Indo France Trade Investment


India-France Relations

Relations between India and France have traditionally been close and friendly. With the establishment of strategic partnership in 1998, there has been a significant progress in all areas of bilateral cooperation through regular high-level exchanges at the Head of State/Head of Government levels and growing cooperation and exchanges including in strategic areas such as defence, counter-terrorism, nuclear energy and space. France was the first country with which India entered into an agreement on civil nuclear cooperation following the waiver given by the Nuclear Suppliers’ Group, enabling India to resume full civil nuclear cooperation with the international community. There is also a growing and wide-ranging cooperation in other areas such as trade and investment, culture, science & technology and education. France has consistently supported India’s increasing role in international fora, including India’s permanent membership of the UNSC. The momentum of bilateral exchanges has been maintained at the highest level over recent years. A clear indication of the importance that France assigns to the strategic partnership with India was the fact that India was the first country in Asia that the President chose for a bilateral visit.

President François Hollande, accompanied by Mme Valérie Trierweiler, paid a State visit to India on 14-15 February, 2013. He was accompanied by a 6 member Ministerial delegation as well as a large business delegation. He held talks with the Prime Minister Dr. Manmohan Singh and a joint statement was issued at the conclusion of the delegation level talks. He was hosted in the evening at a State Banquet by Hon’ble President of India. EAM, UPA President, Leader of the Opposition and the Governor of Maharashtra called on him. In Mumbai, he interacted with Indian

Business leaders. Four principal agreements signed during the visit were:

(1) Cultural Exchange Programme
(2) LoI on intensification of Cooperation in the fields of Education and Research
(3) Statement of Intent for long-term Cooperation in Space
(4) Joint Statement to follow-up and strengthen cooperation in the railway
sector. In addition, there were a series of agreements signed in the Education,
Science & Technology sectors. Before the State visit, the first meeting between President Hollande and Prime Minister Singh took place on the sidelines of the G20 Summit in Los Cabos on 19 June 2012.

Institutional Structure for dialogue:

France and India have instituted a Strategic Dialogue at the level of National Security Advisors whose 24th round took place in New Delhi on September 4, 2012. NSA held talks with the Diplomatic Advisor to the French President, Mr. Paul Jean-Ortiz in New Delhi on 12 July 2013. The latest round of Annual Foreign Office Consultations at the level of Foreign Secretaries was held in Paris on 17 June, 2013. The 3rd meeting of the JWG on Counter-terrorism was held in New Delhi on November 19- 20, 2012. The first round of the India-France cyber dialogue was held in Paris on 24 May, 2013. The first round of the Track 1.5 India-France Annual Dialogue between the Observer Research Foundation, India and the Centre for International Studies and Research (CERI, Science Po – Paris) was held in Paris on 23 May, 2013. The High Level Committee for Defence Cooperation (HCDC) at the level of Defence Secretaries, met in New Delhi on 26-27 April 2012. The 11th meeting of the Indo- French Research Forum (IFRF) was held in Paris from 17-19 December 2012. The 16th session of the Joint Committee for Economic and Technical Cooperation, at the level of Ministers of Commerce was held on 23-25 June, 2010 in Paris. The Indo- French CEOs Forum, formed in 2009, has been tasked to identify new avenues for cooperation and take initiatives to facilitate business links between both countries. The sixth edition of the CEO’s Forum was held in Paris on 8-9 July, 2013. It was inaugurated by Shri Anand Sharma, Hon’ble Commerce & Industry Minister along with the French Minister for Economy and Finance, Mr. Pierre Moscovici.

Indo French Trade & Investment
Bilateral trade

Indo-French bilateral trade has been growing though it has still not reached the € 12 billion target set by both the Governments during the visit of the French President to India in January 2008. The growth continued in 2011, with bilateral trade increasing by 6%. In 2012, the overall bilateral trade increased by 5.98% to € 7.9 billion riding on an increase in French aero-space exports to India but there was a decrease of 2.06% in the Indian exports to France over the same period of 201. India still had a small trade surplus of € 1.4 billion.

Foreign Direct Investment (FDI) Approvals:

France is the 9th largest foreign investor in India with a cumulative investment of approximately € 2.31 billion (USD 3.01 billion) during the period April 2000 to June 2012 which represents 2% of total FDI equity inflows into India for the period.

The number of technical and financial collaborations approved with France are 952. Top sectors attracting FDI inflows from France are Chemicals (other than fertilizers), Cement and Gypsum Products, Services Sector (financial & non-financial), Fuels (power & oil refinery), Electrical Equipment (including computer software & electronics) and automobile sector.

There are about 800 French companies (subsidiaries or JVs, representative offices or branch offices with about 150,000 employees. These include major French companies like Capgemini, Schneider Electric, Lafarge, Renault, Sanofi Aventis, Essilor, BNP Paribas, Louis Dreyfus, Armateurs, Alstom, Areva, Saint-Gobain, Onyx, Pernod Ricard, Alcatel-Lucent, Louis Vuitton, L’Oréal, GDF, Total, Danone, Air Liquide, Vici, Veolia, Vicat etc.

Indo France Corporation Sector
Civil Nuclear Energy Cooperation

A landmark Agreement on Civil Nuclear Cooperation was signed between India and France on 30 September, 2008 during the visit of Prime Minister Dr. Manmohan Singh to France. Subsequently, during the visit of President Nicolas Sarkozy to India from 4-7 December 2010, the General Framework Agreement and the Early Works Agreement between NPCIL and Areva for implementation of EPR NPP Units at Jaitapur were signed.

Space Cooperation

France and India view each other as important partners in space technology and applications. Indian Space Research Organization (ISRO) and its French counterpart Centre National de Etudes Spatiales (CNES) have a rich history of cooperation and collaboration spanning about four decades. Scientific community of the two nations cooperates in joint radiation experiment, space components development and space education. ISRO and CNES (French National Space Agency) have an umbrella agreement, operating successfully since 1993, under which joint missions like Megha-Tropiques and SARAL have been taken up. The joint satellite Megha Tropiques was launched on October-12, 2011 by ISRO’s Polar Satellite Launch Vehicle (PSLV). Another joint Indo-French satellite SARAL (Satellite for ARGOS and ALTIKA), carrying a Ka-band altimeter to study the ocean surface and a platform for collecting data, was successfully launched by PSLV on February 25, 2013. A ‘Science Seminar’ and ‘Research and Technology Workshop’ was organized in Bangalore during February 05-06, 2013 and ISRO and CNES have jointly identified areas of further cooperation. A Statement of Intent for Long-Term Co-operation in Space between ISRO and CNES was signed between Chairman ISRO and President of CNES on 14 February 2013. Under a commercial Launch Service Agreement between Antrix Corporation Limited (ANTRIX), the commercial arm of ISRO and ASTRIUM SAS, a Company under EADS, France, an advanced Remote Sensing satellite – SPOT -6 built by ASTRIUM SAS was successfully launched on- board ISRO’s Polar Satellite Launch Vehicle (PSLV – C21) on 9 September 2012. Arianespace based at France has been the major provider of launch services to
Indian Geo-Stationary satellites. Subsequent to the launch of APPLE satellite on a co-operative mode, 14 Geo-Stationary satellites of India have been launched by Ariane on a commercial basis.

Defense Cooperation

Within the framework of structured talks under the Indo-French Defence Cooperation Agreement several meetings on industrial collaboration and service exchanges are held regularly. The High Level Committee for Defence Cooperation (HCDC) at the level of Defence Secretaries, met in New Delhi on 26-27 April 2012. The 11th meeting of the Indo-French Research Forum (IFRF) was held in Paris from 17-19 December 2012. Indo-French Air Force Exercise Garuda IV was held at Istres air base in France from 14 – 25 June 2010. Indo – French Naval Exercise, Varuna was held in the Mediterranean sea off the port of Toulon from 19-22 July, 2012. The first IndiaFrance joint army exercise named Shakti was conducted in India at Chaubattia from 9-22 October 2011. Government of India has selected Rafale from M/s Dassault Aviation, France for procurement of 126 MMRCA for the Indian Air Force. Contract negotiations are currently ongoing.

Cultural Exchange Corporation

Indian culture enjoys a wide and discerning audience among the French population, as is evident in the numerous and frequent cultural events organized all over France, spanning the entire spectrum of Indian art, music, dance, cinema and literature. While the Indian Council for Cultural Relations (ICCR) sponsors visits of Indian artists to France, from time to time, there are a growing number of private impresarios who organize cultural events throughout France. Hon’ble Minister of Culture of India, H.E. Mrs. Chandresh Kumari Katoch was on a two-day official visit to France on April 3-5, 2013. During the visit, she met her counterpart Minister of Culture and Communication of France, H.E. Mme Aurelie Filippetti. The two Ministers reviewed the cooperation between India and France under the bilateral Cultural Exchange Programme, which was signed in Delhi on 14 February, 2013, during the visit of President Francois Hollande to India, including cooperation in the area of museums. In keeping with the importance both the countries accord to cinema and the willingness to enhance cooperation in the field, a revised Indo- French Bilateral Film Co-Production Agreement was signed during the visit of French President to India in December 2010. An MOU was signed on 26th January 2012 between the Ministry of Culture of India and the Louvre Museum with the aim of
establishing an active partnership in the area of exchange of competencies and expertise, particularly in the field of museology, temporary exhibitions etc.

Educational and Technical Cooperation

The bilateral educational cooperation between India and France has grown over the last few years. Around 300 MoUs have been signed between Indian and French universities and private institutions. The number of Indian students studying in France in various fields has increased over the years. For the academic year 2011- 2012, 2550 Indian students came to France as compared to 2500 a year ago. There is a growing desire to further strengthen the bilateral E&T collaboration. This is reflected in the joint statement issued during the visit (February 14-15, 2013) of French President Francois Hollande to India, which lays stress on building an education plan including twinning of higher education institutions, mutual recognition of degrees, research collaborations and training of teachers. The framework for bilateral educational cooperation is provided by the Educational Exchange Programme (EEP), which includes mutual recognition of degrees, bolstering the research programme and increasing student-scholar Research mobility through a flexible visa regime).

A Joint Working Group has also been set up under the EEP. One of the most important initiatives in the field of education has been the cooperation on the new IIT in Rajasthan, following a joint declaration in 2008. A Letter of Intent (LoI) was signed in 2012. The Indo-French Centre for Promotion of Advance Research (CEFIPRA), which has completed 25 years, is the nodal framework for promoting bilateral scientific cooperation in fundamental & applied research, frontier technologies and exchange of scientists and post-doctoral researchers. The office of CEFIPRA has been established in Delhi and the centre is currently funded through an annual corpus of € 3 million, with India and France equally contributing Euro 1.5 million each. There is interest on both the sides to further bolster research, and technological cooperation between Indian and French research institutions and
universities. To this end, two sides have launched in February 2013 the “Raman- Charpak Fellowship” which will enable exchange of doctoral students between the two countries. To further broaden the scope of future engagements in S &T several Memorandum of Understanding and Letter of Intent (LoI) between institutions were signed during the visit of French President in February 2013 to India. France will be the partner country for the 2013 Global Technology Summit to be held in New Delhi.

Cooperation in the field of Railways

During the State Visit of French President François Hollande to India on 14-15 February, 2013, a Joint statement was signed by Shri Pawan Kumar Bansal, Minister of Railways, India and Mme Nicole Bricq, Minister of Foreign Trade, Mr. Frederic Cuvillier, Minister of Transportation Sea and Fishing, France to follow up and strengthen the cooperation in the Railways sector between the two countries. A Memorandum of Understanding (MoU) was signed by Shri Vinay Mittal, Chairman, Railway Board, Ministry of Railways, and Mr G. Pepy, Chairman and CEO Société Nationale des Chemins de Fer Français (SNCF), the French National Railways, for Technical cooperation in the field of Railways.


European companies have invested $198 billion in India during the last ten years. This gives Europe Inc the distinction of being the largest inbound investor group in India. In the same period, companies from the US and Japan (two of the historically large FDI providers in India), put in $138 billion and $50.7 billion respectively. Thus, Europe Inc’s investments during the review period are higher than the combined spend of Japanese and US firms. Unlike their Indian counterparts, European companies have a higher proclivity for internationalising through Greenfield initiatives. Our study shows that about 60% of European FDI was channelised for setting up branch offices, units, subsidiaries and manufacturing plants. Despite the recent economic turmoil, these companies spent $118 billion on 2566 Greenfield projects. European companies have spent $80 billion to acquire interests in 1442 companies. In comparison, Indian companies had spent $38 billion on mergers and acquisitions and $18 billion on Greenfield projects between 2003 and 2012.

Germany, UK & France Investors from the European Union’s (EU) largest economies- Germany, UK and France-collectively account for 64% of the continent’s overall investments in India. The UK is the largest investor from the continent. British companies account for $70 billion or about 35.5% of the overall EU-India FDI piece. Strong cultural affinity, colonial links, the presence of a vibrant Indian Diaspora in the UK and overall comfort in dealing with English speaking executives give UK
businesses an edge. At $34.47 billion, Germany is the second largest EU investor. Over 15% of all European acquisitions and 18.5% of all European Greenfield spends have originated from Germany. France is the third largest and the fastest growing European investor in India. French companies spent $21.64 billion, which is 10.92 per cent of overall EU investments, during the review period. French companies also have the distinction of funding the largest Greenfield projects in India. With an average project size of $59.3 million, projects originating in France are approximately 1.3 times larger than the average across all EU source countries.

Sectors / Mergers & Acquisitions

About 26 per cent of all inorganic transactions (volume wise) and 11 per cent of Greenfield FDI projects were seen in India’s Business Services Sector. They include Professional services, Transportation, Real Estate, Healthcare, Pharmaceuticals and others. Many of these services are delivered from centres / units in India. European firms prefer to acquire or organically setup these centres and integrate them with their global network. This allows them to provide high volume services at low costs.
Around 15 per cent M&A transactions were observed in the Industrial Products segment (volume wise), thanks to the abundant supply of skilled workers and a strong domestic market. Within Industrial products, 40 per cent of the deals were observed in Automotives and Chemicals space. After China, India has become the second largest emerging country for Light Vehicle assembly. All the major original equipment manufacturers have production facilities in the country. The Auto and Auto Ancillaries industry is on track to receive more investments from European majors.

Value wise, the Technology, Media and Telecommunications segment (TMT) and the Energy, Utility, Mining and Infrastructure (EUMI) attracted $52 billion of capital, the equivalent of 65% in value terms of all M&A deals. Approximately 85% of all Europe to India M&A deals are less than $100 million and the average deal value was about $69 million for the 2004 -2013 period. While deal activity is undergoing a temporary slowdown, partly due to uncertainty over Parliamentary elections, it is expected to pick up going forward.

Employment Generation

Our study shows that EU companies collectively provide direct employment to 1.5 million and indirect employment to 6.3 million personnel. Of this, about 562,335 new jobs were created in the last 10 years alone through the Greenfield route. In comparison, US companies created 575,711 new jobs and Japanese companies created 225,184 new jobs through their respective Greenfield initiatives. Germany, UK and France collectively account for 765,000 or 51 per cent of overall European direct employment creation in India. Swedish companies have created more jobs on a per Greenfield project basis. They have added 287 jobs with every project as against the European average of 219. While M&A deals do not necessarily result in the addition of new jobs, European companies are well know to preserve existing jobs in companies that are not doing well, post the acquisition.


The preferences of European companies are similar to that of any commercially motivated investor. The three most important reasons for investing in India are: Domestic market growth potential, proximity to markets or customers and skilled workforce availability. A large slice of the Indian population is seeing a rapid shift from the low-middle classes to the upper middle class category. The ambition, passion and drive of India’s youthful population is one of the main reasons for this demographic shift. Other factors such as healthy savings rate, rising rural incomes driven, pricing support for crops, improvements in literacy and quality of education, a culture of entrepreneurship and improvisation (Jugaad in local parlance), a proficient managerial class, a reasonably robust banking system and capital market, and an activist supreme court have aided this change. Even if a GDP growth rate of 6-7% were to be estimated, by 2030, the country will have the largest middle class population and consumption in the world.

Recommendations for EU Companies

India maybe a difficult place to conduct business, but there are umpteen success stories. The challenges seen in India are not unique to India alone. All developing countries exhibit similar demand characteristics and constraints. Successful companies learn from their India opera-tions and treat the country as a laboratory for developing products, business models, talent, capabilities, and operating paradigms that could be replicated in other growth markets. If a company is able to manifest itself successfully in India, it can win everywhere else. We issue the following recommendations for European firms:

1) Adapt your product and services to the mass market and take a long term view of India
2) Commitment from the topmost level and empowerment of local management
3) Brace for lumpy cash flows
4) Build relationships
5) Forge a strong emotional connect with employees
6) Focus on India’s potential, not the problems
7) Have a flexible notion of time
8) The best time to invest in India is during a slowdown— NOW

Recommendations for Indian Policy Makers

Indian Policymakers are doing a remarkable job within stiff constraints. Like any form of inter-national trade, European investments create winners and losers, thereby causing apprehen-sion in certain quarters. Policymakers have to play a delicate balancing role to enhance India’s FDI attractiveness while ensuring minimum disruption to the affected groups. Since, stable inflows are seen as an international affirmation of an economy’s health, we issue the following recommendations:

1) Better co-ordination between the Centre and State ahead of crucial policy changes
2) Swift implementation of policy changes
3) Promote non-metro cities as pockets of excellence
4) Sort out contours of India’s Intellectual Property Rights regime
5) Ensure efficacy of the rule of law by giving autonomy to vigilance agencies
6) Create an institutional mechanism for dispute resolution in infrastructure projects
7) Initiate reforms in trade facilitation and export promotion