Businesses from France looking at India with renewed expectations

French President Francois Hollande visits India as guest of honour at the Republic Day parade on January 26. Is the visit a sign of the coming of age of Indo-French relations?

It's been almost two years to the date from Hollande's first visit to India as president. In the interregnum, a lot has changed around the world and in bilateral relations. The world is confronted with its biggest geostrategic challenge in the shape of the Islamic State (IS), which has emerged as a major threat to peace and security around the world and whose agents have already carried out numerous attacks in France, the US and many other countries.

The IS attacks in the Middle East have also led to the biggest refugee crisis since the Second World War and over a million refugees have landed in the European Union. Hundreds more have perished in their attempt to cross the Mediterranean Sea, seeking the safety of Europe.

The situation of the world economy is hardly any better, as over the last year or so it has been rattled by the Chinese tsunami and a European economy that seems stuck in low, jobless growth, with very few bright spots, including India, which seem to be keeping the global economy afloat.

With its expected GDP growth of about seven percent this year, India has kept its place as the fastest growing large economy in the world for the second year running. Businesses from around the world, including France, are now looking at India with renewed expectations. Ever since India elected Narendra Modi as prime minister in May 2014, there seems to be a new spring in the step of Indian relations with France.

Modi was in France twice in 2015, once on a bilateral visit in April and then again in November for the Climate Change Summit in Paris. Besides, Indian and French leaders have taken time out for bilateral discussions at practically all multilateral events like the UN General Assembly meeting in New York in September and the G20 meet in Antalya, Turkey, in November.

Anyone looking for signs of this new sense of purpose and direction in the relationship needs to only look at fresh movement in the long-pending deal over the purchase of the French Rafale multi-role medium range combat aircraft. After having been stuck for nearly seven years, when in January 2012, India finally opted for Rafale as the aircraft that would become the new backbone of the Indian Air Force, with 128 fulfilling the role, the French government and Rafale-manufacturer Dassault were hoping it would be only a matter of a few months more to close the deal and begin the supply of the aircraft.

On his first visit to France, at a joint press conference with Hollande in Palais Elysee, Modi sprung a surprise and announced that India would buy 36 Rafales in fly-away condition, saying that the terms of this deal would be finalised shortly.

The announcement came as a big relief to Dassault, which was on the verge of closing down the Rafale assembly line as it had no firm orders on hand from anywhere. Eight months later, as Hollande reaches India, hopes are high that the deal would be sealed during this visit with clear timetables for delivery of the aircraft and setting the scene for a bigger defence deal between the two sides.

Modi sees a big role for the French in creating a real manufacturing hub in the country, especially in areas where the French are normally strong, notably railways, aviation, defence, automobile, nuclear power etc. During his visit to France in April last year, Modi highlighted several times the focus of his government in improving the manufacturing sector and with several very aggressive incentive schemes to get the Indian private sector and foreign companies as well to invest more aggressively in order to boost the manufacturing capacities in the country.

Besides, Make in India, France is an equally good and logical partner for India in the implementation of several other projects that the country has been focussing on. One of the most important areas for enhanced bilateral cooperation in the urbanisation of India.

In the smart city project, the French have already evinced interest in undertaking the work in three cities.

Another key area where France could lend a helping hand to India is the country's power sector, in conventional, nuclear as well as renewable energy sources. The biggest boost in this collaboration was received during the Climate Change Summit. At the event, India, along with dozens of other nations, launched the International Solar Alliance, aimed at pooling resources and technologies to boost the solar energy power plants throughout the nations that are blessed with adequate number of sunny days.

So far, the Indo-French business relationship remains overwhelmingly dominated by the behemoths, with very little engagement of the smaller companies, which ironically make up the bulk of both Indian and French economies. The small and medium enterprises (SMEs) sector is involved only in small volumes of trades in very traditional segments such as textiles, food, gems and jewellery.

But the reluctance of more SMEs to trade or do business with each other has led to a stagnation in Indo-French trade, which has been hovering around the seven billion euro mark for almost all of the past decade, despite several ambitious targets set by leaders on various occasions. This pales in comparison to the trade between India and Germany or India and the UK, both of which are nearly thrice as high as that of France.

The new focus areas of India could be the big breakthrough in this relationship which could help take the bilateral trade to the next level and give the bandwidth which has been missing from this crucial relationship for a long while.

By Ranvir S Nayar

(The author based out of Paris is managing director of the Media India Group. The views expressed are personal. He can be contacted at [email protected])