LIBA 07-09

Indo- France Economic Relation

International Economics

Jithin.K.Thomas

3/6/2009

Jithin.K.Thomas 07094

Yesudas 07127

Marie Line 07

Kurian Alex 07098

Table of ContentsChapter 1 Executive Summary........................................................................................................3

Chapter 2 Historic Ties....................................................................................................................4

Chapter 3 Current trade...................................................................................................................7

Indian companies based in France.............................................................................................10

India France Defense Cooperation............................................................................................14

Indian Merchandise Exports to France......................................................................................16

Indian Agro Exports to France..................................................................................................17

Indian IT Exports to France.......................................................................................................19

Higher education in France for Indian students.........................................................................19

India France tourism..................................................................................................................21

Chapter 4 The possibilities of future growth between France and India.......................................22

Chapter 5 Conclusion....................................................................................................................26

A French prospective.................................................................................................................26

Chapter 6 References.....................................................................................................................28

Attachment

1. Export Import Data yearly

2. Export Data

3. Import Data4.

Chapter 1 Executive Summary

India and France have enjoyed strong bilateral linkages with trade and Investment flows between the two countries rising continuously. The two sides have over the years built several platforms for improving bilateral ties and cooperation in their respective complementary areas. France is India’s fifth largest trading partner in EU and ranks fourth among all EU states in terms of foreign direct investment into India. The total trade volume between the two countries has increased by 11.58% over the period 1998-99 to 2004-05 with growth rate also rising continuously. The FDI inflows from France into India also witnessed a growth of 87% over the period 1991-2004. However, India’s presence in France is lagging, both in terms of exports and investment, in comparison to other trading partners of France. The economic and commercial opportunities that exist between the two countries have not been exploited to their full potential.

It is essential to discover the complementarities existing so that they can provide a direction towards strengthening economic and commercial relationship between the two countries. A few sectors that provide a potential for enhanced trade and investment are food processing, information and communication technology, biotechnology, pharmaceuticals, telecom, automotive sector, agro-food industry and textiles. Besides, the existing areas of economic cooperation can also be utilized for the purpose. For instance, India is looking for technology for increasing agriculture productivity for which cooperation can be sought from France on the sidelines of Working Group on Agriculture with France. Few issues need to be resolved before embarking on the road to boosting the bilateral ties, the most important being on agriculture discussions at the World Trade Organization. To conclude, tremendous potential exists for building linkages between India and France but for this it is necessary to identify the areas of complementary strengths and work out the issues that exist between the two countries.

Chapter 2 Historic Ties

The first French expedition to India is believed to have taken place in the reign of Francois I, when two ships were fitted out by some merchants of Rouen to trade in eastern seas; they sailed from Le Havre and were never afterwards heard of. In 1604 a company was granted letters patent by Henry IV, but the project failed. Fresh letters patent were issued in 1615, and two ships went to India, only one returning.

La Compagnie française des Indes orientales (French East India Company) was formed under the auspices of Cardinal Richelieu (1642) and reconstructed under Jean-Baptiste Colbert (1664), sending an expedition to Madagascar. In 1667 the French India Company sent out another expedition, under the command of François Caron (who was accompanied by a Persian named Marcara), which reached Surat in 1668 and established the first French factory in India. In 1669, Marcara succeeded in establishing another French factory at Masulipatam. In 1672, Saint Thomas was taken but the French were driven out by the Dutch. Chandernagore (present-day Chandannagar) was established in 1673, with the permission of Nawab Shaista Khan, the Mughal governor of Bengal. In 1674, the French acquired Valikondapuram from the Sultan of Bijapur and thus the foundation of Pondichéry was laid. By 1720, the French lost their factories at Surat, Masulipatam and Bantam to the British.

On February 4, 1673, Bellanger, a French officer, took up residence in the Danish Lodge in Pondichéry and the French Period of Pondichéry began. In 1674 François Martin, the first Governor, started to build Pondichéry and transformed it from a small fishing village into a flourishing port-town. The French were in constant conflict, in India, with the Dutch and the English. In 1693 the Dutch took over and fortified Pondichéry considerably. The French regained the town in 1699 through the Treaty of Ryswick signed on September 20, 1697.

Between 1720 and 1741, the objectives of the French were purely commercial. The French occupied Yanam (about 840 km north-east of Pondichéry on Andhra Coast) in 1723, Mahe on Malabar Coast in 1725 and Karaikal (about 150 km south of Pondichéry) in 1739. After 1742 political motives began to overshadow the desire for commercial gain. All factories were fortified for the purpose of defence.

In the 18th century the town of Pondichéry was laid out on a grid pattern and grew considerably. Able Governors like Pierre Christoph Le Noir (1726-1735) and Pierre Benoît Dumas (1735-1741) expanded the Pondichéry area and made it a large and rich town. Soon after his arrival in 1741, the most famous French Governor of Pondichéry and all French India, Joseph François Dupleix began to cherish the ambition of a French Empire in India but his superiors had less interest. French ambition clashed with the British interests in India and a period of military skirmishes and political intrigues began. Under the command of the Marquis de Bussy-

Castelnau, Dupleix's army successfully controlled the area between Hyderabad and Cape Comorin. But then Robert Clive arrived in India in 1744, a dare-devil British officer who dashed the hopes of Dupleix to create a French Colonial India.

After a defeat and failed peace talks, Dupleix was recalled to France in 1754. In spite of a treaty between the British and French not to interfere in local politics, the intrigues continued. For example, in this period the French were also expanding their influence at the court of the Nawab of Bengal, and expanding their trade volume in Bengal. In 1756, the French encouraged the Nawab (Siraj ud-Daulah) to attack and conquer the British Fort William in Calcutta. This led to the Battle of Plassey in 1757 where the British decisively defeated the Nawab and his French allies, and extended British power over the entire province of Bengal.

Subsequently France sent Lally-Tollendal to regain the French losses and chase the British out of India. Lally arrived in Pondichéry in 1758, had some initial success and razed Fort St. David in Cuddalore District to the ground in 1758, but strategic mistakes by Lally led to the loss of the Hyderabad region, the Battle of Wandiwash, and the siege of Pondichéry in 1760. In 1761 Pondichéry was razed to the ground by the British in revenge and lay in ruins for four years. The French had lost their hold now in South India too.

In 1765 Pondichéry was returned to France after a peace treaty with Britain in Europe. Governor Jean Law de Lauriston set to rebuild the town on the old foundations and after five months 200 European and 2000 Tamil houses had been erected. During the next 50 years Pondichéry changed hands between France and Britain with the regularity of their wars and peace treaties.

In 1816, after the conclusion of the Napoleonic Wars, the five establishments of Pondichéry, Chandranagore, Karaikal, Mahe and Yanam and the loges at Machilipattnam, Kozhikode and Surat were returned to France. Pondichéry had lost much of its former glory, and Chandernagore was eclipsed as a trading centre by the nearby British establishment of Calcutta (present-day Kolkata). Successive governors improved infrastructure, industry, law and education over the next 138 years.

By decree of the January 25, 1871, French India was provided with an elective general council (Conseil général) and elective local councils (Conseil local). The results of this measure were not very satisfactory, and the qualifications for and the classes of the franchise were modified. The governor resided at Pondichéry, and was assisted by a council. There were two Tribunals d'instance (Tribunals of first instance) (at Pondichéry and Karikal) one Cour d'appel (Court of Appeal) (at Pondichéry) and five Justices de paix (Justice of the Peace). The agricultural produce consisted of rice, earth-nuts, tobacco, betel nuts and vegetables.

The independence of India in August 1947 gave impetus to the union of France's Indian possessions with former British India. The lodges in Machilipatnam, Kozhikode and Surat were ceded to India in October 1947. An agreement between France and India in 1948 agreed to an

election in France's remaining Indian possessions to choose their political future. Governance of Chandernagore was ceded to India on 2 May 1950, and was merged with West Bengal state on 2 October 1955. On November 1, 1954, after long years of freedom struggle the four enclaves of Pondichéry, Yanam, Mahe, and Karikal were de facto transferred to the Indian Union and became the Union Territory of Pondichéry. The de jure union of French India with India did not take place until 1963, when the French Parliament in Paris ratified the treaty with India.

The French East India Company La Compagnie française des Indes orientales or Compagnie française pour le commerce des Indes orientales was a commercial enterprise, founded in 1664 to compete with the British and Dutch East India companies.

Planned by Jean Baptiste Colbert, it was chartered by King Louis XIV for the purpose of trading in the Eastern Hemisphere.

The first state-sponsored French voyage to the Indies occurred in 1603, a voyage captained by Paulmier de Gonneville of Honfleur. French king Henri IV authorized the first Compagnie des Indes Orientales, granting the firm a 15-year monopoly of the Indies trade. [2] This precursor to Colbert's later Compagnie des Indes Orientales, however, was not a joint-stock corporation, and was funded by the Crown.

The initial capital of the revamped Compagnie des Indes Orientales was 15 million livres, divided into shares of 1000 livres apiece. Louis XIV funded the first 3 million livres of investment, against which losses in the first 10 years were to be charged. [2] The initial stock offering quickly sold out, as courtiers of Louis XIV recognized that it was in their interests to support the King’s overseas initiative. The Compagnie des Indes Orientales was granted a 50-year monopoly on French trade in the Indian and Pacific Oceans, a region stretching from the Cape of Good Hope to the Straits of Magellan.[2] The French monarch also granted the Company a concession in perpetuity for the island of Madagascar, as well as any other territories it could conquer.

The Company failed to found a successful colony on Madagascar, but was able to establish ports on the nearby islands of Bourbon and Île-de-France (today's Réunion and Mauritius). By 1719, it had established itself in India, but the firm was near bankruptcy. In the same year the Compagnie des Indes Orientales was combined under the direction of John Law with other French trading companies to form the Compagnie Perpétuelle des Indes). The reorganized corporation resumed its operating independence in 1723.

The Company was not able to maintain itself financially, and it was abolished in 1769, about 20 years before the French Revolution. King Louis XVI issued a 1770 edict that required the Company to transfer to the state all its properties, assets and rights, which were valued at 30 million livres. The King agreed to pay all of the Company’s debts and obligations, though

holders of Company stock and notes received only an estimated 15 percent of the face value of their investments by the end of corporate liquidation in 1790.

Chapter 3 Current trade

India and France have enjoyed cordial and substantive ties for long. The last decade has witnessed particular strengthening of Indo-French relationship and a long-term strategic partnership is taking shape between the two countries. France is an important trade and investment partner for India in the 25 nation European Union.

The two sides have over the years built several platforms for improving bilateral flow of trade and investment and improve cooperation in some important areas of the economy. Joint Working Groups met in sectors like IT & Telecommunications, Energy, Mining, Posts, Roads & Urban Development and Agriculture & Food Processing under the governance of the Indo-French Joint Committee on Economic & Technical Cooperation.

TradeIndia and France are actively engaged in providing impetus to the economic relations by identifying various areas where untapped complementarities hold the promise of further growth. France is India's 5th largest trading partner in the EU (after the UK, Belgium, Germany and Italy). The European Union is the second most important destination of India's exports and France accounts for 2.05 % of our export basket. France’s share in India's imports was 1.3% in 2004-05. The current figures are attached Excel sheets.

The table and graph below indicates the Total trade value in rupees between the two countries. It is evident that bilateral trade volume has increased significantly.

\Year 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008

TOTAL TRADE

1,089,561.03 1,606,318.74 2,741,808.82 2,856,534.59 3,562,978.65

%Growth 47.43 70.69 4.18 24.73

2003-2004 2004-2005 2005-2006 2006-2007 2007-20080.00

500,000.00

1,000,000.00

1,500,000.00

2,000,000.00

2,500,000.00

3,000,000.00

3,500,000.00

4,000,000.00

Indo French Trade

TOTAL TRADE

However, substantial fluctuations occurred in the growth of exports and imports between the two countries.

2003-2004 2004-2005 2005-2006 2006-2007 2007-20080

10

20

30

40

50

60

70

80

%Growth

%Growth

\Year 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008

TOTAL TRADE 1,089,561 1,606,319 2,741,809 2,856,535 3,562,979

%Growth 47.43 70.69 4.18 24.73

India's Total Trade 65,247,440 87,640,409 111,682,676 141,228,560 166,817,522

%Growth 34.32 27.43 26.46 18.12

%Share 1.67 1.83 2.45 2.02 2.14

TRADE BALANCE 87,608

India's Trade Balance

-6,574,092 -12,572,502 -20,399,102 -26,872,707 -35,644,818

From the chart above if we plot the percentage share of Indo – French Trade with India’s Total Trade; we see that there is general upward trend in spite of a decline in 2006.

2003-2004 2004-2005 2005-2006 2006-2007 2007-20080

0.5

1

1.5

2

2.5

3

%Share

%Share

French exports to India include electrical equipment, organic chemical products, aeronautical & space construction products, mechanical equipment, general & special usage machines, and pharmaceutical products. Indian exports to France consist of both traditional items such as garments, leather, textiles, raw cotton and yarn, and marine products, and non-traditional items such as automotive components, electronic and rubber components, chemicals and dyestuffs, pharmaceuticals, granite, and consumer durables are showing promising growth. India's presence in France is lagging. India doesn't emerge in the list of top 10 investing countries in France. Indian exports of software services to France are still at a low level. Therefore, a huge potential market remains open for the Indian software industry.

Indian companies based in France

General characteristics

Fance is becoming increasingly attractive to Indian companies and investors: with more than 50 companies employing over 3,000 people in the country. Indian investment generated 528 jobs in 2007, which is a 70% increase on 2006. In 2007, Indian firms acquired 243 foreign-owned companies, for a total value of approximately $32.76 billion, compared to $9.9 billion in 2006 and $4.2 billion in 2005.

In 2007, India is the 14th leading source country for international investment in France in terms of the number of jobs created or maintained.

Sectors

Leading sectors in 2007 (in order): metals, metalworking and recycling (47.3% of jobs created); electric, electronic, IT and medical equipment (37.5%), agro-food, agriculture and fishing (5.7%). The first two sectors together account for roughly 85% of jobs created in France by Indian investment projects. Over the 2002-2007 period, software and IT services come out in the lead in terms of both the number of projects and the number of jobs created: 11 projects led to 650 jobs being created or maintained.

Type of investment

In 2007, the distribution of investment projects per type of investment operation was relatively even. In terms of the number of jobs being created, takeovers of ailing firms represented 85% of the total.

The “production, manufacturing, assembly” function accounted for slightly more than 90% of jobs created in France in 2007 as a result of Indian investment. Over the 2002-2007 period, commercial and liaison offices came out ahead (42.2% of jobs created), followed by production (30.6% of jobs created). France is also given priority in terms of representative offices in the new technologies sector and R&D centers, as can be seen by recent investments by Wipro Ltd, Ranbaxy and Span Diagnostics.

Regional investment locations

The majority of Indian companies are based in Paris or in the Ile-de-France region; the fact that Paris is a major capital city with a large Indian community can favorably influence the investment decisions of certain Indian investors.

However, Indian investment is now tending to relocate to the South of France and specifically the Rhône- Alpes region and Sophia-Antipolis which offers a scientific and technology park.

Indian investment flows since 2000

Since the year 2000, 27 Indian investment projects have enabled 1,638 jobs to be created or maintained in France.

In 2007, seven investment projects led to 528 jobs being created or maintained.

Indian investment projects in France in 2007 included:

Blue Stampings and Forgings Ltd acquired the MSI group (Meca Stamp International) forging, stamping, mechanical soldering for industrial equipment - Hénin Beaumont, Pas-de-Calais

Havell’s India Ltd - manufacture of lighting equipment for industrial and commercial use business takeover - Saint-Etienne, Loire

Aesa Air Engineering - environment, air treatment - takeover-extension - Thann, Haut-Rhin

Tata consultancy - Indian leader in the field of engineering and studies - Blagnac, Haute Garonne

French Investment in India

An analysis of the foreign collaborations and Foreign Direct Investment (FDI) approved by the Government after the announcement of new industrial policy since August 1991 shows that FC approvals and investment from France has risen substantially. From August 1991 to March 2005, Government has approved 26,631 foreign collaboration (technical & financial) proposals with a corresponding foreign direct investment of US$ 67650 million. Out of this the total number of approvals with France have been of the order of 885 (3.32% of the total approvals) with an equity participation of US$ 1740 million representing 2.57% of the total Investment.

SHARE OF TOP INVESTING COUNTRIES FDI EQUITY INFLOWS (Financial year-wise):

Amount Rupees in crores (US$ in million)

Ranks Country 2005-06 (April-

March)

2006-07 (April-

March)

2007-08 (April-

March)

2008-09 (April –

Nov.08 )

Cumulative Inflows

(April ‘00 to Nov. ‘08)

%age to total

Inflows (in

terms of rupees)

1. MAURITIUS 11,441 (2,570)

28,759 (6,363)

44,483 (11,096)

35,172 (8,064)

145,545 (33,699)

44 %

2. SINGAPORE 1,218 (275)

2,662 (578)

12,319 (3,073)

8,512 (1,983)

26,638 (6,340)

8 %

3. U.S.A. 2,210 (502)

3,861 (856)

4,377 (1,089)

5,506 (1,294)

25,463 (5,826)

8 %

4. U.K. 1,164 (266)

8,389 (1,878)

4,690 (1,176)

3,191 (732)

22,255 (5,095)

7 %

5. NETHERLANDS 340 (76)

2,905 (644)

2,780 (695)

3,344 (766)

15,266 (3,471)

5 %

6. JAPAN 925 (208)

382 (85)

3,336 (815)

989 (227)

10,325 (2,353)

3 %

7. GERMANY 1,345 (303)

540 (120)

2,075 (514)

2,331 (544)

9,070 (2,088)

3 %

8. CYPRUS 310 (70)

266 (58)

3,385 (834)

4,486 (988)

8,553 (1,973)

3 %

9. FRANCE 82 (18)

528 (117)

583 (145)

1,804 (409)

5,188 (1,169)

2 %

10. U.A.E. 219 (49)

1,174 (260)

1,039 (258)

938 (218)

3,810 (881)

1 %

TOTAL FDI INFLOWS *

24,613 (5,546)

70,630 (15,726)

98,664 (24,579)

85,700 (19,791)

331,758 (76,915)

-

S.No. Country %age to total FDI Inflows

(In Rs) (In US$)

1. MAURITIUS 1,437,341.95 33,329.49

2. SINGAPORE 262,754.28 6,265.92

3. U.S.A. 252,868.97 5,790.54

4. U.K. 220,996.05 5,063.22

5. NETHERLANDS 151,372.27 3,444.77

6. JAPAN 103,066.20 2,349.31

7. GERMANY 90,400.70 2,081.63

8. CYPRUS 77,651.11 1,812.16

9. FRANCE 46,337.82 1,056.13

10. U.A.E. 36,532.20 848.87

Top sectors attracting FDI approvals (during August 1991 to March 2005) from France are Fuels (power & oil refinery) (16.89%), Chemicals (other then fertilizer) (16.25%), Cement and Gypsum Products (14.37%), Glass Industry (10.08%) & Food Processing Industry (6.98%).

Top sectors attracting FDI inflows (during January 2000 to December 2004) from France are Chemicals (other than fertilizers) (20.62%), Cement and GypsumProducts (20.15%), Services Sector (financial & non-financial) (8.83%), Fuels(power & oil refinery) (6.28%) & Electrical Equipments (including computersoftware & electronics) (3.46%).

The top French companies which have invested in India are M/s Lafarge (Cement & Gypsum), Air Liquide International (Chemicals other than Fertilizers), Usinor Sacilor (Ugine Division)(Metallurgical Industries (Ferrous)), Group Danone (food), Saint-Gobain (glass), Total SA (Fuels), Compagnie International Du Radio Telephone (Telecommunications (Cellular Mobile/ Basic Telephone Services), Total Gas & Power India (Fuels (Oil Refinery)), Ciments Francais (Cement & Gypsum Products) etc. The economic arm of the Regional most industrialized Rhone Alps region of France has recently opened an office in New Delhi to give impetus to the trade between the region and India.

Many French companies have gained a foothold in the Indian IT markets. France is also a potential market targeted by Indian software companies. In the telecom sector, France has a strong representation through investments made by French majors Alcatel in Gurgaon, Bangalore and Chennai, and France Telecom in Mumbai through a partnership with BPL Mobile and Sema Group, which is now part of Schlumberger Group and has its own subsidiary in Calcutta for telecom software development.

In electronics industry Thomson Multimedia has opened a subsidiary in Chennai and has a significant market share in tubes for the Colour TV industry in India through exports coming from its industrial production sites in Europe and China. In mines, the cooperation between India and France is one of the most longstanding one and active within the bilateral cooperation.

France has also invested in India's infrastructure primarily in roads and railways. Several French companies have a strong presence in India in this sector. The consumer goods sector in India has experienced a significant evolution over the past few years.

France, being particularly synonymous with creativity, luxury and fashion, has a significant presence in India in this sector and a vast number of French brands are today available in the Indian market.

The French presence in this sector covers a diverse range of activities such as perfumes & cosmetics, tableware & home decoration products as well as fashion accessories. Brands such as Verrerie Cristallerie d'Arques, Baccarat, Lalique and Daum, which are ranked amongst the top crystal ware companies in the world, today adorn Indian homes.

A large number of world-famous perfume & cosmetic brands are also available in the Indian market. As for the fashion accessories sector, ST Dupont, Cartier and more recently, Louis Vuitton, are already very popular with the Indian consumer. Gotier, a leading French furniture name is also establishing its presence in the Indian market. In fact, the contribution of France to this sector is increasing overtime and still large potentials remain to be exploited.

India France Defense CooperationIndia France Defense Cooperation dates back to the early years of India’s independence but this relation was restricted to the relation of a buyer and seller. France sold military hardwares to India since they are natural ally. In 1998, the strategic partnership took India France Defense Cooperation further. Both countries have been continuously working for better real multi-level cooperation. The results and successes of the India and France defense cooperation has been exemplary.

France and Russia were the only countries that did not condemn India's decision to go nuclear in 1998. In 2003, France became the largest supplier of nuclear fuel and technology to India and remains a large military and economic trade partner. The recent decision by the Indian government to purchase French Scorpène class submarines worth 3 billion USD and 43 Airbus aircraft for Air India worth 2.5 billion USD has further cemented the strategic, military and economic co-operation between India and France.

India France Defense Cooperation agreements promote bilateral strategic ties in fields like -

Defense strategies, Defense R&D,

Production of weapon systems and capabilities. Procurement of weapon systems and capabilities. Joint military exercises. Transfer of sophisticated armament technology. Counter mechanism to thwart international terrorism. Sharing of military expertise. Sharing of military hardware expertise. Joint development of value-added military technologies and hardware’s.

The growing mutual trust amongst India and France has further deepened bilateral defense cooperation. This has facilitated India to share France's knowledge on defense expertise, experience and technology. India is in need to improve its defense arsenal by procuring modern military equipments, hardwares and know-how, which can be sourced from France. And simultaneously, France also needs to share its modern military arsenal and expertise and know-how for earning extra revenue for the country and also to project its enhanced supremacy to the world.

India France Defense Cooperation can further cement harder if France can bag the gigantic defense deal of India amounting to $ 6.5-billion. The contract essentially narrates requirements for - 126 multi-role combat aircraft to the Indian Air Force. The Ministry of Defense, Government of India proposes to issue a global request for proposal (RFP) for this Indian defense deal, which proposes to induct 15-20 jets into IAF and the rest to be manufactured under license in India. Incidentally, France is eager to sell its multi-role Rafale fighter to India. The multi-role Rafale fighter is at present serving the French Air Force and Navy and its technology is in sync with the Mirage-2000-V jets which was the original choice of the IAF. The American made F-16 and F\A-18 fighters, Swedish made JAS-39 Gripen and the Russian made MiG-29M2 fighters are the close competitor of French made multi-role Rafale fighter. India France Defense Cooperation appreciates each other as a pole of power in an increasingly multi-polar world. French defense sells to India will face stiff competition because -

Its defense products are very expensive, Equivalent defense products are on offer from US and Russia, The growing Indo-US strategic military partnership, India- Russia defense agreement extension till 2010, Israel – India growing military business, Indigenous development state of the art defense production capabilities in India for

-

o Avionics, o Combat aircrafts, o Combat helicopters, o Battle tanks.

The political leaders of both the countries India and France have now realized the importance of forging strong defense ties with each other for mutual benefits. Earlier in 1998, India France

Defense Cooperation identified 52 areas of technological expertise for mutual sharing and further development. Some of the key areas are -

Co-production of engines, Co production of diesel or electric submarines.

The French political leadership is keen to forge deep rooted defense cooperation with India as India's economic prowess is growing. The new widespread consensus in the international arena is that France should take much more initiatives for deepening its defense cooperation with rising India.

Indian Merchandise Exports to France

Indian Exports to France grew by 20% in 2003-04, then increased to US $ 1289.80 million ($ 1.2 billion) as against $ 1074.09 million ($ 1 billion) in 2002-03. India's exports to France stood at $ 1289.80 million in 2003-04, but India’s share in France’s global imports is only 0.45%.

Indian Exports to France - major commodities are -

Information technology based services, Agricultural products, Fisheries products, Ready-made garments, Cotton, Cotton accessories, Cotton yarn, Cotton fabric, Petroleum products, Man-made fibers for ready made garments, Transport equipments.

Indian Exports to France like fabric and yarn for textiles has registered tremendous growth. The annual growth have risen from $18 million in 1962-1971 to $63 million in 1982-1991. Exports of clothing to France have grown from annual average below $3 million in 1962-1971 to $108 million in 1982-1991.Further, Indian Exports to France also includes commodities like -

Leather goods, Crude matter, Polished diamonds, Animal feed, Petroleum products, Indian whiskey.

The latest hot commodity from India which has got ready and tremendous wide-spread acceptance in France is Indian Agricultural products and Indian fisheries products. The Indian Food-processing sector produces around 50 million tons of fruits and 90 million tons of vegetables. But inadequate food processing infrastructure in India could only process 6% of the perishable products available in India. Thus, the Indian Government has proposed to export a substantial portion of Indian Agricultural products and Indian fisheries products to France, in absence of proper food processing infrastructure in India. The great demand for Indian vegetables, fruits and flowers has got ready acceptance from the trade and business community of France. Although, the Indian Agribusiness and Food Processing Sector aims to increase the percentage of processed food available in India and to meet export demand by 20% over the next ten years, but still it is inadequate. A huge future demand for processed food is an absolute realty with changing socio-economic situations across the world especially in the developed countries like France. The Processed food sector in France offers tremendous scope for India.

Furthermore, the growing Indian Exports to France has facilitated wide-spread acclamation and acceptance throughout the European union. France's economic prowess and business leadership was exploited for entering into European market through different trade agreements France had entered into with its European business partners, benefiting both India and France.

Indian Agro Exports to FranceIndian Agro Exports to France like fabric and yarn for textiles has registered tremendous growth. The annual growth has risen from $18 million in 1962-1971 to $63 million in 1982-1991. Exports of clothing to France have grown from annual average below $3 million in 1962-1971 to $108 million in 1982-1991.

Indian Agro Exports to France - major commodities are:

Agricultural products Fresh Fruits and dried fruits Fruit juices and concentrates Vegetables Oilseeds Vegetable oils and fats Edible nuts Sugar and honey Grains and Pulses Wheat Rice Tea Coffee

Spices and herbs Tobacco Leather garments and goods Handicrafts Agro-chemicals Castor oil Carpets Cashew Fisheries products Ready-made garments Cotton Cotton accessories Cotton yarn Cotton fabric Man-made fibers for readymade garments Leather goods Crude matter Animal feed

Indian commodities which got tremendous wide-spread acceptance in France are Indian Agricultural products, Indian fisheries products and Indian Organic food products. The Indian Food-processing sector produces around 50 million tons of fruits and 90 million tons of vegetables. But inadequate food processing infrastructure in India could only process 6% of the perishable products. Thus, it has been proposed by the Indian Government to export a substantial portion of Indian Agricultural products, Indian Organic food products and Indian fisheries products to France, in absence of proper food processing infrastructure in India. Due to the great demand for Indian organic food products, vegetables, fruits and flowers has got ready acceptance from the trade and business community of France. Thus, Agro food sector in France offers tremendous scope for Indian Agro exports industry.

Indian IT Exports to France

The Indian IT Exports to France caters two types of basic IT services: Software development Application outsourcing

With growing numbers of the IT off-shoring jobs coming to India, its subsequent consolidation

of off-shoring models will become more popular. The fast growing Indian IT industry is expected to exploit new IT services in France, such as -

Software development, support and installation Consulting Networking and network infrastructure management Systems integration Training and Education Hardware support and Installation services Network consulting and network integration

Indian IT industry revenue growth is pegged at 24-27% in the current financial year. India MNC giants like Tata Consultancy Services, Wipro, and Infosys still lead the race and has been ranked as the top three IT services exporters from India. The Indian IT services sector continues to be the largest employer in India and will continue to be so in the near future. The Indian IT industry's contribution to the Indian GDP was 5.2%. The Indian IT industry has recorded revenue to the quantum of $US 39.6 billion in financial 2006-2007. Challenges in terms of awareness, culture, regulatory environment, and language barriers are some of the bottlenecks that Indian companies need to negotiate.

Higher education in France for Indian students

Higher education in France for Indian students are offered from the French Embassy in India. Short term scholarship are available to Indian students who wish to pursue bachelor's/master's degrees from accredited Indian universities and short courses from French institutions. The course duration varies from 3-6 months. Long-term financial assistance or grants are offered to meritorious Indian students for pursuing bachelor's/master's degrees French universities or institutions. The length of financial assistance may be 2-3 years. Bilateral students exchange program is applicable and allowed to institution or universities that have entered into the students exchange program contract. This student exchange program is only applicable for students who have successfully completed their bachelor's/master's degree from Indian institutes or universities which have contracts for students exchange programs. Further, facilities exist for advanced research for Indian PhD students who can complete a part of their research in France. This is offered to facilitate Indian PhD students so that they can have a feel of the French research and development arena. France being a self-sufficient country and an international economy superpower, commands a high respect for its advanced research and development facilities.

Furthermore, higher education in France for Indian students is also offered for pursuing internships and courses in professional training. Scholarships for these programs are tailor made for Indian students who wish to study in France.

Eligibility requirements for pursuing Higher Education in France for Indian Students are -

For pursuing Bachelor degree -

A pass in senior secondary examination with a minimum of 50% marks. Must be pursuing studies or just completed studies from the union territory of India. Must have received a bona fide confirmed admission letter from the concerned university or institute in France to pursue further studies. A recommendation letter from a professor of the university or institute last attended.

For pursuing Master degree -

A pass in bachelor’s degree with a minimum of 60% marks. Must not have attained the age of more than 28 years, Must have received a bona fide confirmed admission letter from the concerned university or institute in France to pursue further studies. A recommendation letter from a professor of the university or institute last attended.

For pursuing professional training -

A NOC from the institute or university in India where the student is studying currently. Must not have attained the age of more than 30 years. Must have received a bona fide confirmed admission letter from the concerned university or institute in France to pursue further studies. A recommendation letter from a professor of the university or institute last attended.

For pursuing Students Exchange Program -

A NOC from the institute or university in India where the student is studying currently. Must not have attained the age of more than 30 years. Must have received a bona fide confirmed admission letter from the concerned university or institute in France to pursue further studies. A recommendation letter from a professor of the university or institute last attended.

Financial assistance includes the following -

Stipend of €615 (maximum) per month Round pre-paid air ticket Medical insurance Tuition fees

India France tourism

To facilitate growth of India France tourism, the respective governments of both the countries have signed an agreement during the visit of the then French president Mr. Jacques Chirac. The Memorandum of Understanding (MoU) for the development of India France tourism was signed in New Delhi. The main features of the MoU signed by India and France for cooperation in the field of tourism between India and France are as follows:

Encouraging the quality destination-tourism Increasing tourist traffic Generating skilled manpower and employment for the development in tourism and travel Encouraging tourism to better bilateral relationship of both the two countries Reciprocation of experiences of administration and management Reciprocation of experiences for further development of tourism in both the countries Facilitating marketing of tourism covering areas like -

Promotion Tourist information Market research

The Memorandum of Understanding for the development of India France Tourism became functional on and from 20th February, 2006. The Memorandum of Understanding is valid for five years and shall get automatically renewed for another two years, if agreed upon by the two countries.

Further, India and France tourism industry is also keen to focus on other gray areas for the development of tourism business, like -

Business travelers Professionals Student Tourists Easing visa norms

Chapter 4 The possibilities of future growth between France and India

We are analyzing the future possibilities of future growth between France and India in the light of The France - India Summit was held in Marseille on 29 September 2008.

The Prime Minister of India Dr. Manmohan Singh and President Nicolas Sarkozy held a bilateral summit in Paris today, at which they reaffirmed the importance attached by both countries to their strategic partnership and their commitment to further strengthening bilateral cooperation in a wide range of areas. Both sides reiterated their intention to keep up the momentum of regular high level exchanges.

India and France agree on the need for greater international cooperation to deal with challenges facing mankind. Both countries are committed to international peace and security, nuclear non-proliferation, the fight against terrorism and the need to ensure food security and energy for all countries.

Both countries recognize` the need to promote the development of stable sustainable, efficient and affordable energy sources, including nuclear energy. In this context, they welcomed the agreements adjusting the international civil nuclear cooperation framework to enable collaborations with India. India and France welcome the signature of a bilateral agreement for civil nuclear cooperation, which will form the basis of wide-ranging bilateral collaborations in energy and research.

India appreciates French support for permanent membership of India in the UN Security Council. Along with other developing countries India is committed to continue dialogue and collaboration with the G8. France also believes the G-8 needs to be expanded over time to G-13 including India1. India and France agree on the need for improved global economic governance to ensure that globalization and interdependence work for the benefit of all.

Both countries are fully committed to consolidating their relationship in the field of defence by increasing the range, level and frequency of their military exchanges, joint exercises, joint programmes and prospects in the fields of defense industry, research and technology. This commitment is well evidenced between the two countries by the possibility

of joint development, as early as feasible, of Short Range Surface-to-Air Missiles (SRSAM) and of the Kaveri engine for Light Combat Aircraft. Discussions concerning the up gradation of Mirage-2000 aircraft are also well under way and are expected to be finalized by next year.

1

Both countries are fully committed to consolidating their relationship in the field of defence by increasing the range, level and frequency of their military exchanges, joint exercises, joint programmes and prospects in the fields of defense industry, research and technology. This commitment is well evidenced between the two countries by the possibility

of joint development, as early as feasible, of Short Range Surface-to-Air Missiles (SRSAM) and of the Kaveri engine for Light Combat Aircraft. Discussions concerning the up gradation of Mirage-2000 aircraft are also well under way and are expected to be finalized by next year.

India and France also underlined the vitality of Indo-French scientific, technical and educational cooperation. Bearing in mind the Joint Statement issued on 25 January, we welcome the arrangements taken on one side to encourage more Indian students to study in France and, on the other side, to allow more French students study in India. The Indo-French Consortium of Universities will facilitate the organization of courses of mutual interest at Master’s degree and Ph.D levels by Indian and French universities, increase the number of academic institutional tie-ups, scholarships, joint projects, seminars and novel collaborative schemes including substantive contribution of French higher educational institutions to the creation of one of the eight new Indian Institutes of Technology. This Indo-French Consortium will also facilitate the mutual recognition of degrees; encourage student/faculty mobility and intellectual exchanges.

This summit is the consequence of a political partnership revived. Indeed the current development of Franco-Indian relations can be traced to the spirit of the State visit of the former President of the French Republic to India, from 24th to 26th January 1998, which provided a new impetus to the bilateral relations and allowed the establishment of the foundation of a durable partnership. The strategic partnership envisaged by the then President of the French Republic took concrete shape. The Forum of Franco-Indian Initiatives, which contributes to stabilizing and strengthening the bilateral relation, meets regularly. The high-level Council for Defense Co-operation meets once a year. The first session since 1991 of the Joint Trade Commission was held in November 1998 in New Delhi; three subsequent sessions were held in May 2000, December 2001 and November 2003.

This extract from the France-India Summit on 30th September 2008 shows a new step in the relation between France and India. In this meeting were evoked and discussed the future opportunities of Trade between these two nations. A new synergy was created among the both countries.

This extract argues that five sectors are seen as growth opportunity:

a) Agribusiness and food processing:

Indeed, the India and France trade relations should focus on forging ties for the development of the agribusiness and food-processing sector. It is the most important point in the relation between the both and should be discussing through the World Trade Organization. Indeed the India food-processing industry generates around 50 million tons of fruits and 90

million tons of vegetables. However India suffers of an inadequate food processing infrastructure and could only process 6% of the perishable products available in the country. Consequently India is looking for technology for increasing agriculture technology for which cooperation can be sought from France. The future objective of the India Agribusiness is to boost the percentage of processed food available to 20% over the next ten years. Moreover a tremendous future demand for processed food is expected regarding the socio-economic changes. Besides the government of India's Mid-day Meal Program for primary school children is another prospective area of Agri and Food-processing Industry. The processed food industry in India offers an important scope in organized street food business.

In the agribusiness sector, the technology is becoming a potential advantage as the:

• Biotechnologie development, irrigation, Hydro resources techniques, engines modernisation and harvest techniques, artificial insemination, cattle feeding

• Equipments and technologies in fruits transformation, vegetables, diary product cereals, silos and cold storage, packing.

b) Heavy industry and infrastructure   :

France has already invested in India's infrastructure primarily in roads and railways. Indeed several French companies have a strong presence in India in this sector as Lafarge. But more investments are needed as:

• Railway equipment, water sanitation, garbage , urban public transport

Regarding the water industry, near 40% of the population do not access to drinking water. Besides, because of the population growth, the need in water is increasing. France is already a player in the water industry like Cegelec, Degrémont, Pont-A-Mousson, Safege, Schlumberger or also Seureca. Since 1999, two big companies Suez Lyonnaise des Eaux and Vivendi are also settled in India. Three French India centers of research were opened in Delhi, Bengalore and Hyderabad. Water is a sector where France is well implanted and owns an image of “efficiency”; consequently an important development can be seen.

c) Consumer Goods   :

France, being particularly synonymous with creativity, luxury and fashion, has a significant presence in India in this sector and a vast number of French brands are today available in the Indian market. The French presence in this sector covers a diverse range of activities such as perfumes & cosmetics, tableware & home decoration products as well as fashion accessories. Brands such as Verrerie Cristallerie d'Arques, Baccarat, Lalique and Daum, which are ranked amongst the top crystal ware companies in the world, today adorn Indian homes. A large number of world-famous perfume & cosmetic brands are also available in the Indian market. As for the fashion accessories sector, ST Dupont, Cartier and more recently,

Louis Vuitton, are already very popular with the Indian consumer. Gauthier, a leading French furniture name is also establishing its presence in the Indian market. In fact, the contribution of France to this sector is increasing overtime and still large potentials remain to be exploited. L’Oréal is in India since 1994 attracts more and more customers, attested by the opening of a new production center in Pune.

d) High Technology   :

In India, the innovation development and the availability in highly competitive workforce are so important that the local capital is not sufficient. Consequently India needs foreign capital. The concerning sectors are software elaboration, bank informatics, oil refinery, telecommunication networks. Many French companies have gained a foothold in the Indian IT markets. France is also a potential market targeted by Indian software companies. In the telecom sector, France has a strong representation through investments made by French majors Alcatel in Gurgaon, Bangalore and Chennai, and France Telecom in Mumbai through a partnership with BPL Mobile and Sema Group, which is now part of Schlumberger Group and has its own subsidiary in Calcutta for telecom software development. Therefore, we can expect an important French investment in India.

e) Airport and port equipment   :

In fact India needs Satellite navigation system, a new electric distribution, high voltage overhead cables. France and India are already partners as the future realization of six submarines in Mumbay. Another example could be the Indian satellite INSAT 3 (to prevent mousson season) that was launched with the participation of France through it rocket Ariane 5. This success has created an emulation with the two countries and pledges a continuous alliance for the future.

Chapter 5 Conclusion

There is tremendous potential for building linkages between India and France in several areas such as Agriculture and Food Processing, Information Technology and fashion and audiovisual media.

But for this there is need for setting targets and increasing the interaction between the two sides over the next two to three years. The target to begin with could be to achieve a 25% growth in bilateral trade over the next three to five years and set a target of at least Euro 10 billion investment annually over the next five years in select areas for investment which will be put on the fast track for clearance by the Government of India.

A French prospective

At the middle of the XVIII century, the French empire was going to conquest India, which was at this moment one of the richest nation of the world. Can we imagine the same situation nowadays? Not at all. Indeed India will overtake French’s economy in 2020 and become the 3 rd

international largest economy in 2035. Moreover, the French Foreign Market policy should change. The past relations with India were only about the traditional model of importation-exportation of manufacturing goods. This approach is well-appropriated with China, the “factory of the world” but not with the emergent India seen as the “brain of the world” with it millions of Scientifics and highly qualified engineers, a booming informatics sector and ambitious biotechnology and space research programs.

How France can cultivate a solid partnership with India?

By creating a rift with it current commercial policy purely mercantile.

France should set up what Warren Buffet called the “right Trade”, i.e. the exchange of ideas and talents with India. The United States have already adopted this model and the trade between India and USA increased from 9 billion US dollars in 1996 to 32 billion US dollars in 2006, compared to 5 billion US dollars between India and France.

The beginning of this new trade policy could start with an acceleration of student and Scientifics exchange between the two countries (there is 1,200 Indian students in France against 19,000 in United Kingdom)

.

A further objective of better India France Trade Relations could be utilizing France's economic and business leadership for entering into European market through different trade agreements France had entered into with its European business partners.

Chapter 6 References

A Note on India-France Economic Relations & The Way Ahead by CII Indian investment in France by Invest in France Agency Statement of civil nuclear cooperation with India http://commerce.nic.in/eidb/default.asp Ministry of Commerce web site http://business.mapsofindia.com/trade-relations/india-france/ http://dipp.nic.in/fdi_statistics/india_fdi_index.htm Department of Industrial Policy

& Promotion Ministry of Commerce and Industry