8 April 2015

C’est la vie

Apr 08, 2015

Prime Minister Narendra Modi will visit Paris later this week, reciprocating French President Francois Hollande’s visit to India in February 2014. Despite the frequent high-level interactions there has been little traction on substantive issues.

There are several long-pending deals such as six new nuclear power plants by Areva and Nuclear Power Corporation of India (NPCIL), a government-owned entity, and the order for the Dassault Aviations Rafale fighter, that have long-term implications for India and France. In both these deals pricing has become a major bone of contention and it seems unlikely that these agreements will be formalised any time soon, apart from a reiteration of determination to iron out differences.

The Rafale fighter deal is stalled not only due to the high costs involved, but also due to disagreement on how the local component of fighters to be produced in India will be aggregated. Dassault has taken the position that it cannot guarantee the quality of the Hindustan Aeronautics Limited (HAL) built 108 Rafale fighters after the first 18 are imported. But many experts here say that this is merely a fig leaf to cover Dassault’s financial inadequacy. According to them, Dassault wants another local partner, like the private-sector giant Reliance Industries Limited (RIL), to complete the deal. RIL, with its $10 billion cash hoard, has already set up a defence sector business unit, Reliance Aerospace Technologies Pvt Ltd (RATPL), in anticipation of this.

A high-ranking official recently summed this up as France being preferred even though “it has time and again proved to be more mercenary than we like.”On the economic front France is still not much of a partner with bilateral trade of about eight billion euros. This is less than India’s trade with all of France’s neighbours such as Germany, Belgium, the United Kingdom, Netherlands and Italy. From 2000 onwards, the total foreign direct investment in India amounted to close to $900 billion. France’s contribution has been below $15 billion or about 2 per cent during this period. Clearly the economic relationship with France could do with much improvement and the political relationship, based more on arms transfers, is something neither country should be comfortable with.
Sadly, there are few expectations of a Modi-Hollande breakthrough on this score. But, as the French would say, c’est la vie (this is life).

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