Now India is the number one strategic partner of France in the Indo-Pacific region.
By Rajesh Mehta & Ludovic Dalleau
The new alliance between Australia, the United Kingdom and the United States (AUKUS) has been a hard blow for France. For sure because of the torpedoing of the “contract of the century” of Naval Group and the French defense industry of 31 billion dollars, related to the construction of twelve submarines with diesel-electric propulsion for the Australian navy but mainly because of the heavy harm that it has caused to the US-France friendship.
“The subject is first of all that of the rupture of confidence between allies” said M. Le Drian, the French ministry of Foreign affairs.
The Aukus crisis added a new parameter in an international context already marked by uncertainties and the rise of unilateralism. This forced France to adapt rapidly. Four days after the conference of Joe Biden, President Macron and PM Modi had a telephone conversation to discuss closer collaboration between India and France in the Indo-Pacific region. “We place great value on our Strategic Partnership with France”, tweeted PM Modi just after the phone call.
Adding the fact that France is a permanent member of the United Nations Security Council and a leading country in European Union, the consolidation of the Indian French relationships will benefit more globally to India.
France’s priority remains to offer an alternative to the contest between China and USA, e.g. a stable multipolar order based on rights, free movement and fair, efficient and inclusive multilateralism with the Indo-Pacific region at the heart of this strategy. India share the same vision. This should definitively lead to a real boost to the Indo-French partnership for the mutual benefit of both countries and the Indo-pacific region.
How to give a boost to the Indo-French relationships.
Relations between India and France were strengthened with the launch of the strategic partnership in 1998, which testifies to the bonds of friendship and trust between the two countries. This partnership is deployed along several lines of cooperation: civilian nuclear power, defense, counter-terrorism, space, cybersecurity and digital.
The signing of an agreement for the supply of 36 Rafale aircrafts in September 2016 (with Dassault) and of an industrial agreement in March 2018 for the construction of six EPR nuclear reactors (with EDF) at the Jaitapur site, Maharashtra, fall directly within this framework.
Since this strategic partnership, the French Indian economic exchanges were growing steadily, even if it experienced a sharp slowdown in 2020 following the Covid-19 crisis at 9 billion euros in trade compared to 11.5 billion euros in 2019. But his figure remains far below the level of trade of India with UK and Germany to name the top 2 other economies in Europe. France is only India’s 29th supplier with less than 1% market share (3.3 billion euros in 2019) and its 15th customer (4.7 billion euros in 2019). Where UK stands to be India’s 21th supplier with 1.4% market share (5.9 billion euros in 2019) and its 7th customer (7.6 billion euros in 2019) and Germany is 12th supplier with 2,6% market share (10.6 billion euros in 2019) and its 8th customer (8.6 billion euros in 2019). The French exports are mainly based on the aeronautics (Arianespace, Dassault, Safran, Eurocopter), chemicals & pharmaceutic and communication.
When analysing the partnership from the foreign direct investments (FDI) angle, France is among the first foreign investors in India, with a stock of 9.8 billion euros at the end of 2020 (6th G20 investor). But this is more than two times less than the 25 billion euros of French FDI in China. This spread of French FDI between India and China could be reduced if French companies have the willing to diversify their supply chains from China by investing massively in India and use it as hub for manufacturing, in line with “Make in India”, Indian major national programme designed to facilitate investment, foster innovation and enhance skill development.
The potential of trade growth with between France and India is evident. France has a strong economy contributing to14% of the world GDP (5th economy in the world and second in Europe after Germany) and is the leading European investor in India in terms of number of subsidiaries (750) and the 1st European employer (350 000 jobs) in sectors such as automotive (Citroen, Michelin), water and waste management (Veolia, Suez) or construction and equipment for electrical energy (Alstom, Areva, Schneider Electric, Legrand, Vinci). This should encourage the French industry to level up its presence in India. Moreover, with the announcement of New Education Policy and New Science, Technology & Innovation Policy of the GoI, which will create an additional space for potential collaboration with Universities and R&D organisations to secure any local implementation. A good example has been given recently between EDF, the French major electricity company, who signed a Memorandum of Understanding (MoU) with the International Institute of Nuclear Energy (I2EN) in France and the Veermata Jijabai Technological Institute (VJTI) in Maharashtra to set up a Nuclear energy Centre of Excellence. If France’s focus was mainly on dealing big contracts with India, it should now foster its SME and mid-size companies to boost the Indo-French economic relations.
India is just at the beginning of a development which should bring it to be amongst the first top economies in the world. The forecasted 11% of growth for 2021-2022, a world record, is here to recall us that this development will create opportunities not only in strategic sectors but also widely in sectors of daily life such as energy and electricity, agro-food processing, construction material, logistic and transport. Adding with the fact that India, in the same time, has emerged as the third largest startup ecosystem in the world after the US and China, with a total of 51 unicorns, ahead of the UK (32), Germany (18) and France (16), there is no doubt that India should be now in n°1 position for any French company that is looking for international expansion.
(The authors – Rajesh Mehta is a leading consultant & columnist working on Market Entry, Innovation & Public Policy. Ludovic Dalleau is running a boutique consulting firm with focus on India and is the President of the India Business Club Paris. Views expressed are personal and do not reflect the official position or policy of the Financial Express Online.)