Mr. Bharat Dhawan, Managing Partner, Forvis Mazars, India
Decoding Trade Policies: How India and France Can Navigate New Regulations
In an increasingly intricate global trade landscape, businesses must navigate through evolving regulations, trade agreements, and geopolitical factors that have become essential checkpoints. It is crucial for companies operating across borders to comprehend the potential implications of these factors and capitalize on emerging opportunities.
In today's globalized world, international trade is a fundamental driver of economic growth and bilateral relationships. The trade ties between India and France are critical, given their shared interests in technology, manufacturing, services, and more. However, the landscape of global trade is constantly evolving, and both countries face the challenge of adjusting to shifting trade policies. Understanding and adapting to these changes is essential for businesses looking to maintain competitive advantage and long-term success.
What is happening on the ground?
Trade relations between India and France have recently received a significant boost. In 2023, the two countries adopted a roadmap titled “Horizon 2047: Charting the future of India-France Strategic Partnership,” setting the course for the next 25 years.
Later, during her visit to India in late 2024, French foreign trade minister, Honourable Ms Sophie Primas emphasized the potential of sectors such as clean energy, emerging technologies, and aviation to enhance economic and trade ties between the two countries. Other key sectors, including renewable energy, automotive manufacturing, and infrastructure, have offered both countries a fertile ground for collaboration. That said, both countries have been long-time partners in the area defence and aeronautics.
Both nations are now considering increasing investment flows across borders in these areas. It is worth mentioning that France is India’s third-largest trading partner in the European Union (EU), after the Netherlands and Germany. Bilateral trade between India and France has been growing strongly, rising 34% to $15.11 billion in 2023-24 from $11.26 billion in 2019-2020. The country is also one of the largest investors in India with a cumulative FDI stock of $11.24 billion from April 2000 to June 2024. There are over 70 Indian companies supporting thousands of jobs in the French economy. At the same time, there are over 750 French companies invested in India, employing over 450,000 people.[1]
As the trade relations between the two countries continue to grow stronger, both countries are navigating issues like market access, regulatory alignment, and intellectual property rights. For India, balancing liberalization with domestic policy objectives is a delicate task, while France, as an EU member, has to ensure that any trade agreement complies with broader EU standards, including environmental regulations and trade rules.
Emerging regulatory trends
One of the most pressing shifts is the growing focus on climate change and sustainability-related policies. The stringent environmental regulations applicable to EU member states that aim at reducing carbon emissions will continue to impact businesses that want to trade elsewhere in the world. Conversely, as India moves towards more sustainable practices, French businesses engaged in sectors like renewable energy and clean tech will find opportunities to collaborate.
Technology innovation is another focus area. According to the Ministry of External Affairs, Government of India, the two countries are the “central Start-up and innovation ecosystems in their respective regions.” “Recognising the central role of technology in addressing the challenges of the 21st century, India and France agree to further deepen their cooperation to promote research partnerships and technologies, which are essential to ensure our countries’ self-reliance,” said a July 2023 press note from the Ministry.[2]
In this light, the two countries have already been working on creating an Indo-French Road Map on cyber security and digital technology. Both countries have committed to further deepening their cooperation in areas like digital public infrastructure, cybersecurity, Start-up, AI, supercomputing, 5G/6G telecom and digital skills development. The push for data localization and privacy laws means that French companies dealing with Indian data must stay up to date on regulatory changes in both regions.
As both countries focus on fostering innovation and protecting their Intellectual Properties (IP), businesses must stay informed about changes in IP laws and how they can safeguard their products and services across borders.
The developing partnership comes at a time when India under the leadership of Honourable Prime Minister Mr Narendra Modi is going to co-chair the Artificial Intelligence (AI) Action Summit being organized in France in February. The Summit is seen as a transformative milestone for both nations.
But there are challenges!
The regulatory shifts in global trade bring with them several challenges for businesses. Complying with local laws governing the sectors of partnership and engagement will remain one of the most significant concerns. With regulations growing more intricate, businesses will need to invest in legal expertise and compliance systems to stay ahead of the curve. This is especially true for firms seeking to penetrate Indian markets and those dealing with the country’s increasingly complex regulatory environment or navigating bureaucratic hurdles.
Let us continue exploring the opportunities
While challenges abound, the newly emerged partnership and the evolving regulatory landscape present numerous opportunities for businesses in both countries. The most prominent opportunity is access to larger markets. Joint initiatives like the Horizon 2047 are expected to help businesses on both sides to grant access to each other’s markets, reduce trade barriers and improve business prospects.
Given that both nations are at the forefront of various industries, collaborations between Indian companies and French enterprises can pave the way for ground-breaking advancements and establish avenues for cooperation in domains like digital technology, cybersecurity, artificial intelligence, renewable energy, electric vehicles, health tech, urban transportation, sustainable farming and infrastructure development.
Word is that the two countries are going to sign a few important deals during the upcoming AI Summit, including procurement of 26 Rafale-M fighter jets and three additional Scorpene-class submarines for the Indian Navy. The combined value of these deals may exceed $10 billion.[3]
Businesses need to be strategic
To navigate these regulatory shifts effectively, businesses must adopt proactive strategies. One key step can be to foster public-private partnerships. Engaging with government agencies and trade bodies can help businesses stay informed about policy changes and ensure they have a voice in formulating future regulations.
Another crucial step is improving their collaboration with regulatory bodies. By working closely with trade associations and industry groups, businesses can better understand regulatory requirements and ensure compliance with new standards.
Leveraging technology is also essential. Businesses may invest in compliance management systems and digital tools to track changing regulations and ensure adherence to local and international standards.
Finally, businesses must build robust risk mitigation frameworks. Developing comprehensive risk management strategies, including contingency planning and compliance monitoring, will help mitigate the impact of regulatory disruptions and ensure long-term success.
Interestingly, India is gradually moving to develop its own data privacy law, similar to what we have in the Europe (read General Data Protection Regulation - GDPR). India has already put out the DPDP (Digital Personal Data Protection) Rules 2023 for public consultation.
By staying informed, building strategic partnerships, and leveraging technology, businesses in both countries can unlock new growth potential and ensure a prosperous future in global trade.