Merkel, who is travelling with four ministers, is to meet Prime Minister Manmohan Singh and President Pratibha Patil during a one-day stop in the Indian capital as part of an Asian tour that will also take her to Singapore.
As well as deeper commercial ties, the two are expected to discuss two major issues that divide them -- the nomination of a new head of the International Monetary Fund (IMF) and the use of nuclear power.
Germany has backed Europe's candidate for the IMF job, Christine Lagarde, amid a rift between developed and developing countries over the running of the multilateral lender.
Traditionally, the IMF has been headed by a European while sister organisation the World Bank is managed by an American, but developing countries are increasingly critical of the system.
On nuclear power, Germany announced on Monday that it will phase out its atomic plants by 2022, a global first by a major country in the wake of the disaster in March at Japan's Fukushima plant.
India, meanwhile, has announced plans to dramatically increase its nuclear power capacity and has been in talks with Russian, French, Japanese and US groups to build new plants across the country.
At present, three percent of India's electricity comes from nuclear power but the government wants to increase that to six percent by the end of the decade and 13 percent by 2030.
Germany is India's biggest trading partner in Europe, with bilateral trade at 15.4 billion euros ($21 billion) in 2010. Indian officials forecast that this figure will grow to 20 billion euros by 2012.
Merkel will also be keen to press the case for the Eurofighter Typhoon fighter jet, made jointly by a European consortium including Germany, which is competing for a $12 billion deal up for grabs in India.
The Eurofighter is up against the France-made Rafale produced by defence contractor Dassault.
Copyright AFP (Agence France-Presse), 2011