Former French President Francois Hollande’s surprise outburst over the Rafale deal has added to the discomfort and uncertainty in the French business community about the future of the largest Indo-French deal in decades.
“What was he really thinking when he made those comments? It is one of the most important business deals that we have with India and the future of not only Dassault, but also hundreds of small and medium enterprises, is tied to this deal,” said the president of one of the largest manufacturing industry associations of France, several of whose members are already present in India and many more are preparing to start doing business with the country.
“It is very irresponsible of our former President to have made such comments that could jeopardise the entire deal,” added the businessman.
The response pretty much sums up the feelings of businesses in France towards the Rafale controversy. They are angry, dismayed or edgy, or a combination of all. Many are upset over Hollande’s comments as they believe they hurt French interests, especially business interests, in India. The French government had also expressed similar fears in its response to the utterings of the former President.
“I believe that this small observation made abroad concerning the important relations between France and India does not do anyone any service, and certainly renders no service to France,” French Secretary of State for Foreign Affairs Jean-Baptiste Lemoyne told a French radio station soon after Hollande’s comments, summing up the feeling here in Paris about the controversy.
Despite the turbulence, many businessmen say they remain convinced that it will be business as usual between the two countries, but just underneath this confidence lies the fear of uncertainty.
“All indications that we have currently are favouring a return of the Modi government to power after the elections next year. So, we should be alright,” said another business leader at a recent meeting with some Indian companies.
“But what happens if the opposition comes to power or if Modi fails to get an outright majority? Will we see a cancellation of the Rafale deal?” asked one of his colleagues. Perhaps, one of the weakest links lies in the supply chain that Dassault needs to set up in India as part of its offset obligations.
Last year, Dassault had asked dozens of companies, almost all of them SMEs, to prepare to set up operations in India. The response was very enthusiastic as most of these SMEs could not afford to venture into India on their own, and riding piggyback on the Rafale project was one of the easiest ways for them to get a foothold in the Indian market. However, of late, some of this enthusiasm seems to be ebbing, at least amongst the smaller vendors of Dassault.
“I am keen to explore the Indian market and I had thought if I accompanied Dassault to India on their Rafale project, it would be the best way for us to go to India. But now we realise that Dassault is asking us to invest a lot of money in India, running into millions of euros for each of us.
“It may be peanuts for them, but for us it is a very heavy charge and the risk of doing business in India remains elevated as usual, so I am now thinking of going slow on this, if not abandoning it altogether,” said the CEO of one of the SMEs involved in supplying key electronic parts to Dassault.
The CEO went on to add that he is aware of at least another vendor who has decided to put on hold the Indian plan, at least for the moment. “If the Rafale story becomes a crisis, I can see many more of my colleagues joining me in staying out of India, at least for now,” he said.