Europe crisis hits India-France bilateral trade

Eurozone crisis has hit the India-France bilateral trade and achieving the USD 12 billion target (of the trade) would be difficult this year, French Ambassador to India, Francois Richier, said.

The French government is trying to bring some budgetary reforms to bring down the budget deficits so that the growth can be brought back, the Ambassador said.

"It is true that last year it (bilateral trade) was not as high as we expected. Europe is undergoing deep economic crisis. We are trying to get out of it (crisis) through economic measures and coordinated European measures which will boost the trade with the rest of the world including India," the envoy said recently, on the sidelines of the inauguration of a joint facility by DCNS (world leader in naval defence) and SEC Industries (city-based defence equipment maker).

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According to a latest report from the French Embassy, the volume of bilateral trade between France and India slowed down in 2011 (5.8 per cent at € 7.46 billion).

French exports rose to € 2.77 billion (a drop of 4.5 per cent as compared to 2010) and French imports to € 4.69 billion (12.9 per cent).

The French bilateral deficit is growing and stands at € 1.92 billion. The fall in French exports is mainly due to the postponement of aircraft delivery. Imports from India have been steadily increasing over the past decade, the report added.

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"In 2011, French exports to India fell by 4.5 per cent to stand at € 2.77 billion. This is due to the slowdown in India's civil aircraft imports: many private airline companies were established in 2003 and their first phase of acquisition is now coming to an end. Despite low aircraft sales, France's market share in this sector remains constant in India (30-35 per cent every year)," the report said.

However, French exports, apart from aviation sector, are rising by 12 per cent with particularly good results in the agrofood sector (113 per cent), agriculture (72 per cent), basic iron and steel products (24 per cent), chemical products (16 per cent) and petrochemicals (15 per cent).

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"We had targeted to do USD 12 billion (trade) this year. So as long as we have not reached that target I will not put another target," Richier said hinting that achieving this target is difficult.

Trade between India and France is far from being balanced, the deficit being to France's disadvantage.

Since 2000, France's trade balance vis-a-vis India has always been negative (except in 2006 and 2007 when France made substantial exports to the Indian aviation sector).

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"As far as France is concerned we expect the reduction in the budget deficit step by step to reduce it to lowest numbers. This will take some time, we are putting little energy into speeding the growth," the diplomat said.

Most Indian companies are expanding and could resume orders after 2012. Aviation should be a major driver of our exports for the coming decade.

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In the long term, French exports are expected to get a boost by the delivery of civil nuclear equipment to India from 2014, the report said.

If concluded this year, the impact of the India-EU Free Trade Agreement will be felt from 2015. On this basis, Indo-French civilian bilateral trade could regain balance around 2015, it added.