Turbocharging the Franco-Indian Partnership

France must revamp its archaic trade policy with India by forging innovation networks that link both countries' scientific and technology capabilities

By Navi Radjou

On July 14 in Paris, a detachment of 400 Indian soldiers proudly led the Bastille Day parade on the Champs-Elysées. The chief guest of honor was Indian Prime Minister Manmohan Singh. By inviting Singh and the Indian soldiers to participate in the Bastille Day march for the first time, French President Nicolas Sarkozy wanted to emphasize France's special relationship with India.

Sarkozy is keen to help India elevate its role on the international scene by endorsing its candidacy to become a permanent member of the U.N. Security Council. He has bullishly asserted the need for expanding the G8 to the G14 by inviting emerging powers like India to join the elite club, and giving them a greater role in setting the global economic and geopolitical agenda.

But hyperbole and symbolic gestures aside, facts prove that France still has a long way to go in engaging India as a strategic partner. Case in point: During his visit to India in 2008, Sarkozy signed deals worth only a few million dollars—compared with the €20 billion ($28 billion) he fetched for Corporate France during his earlier visit to China. Annual bilateral trade between India and France stands at a paltry $8 billion. In contrast, commerce between Germany and India is doubling in volume every few years, and could reach $27 billion in 2012.

Unsurprisingly, Sarkozy is keen to make up for lost time and inject fresh momentum into Indo-French trade. After all, France enjoys a longstanding relationship with India. In the midst of the 18th century, the French Empire was close to conquering the entire subcontinent when Governor Dupleix was called back to France by the Compagnie des Indes (which had established a trade presence in India well ahead of its British rival, the East India Company).

Where's the Knowledge Exchange?

The question now is whether France can effectively reconquer the fast-growing Indian market, which is expected to eclipse the French economy by 2020 and become the world's third-largest by 2035. I doubt it. Why? Because France's trade policies are stuck in a bygone industrial era dominated by the importing and exporting of physical goods, whereas the world is rapidly moving into the digital era characterized by seamless knowledge exchange via Google (GOOG), Wikipedia, and Facebook.

Need evidence of France's archaic trade policy? Just look at the nature of deals cut between Sarkozy and Singh on July 14, and others currently under negotiation. French nuclear giant Areva (CEPFI.PA) signed a deal to sell six nuclear reactors to India. French arms suppliers like Dassault Aviation (AVMD.PA) plan to sell dozens of submarines, helicopters, and fighter jets to the technology-hungry Indian military. It's as if we were transported back to the 18th century, with Sarkozy acting as a Compagnie des Indes captain trading French cannons for Indian spices.

France's transactional trading model (of primarily military/industrial goods) may be appropriate when dealing with China, the "world's factory," which operates under a centralized economy dominated by state-run firms. But this more traditional approach won't cut it for India, emerging as the "world's brain," with its millions of highly qualified scientists and engineers, a booming IT sector, and ambitious biotechnology and space exploration programs. India's entrepreneurial knowledge economy requires a different engagement model.

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