In post-Brexit era, Indian industry should shift investments from UK to France to access European markets: French Ambassador

French President Emmanuel Macron with India's Prime Minister Narendra Modi (file picture)

Terming Indian industry's continued focus on Britain as an investment destination as surprising, French Ambassador Emmanuel Lenain said on June 3 that Indian companies should shift to France to access the large market of continental Europe.

"Indian investment is still very much channelled towards the United Kingdom, at somewhere between 40-50 percent of the whole stock (of Indian outward investments), which is a bit surprising," Lenain said at a media interaction. He termed such investments a business risk.

"Indian goods bound for the European Union (EU) through the UK would have to go through phytosanitary checks twice, as well as border controls," the Ambassador stressed. He added that exports in sectors such as pharmaceuticals would also face regulatory checks twice.

Instead, he suggested that more Indian companies should move to France, in the backdrop of significant labour reforms put in place by the current administration of President Emmanuel Macron. The administration has also put in place a flat tax on capital gains.

Currently, there are 210 Indian companies with 6000 employees in France as compared to nearly 850 Indian companies in the UK. This includes company such as TCS, Tech Mahindra, Murugappa and Zoho. Lenain said France is the third-largest destination for Indian companies in Europe with an estimated $350 million worth of investments.

France is actively pursuing a policy of getting the European headquarters of corporates shifted to France from the UK, said Eric Fajole, Director of Business France South Asia, France's trade promotion body.

On the other hand, the Ambassador said that India is fast becoming a  preferred investment destination for large sectors of the French economy. Apart from strategic manufacturing, this includes technology-driven businesses as well. However, the same can't be said of the majority of French companies in China, who were tipped to move out along with most other Western businesses after the geopolitical fallout of the Covid pandemic hit China's reputation.

"Like most European businesses, while they are not currently doubling down on investments in China, they are also not looking to move out at the moment due to the Chinese economy (remaining strong)," Lenain said. Meanwhile, France posted its strongest economic growth in 2021, with GDP growth rates hitting a 52-year high at 7 percent.

Make in France

France has been the largest destination for Foreign Direct Investment in Europe for the third year in a row, according to the recently released EY Barometer of Europe Attractiveness survey 2022. With 1222 new investment projects, of which 69 percent are extensions of existing projects, the country has seen a 24 percent rise in FDI-led projects in 2021, the report says. It adds that the country remains the top destination for investments in Research and development, in Europe.

The country is also home to 28,000 foreign companies that contribute to 21 percent of the national GDP and make up almost one-third of exports. FDI into France has risen by 50 percent since Macron first came to power in 2017. The French government believes that Indian manufacturers in the electric vehicle sector can corporate more with EV battery manufacturers in France.

French diplomats also stress that investing in the country will also enable Indian manufacturers and exporters to use it as a launchpad for sending their products across the francophone world. There are 29 french speaking nations, many of whom are classified as developing economies in Africa with a fast-growing consumer base. All francophone nations have strong business and political ties to France, and this can be utilized by Indian corporates.

Ambassador Lenain also stressed on the growing ties in education between India and France and stated that the country would welcome about 10,000 Indian students in the current year. The number of Indian students heading to France had been on the upswing in recent years, but had fallen due to the Covid pandemic.

Unlike in other non-English speaking countries, Indian students have the option to study in English at most of the higher educational instituions. France also provides the highest number of scholarships under the European ERASMUS program which provides scholarships and student exchanges.

Need holistic FTA

Present at the same interaction, European Union Ambassador Ugo Astuto said the EU wants a comprehensive trade pact with India, which includes chapters on climate change and labour norms. India is negotiating two separate pacts on trade and investments with the European Union and Astuto confirmed that discussions are set to begin shortly.

India has till now been averse to including such chapters in any of the trade deals it's has successfully negotiated. "We want the agreement to be ambitious broad and neutral, and belonging to the 21st century. Discussions are starting now," Astuto said.