In post-Brexit era, Indian industry should shift investments from UK to France to access European markets:… – Moneycontrol

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 trade promotion body. This also applies for the European headquarters of Indian companies currently based out of Britain.

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 India, they are also not looking to move out at the moment due to the Chinese economy (remaining strong)," Lenain said.

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 most destination for investments into Research and development, in Europe.

The country is also home to 28,000 foreign companies who contribute to 21 percent of 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.

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.

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