Bloomberg News

Hollande in India to Push $20 Billion Deals as Economy Shrinks

February 14, 2013

French President Francois Hollande began two days of talks in India on his first trip to an Asian country since taking office, bidding to boost trade as the European nation’s economy hovers on the edge of recession.

Hollande, who is traveling with a delegation of business leaders and ministers, pledged greater cooperation in defense, nuclear energy and aerospace after meeting Indian Prime Minister Manmohan Singh today. There were no breakthroughs on two pending deals, the Indian purchase of French fighter jets worth at least $11 billion and $9.4 billion of nuclear reactors.

The talks coincided with the announcement that the French economy shrank 0.3 percent in the fourth quarter after manufacturers cut thousands of jobs and Hollande squeezed the budget deficit. Commerce with the world’s second-most populous nation stands at only half the target announced five years ago, a failure that has contributed to a French trade gap that was the second-largest on record last year.

Hollande “wants to send a strong signal to India that France wants to maintain continuity in it relationship and considers India as a privileged, strategic partner,” said Kanwal Sibal, former foreign secretary and Indian ambassador to France from 1998 to 2002.

France, like others among the 17 nations using the euro, is suffering in the wake of the region’s sovereign debt crisis. Yet while neighboring Germany is showing signs of recovery in confidence, exports and manufacturing, Hollande is grappling with shrinking private investment, job cuts by companies such Renault SA and pressure from European partners to speed budget cuts and an economic revamp.

Graft Scandals

The French president pressed Indian officials to complete contracts delayed by protracted negotiations or legislation on domestic safeguards. While the Indian government last year selected Paris-based Dassault Aviation SA to provide 126 Rafale fighter jets in what will be the world’s biggest purchase of warplanes in 15 years, the agreement is yet to be signed.

India’s arms-buying has been slowed by officials’ sensitivities over corruption scandals in previous purchases, including one that helped drive the ruling Congress party to defeat in 1989 elections. India ordered a federal investigation into allegations of graft in the purchase of 12 helicopters from Italy’s Finmeccanica SpA, claims that led to the Feb. 12 arrest of the Italian company’s chief executive officer and which could further slow future deals.

A preliminary pact for nuclear reactors and services worth about 7 billion euros signed in 2010 between Areva SA and state- owned Nuclear Power Corp. of India Ltd. has also not been finalized amid differences over pricing and liability in the event of an atomic accident.

Missed Target

At a joint press conference, Singh said the negotiations on the sale of fighter jets are “progressing well.” He also said the leaders reviewed plans for Areva providing reactors for a nuclear power plant at the Jaitapur site south of Mumbai.

France was India’s 26th-largest trading partner last year, down from 13th in 2006, according to Indian government data. Commerce between the two nations amounted to $9 billion last year, well below a target set in 2008 during a visit by then French President Nicolas Sarkozy of 12 billion euros ($16 billion).

France’s imports and exports represented about 1.1 percent of India’s total trade, according to government data.

Business executives from companies including Dassault, Thales SA, Areva, Veolia Environnement SA, LVMH Moet Hennessy Louis Vuitton SA and Sanofi are scheduled to travel with Hollande. He will speak to business leaders in India’s financial capital, Mumbai, tomorrow.

To contact the reporters on this story: Andrew MacAskill in New Delhi at amacaskill@bloomberg.net; Bibhudatta Pradhan in New Delhi at bpradhan@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net


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