Economy

‘Rafale deal is a milestone in Indo-French defence ties’

| Updated on: Nov 01, 2016
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France is committed to help India build its defence industry, says French Ambassador Alexandre Ziegler

France’s new Ambassador to India Alexandre Ziegler believes that the $8.7-billion Rafale deal will prove to be a milestone in Indo-French defence ties.

In a free-wheeling interview with BusinessLine , Ziegler rued the high customs duties imposed by India, adding that it was imperative to conclude the long-pending India-EU free trade agreement. Edited excerpts:

Now that the Rafale deal has been finalised, what next do you foresee in terms of bilateral defence ties?

The Rafale agreement marks a major milestone in bilateral ties and will take our technological and industrial cooperation to an unprecedented level over the next 50 years. We are looking forward to pursuing and strengthening our cooperation with India.

What are you doing about the recent data leakage incident of French submarine maker DCNS?

This leak originated from an act of malevolence. Thanks to the immediate response of all the stakeholders concerned — from the manufacturer DCNS to the Indian and French authorities — the damage was limited, as no information compromising the security of the submarines was published.

An inquiry has been instituted in France and all means are being used to bring the truth to light as fast as possible. We are, of course, cooperating very closely and in all transparency with the Indian authorities.

What do the French defence firms tell you about the regulatory procedures in India?

Our defence cooperation with India goes back to over 50 years. If we have been able to forge such a relation of trust over the decades, it’s also due to the fundamental values we share, such as the quest for strategic autonomy. France is committed to assisting India in building its own capabilities in defence. The recent signing of the Rafale agreement is a clear illustration of this, with 50 per cent offsets, which will greatly benefit the Indian defence industry and its technological know-how in key areas.

You recently said French companies were willing to invest €8 billion in India. Can you tell us more about that?

There are more than 400 French companies in India. They will further increase their presence and this will translate into a significant inflow of investments. The main sectors are services, chemicals and pharmaceuticals, aerospace, food processing, electronics, mechanical and electrical engineering and automobiles.

The renewable energy sector, which is booming in India, as Prime Minister Narendra Modi has made it one of his priorities, also provides major opportunities for French energy companies, and I have no doubts that they will seize them. French investment in India is set to grow at over €1 billion annually over the years to come.

French firms hardly have a presence in the retail space in India. Has the Carrefour incident made the French industry jittery about investing here?

As for the retail sector, French companies are known for their expertise and are present in all large and middle markets. If these companies are not present in India, it is because they have faced, so far, regulatory restrictions or market conditions that have not been conducive to developing their business. This may change in the near future. Carrefour’s exit from India, which arose from the specific context of the retail sector, did not deter other groups from investing.

What are some of the challenges faced by French companies while investing and doing business here?

First, the legal framework must be as predictable as possible, because investors should not have to face drastic regulatory changes. Second, the easing of imports and exports should be pursued, given that investment and trade go hand in hand. Lastly, firms are eagerly awaiting a simplified tax procedure. The implementation of the GST will be an indisputable game changer for injecting dynamism in future investment flows into India.

Has the stalled negotiations on the India-EU free trade agreement (FTA) impacted French investors and exporters?

French companies did not wait for the FTA to be signed before establishing themselves in India. That being said, concluding a bilateral investment treaty would be a win-win situation. As for exports, the customs duties imposed in India are among the highest in the world. Obviously, the India-EU FTA would boost trade in goods. This would work both ways. One too often forgets that the EU is India’s top market for exports and will remain so even after Brexit.

Germany recently said it would like to see a robust investment protection agreement under the FTA framework. Are French investors demanding something similar?

Of course, France and Germany – like all EU countries – desire to reach a framework with India that is mutually satisfactory for the protection of investments, given the pace of French and European investments in India, as well as to encourage Indian investments in France and the rest of Europe. This issue is an integral part of the India-EU FTA negotiations.

What is your feedback from French companies who were upset with India’s taxation regime, especially after the Vodafone and Cairn Energy cases?

The challenge for both our countries is to apply the tax regime with clarity and legal security, and be able to update it in keeping with the developments in the economy or international fiscal standards. France attaches importance to fostering dialogue in this direction.

Published on January 15, 2018

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