and the EU, considering that Indian companies are not generally prepared to meet the stringent requirements imposed under this mechanism?

Hans-Joerg Hoertnagl: Across the European Union, these regulations are fuelling sustainability. We cannot tell our companies that you must manufacture under certain conditions – not contaminating the water and the air and then import products from companies not meeting these standards.

For the first time in the world we are saying that we want to control how a product is manufactured. And India can profit from that – since it is a countervailing duty and not a ban. Over the last decades, we have imported a lot from China, where labor is cheaper and environmental standards are not so high. At the same time we put certain conditions on our own factories – labor costs, minimum costs, safety conditions, environmental conditions, etc.

We had to close a lot of factories because they were not able to comply with those standards or lost their competitiveness. But as a result, industries moved to Asia. So it’s not fair. Also, every human being has the same right for fresh air.

At the same time, the standards helped develop a number of new industries. Austrian companies developed over 300 components with technology for the recycling industry – filters, air purification, water treatment plants, sewage treatment plants, etc.

So we are now interested in knowing how these products are manufactured, and it is not just about CO₂. We want to see whether the products are manufactured under minimum standards of humane conditions. It’s a very tough burden for the companies. Whether countries like it or not, we’re imposing it, and we think it’s the right step.

IBT: Would you like to elaborate on some of the specific barriers to trade with an investment with India which you feel both governments can work on?

Hans-Joerg Hoertnagl: Honestly, from the Austrian side we are relatively fine. We are mostly we are exporting machinery. So at times, they have to pay import duties. But there are not as many hurdles like licensing as there were before. Of course sometimes it’s a little bit burdensome, as you need to provide technical specifications. But every country is doing that and it has every right to do so.

IBT: What are the significant benefits that an India-EU FTA can bring in your view?

Hans-Joerg Hoertnagl: Of course there will be a major benefit with customs duties coming down on both sides. But it’s not only that. It’s also how you exchange standards with your partner. For example, if you want to export certain food products then Indian inspectors would not have to go to Europe for certification. If it’s certified by European authority, it would be accepted by both sides. It’s also more that you try to combine your norms and make them more compatible. Then you have cooperation on different sectors like customs, technical committees and so on.

IBT: India and Austria are planning to sign a migration agreement. What are the opportunities Indian students can explore for working there and contributing to the Austrian economy?

Hans-Joerg Hoertnagl: We see huge potential for qualified people in Austria, especially in IT. The problem at the moment is that we must adapt to different requirements. We also need nurses, drivers, all kind of technicians, welders, electricians, etc.

We need people adapting to different education standards because we have very high standards in Austria. For everything you do, you must prove that you can do it. For example, you open a bakery shop and then the basis is you go to the school. Then we have this vocational training that starts at around 15. And at the same time you are employed at a company, where you learn there and reach a certain position. Then you continue working at the company and do the Master’s, which is the prerequisite for having your own, say trade shop. When you’re a trader, of course the requirements are less stringent. But you must prove that you know about the products you’re trading. These regulations are actually the basis of the strengths of our industry, which maintains very high quality controls.

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Hans-Joerg Hoertnagl is Trade Commissioner & Commercial Counsellor, India since September 2021. He joined the Austrian Federal Economic Chamber in 1992 and his recent roles include Commercial Counsellor in Bogota (2016-21); Commercial Counsellor in Caracas (2015-16); Regional Director for South Asia, Vienna (2012-15) and Commercial Counsellor in India (2004-12).