The Hindu Business Line : Plenty of scope to improve bilateral trade

Top sectors attracting FDI (during August 1991 to March 2005) from France are fuels (power & oil refinery - 16.89 per cent), chemicals (16.25 per cent), cement and gypsum products (14.37 per cent), glass industry (10.08 per cent and food processing industry (6.98 per cent).

INDIA and France have enjoyed a strong diplomatic relationship and this is increasingly being replicated on the economic front. The last decade, in fact, has seen France emerge as an important trade and investment partner of India. The two sides have undertaken several initiatives to increase bilateral trade and investment and improve cooperation in several important areas such as IT/telecommunications, energy, mining, and agriculture/food processing among other sectors.

According to the Confederation of Indian Industry (CII), France is India's fifth largest trading partner in the European Union and accounts for 2.05 per cent of India's export basket. France's share in India's imports was 1.3 per cent in 2004-05.

Bilateral trade between the two countries has risen steadily over the past few years. While in 1998-99 bilateral trade stood at $1,549.3 million, the figure rose to $2,989.81 million in 2004-05, a growth 11.58 per cent over the six-year period.

Boost to two-way trade: On the occasion of the French President's official visit to India, industry chamber Assocham has released a paper stating that the visit would provide a big boost in accelerating two-way trade between India and France which is expected to exceed 10 billion euros by 2010 from its current level of 3.6 billion euros. The paper, called `India-France Economic Partnership', further states that currently Indo-French trade was only 0.51 per cent of France's total trade of 800 billion euros and there are a number of areas where potential for boosting trade exists.

A disaggregated analysis of exports and imports by CII indicates that both Indian imports from France and Indian exports to France have increased over time. Indian imports from France were $719.6 million in 1998-99 that rose to $1,380.7 million in 2004-05 while Indian exports to France increased from $829.7 million in 1998-99 to $1,609.11 million in 2004-05.

Main exports: 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.

According to CII, India needs to increase its presence in France through the investment route specifically in areas that are of interest in France. There are already several Indian firms present in France but there is a strong need to diversify into other sectors and also improve the presence in the existing sectors. Some of the new sectors for investments by Indian companies could be auto components, pharmaceuticals and electronics.

Corporate tie-ups: Among Indian IT firms, Tata Consultancy Services (TCS) has a partnership with a French company in France, Wipro has opened a representative office in Paris, Sankhya Infotech has a commercial office in Toulouse, Satyam Infoway is also looking for business opportunities in France and new Indian companies like Netkraft Private Ltd and Technova Information Systems are gaining a preliminary foothold in the French market. Further, to enable Indian businesses to set up operations in France, the Invest in France Agency opened its India office last year.

Meanwhile an analysis of the foreign collaborations and Foreign Direct Investment (FDI) approved by the Indian Government between August 1991 to March 2005 shows that the Government has approved 885 foreign collaboration (technical & financial) proposals with French companies, with an equity participation of $1,740 million representing 2.57 per cent of the total investment.

Further, the share of French FDI in total FDI received by India has risen from 1.73 per cent in 1991 to 3.06 per cent in 2004.

French presence: There are about 300 French companies operating in India, which include major firms such as Lafarge, Group Danone, and Saint-Gobain among others.

Many French companies have already gained a foothold in the Indian IT market. In the telecom sector, France has a strong representation through investments made by French majors Alcatel and France Telecom through a partnership with BPL Mobile.

France also is expanding its presence in the luxury and fashion segments in India with a number of high-end French brands such as Baccarat, Chanel, Cartier, and Louis Vuitton now available in the country. In addition, many French wine making firms have collaborated with Indian partners to provide technological know-how in setting up in vineyards and wineries.

India's airline industry too is a sizeable customer base for French aircrafts, having placed orders worth 13 billion euros recently.

French companies also have a presence in the Indian automotive segment. For instance the Valeo Group of France has a presence in India through a joint venture with the Anand Group called Valeo Friction Materials India Limited (VFMI) of India. VFMI is manufacturing clutch friction facings to cater to the needs of passenger cars, utility vehicles, commercial vehicles, tractors and three-heeler segments.

There is however much greater potential for building linkages between India and France in several areas such as agriculture and food processing, IT, fashion, infrastructure, defence and audiovisual media. But, according to CII for this to happen, there is a 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 per cent growth in bilateral trade over the next three to five years and of at least 10 billion euros investment annually over the next five years in select areas.

Our New Delhi Bureau

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