Mr. Avimukt Dar, Founding & Senior Partner, CMS INDUSLAW, Mr. Lokesh Shah, Partner, CMS INDUSLAW & Ms. Agnès de l’Estoile Campi, Co-head CMS Tax Practice Group, CMS Francis Lefebvre Avocats
MAKE IN INDIA MEETS FRENCH INNOVATION: VISION TO REALITY
India and France have a strong history of strategic partnership. The basis of this relationship surrounds around shared democratic values, respect for international law, strong economic, cultural, academic, and people-to-people ties. France and India collaboration spreads across sectors like defence, technology and infrastructure.
In 2023, both India and France have adopted a roadmap ‘Horizon 2047’, setting the course for the next 25 years, which includes building defence capabilities and deepening cooperation in the space sector.1
Amidst this, India seeks to boost entrepreneurship through the ‘Make in India’ initiative which focuses on four pillars, namely, (1) new processes – with de-regulation and ease of doing business; (2) new infrastructure – with boost to innovation and research activities; (3) new sectors – foreign direct investment opened up in sectors like defence production and (4) new mindset – government as a partner in the industry.2
The vision of creating a hub for French innovation in India is gradually seeing the dawn of the day with initiatives like Dassault Falcon 2000 manufacturing in India and Airbus engaging with TATA group in the first aircraft manufacturing contract for the private sector in India. France has been a key partner in India's nuclear energy program, with EDF and Areva (now Framatome) involved in nuclear power projects. The renewable energy sector has also attracted French investment, with companies like EDF Renewables and Engie establishing operations in India's solar and wind energy markets. It is notable that as of February 2025, French investment in India has risen to USD 20 billion with prime focus on defence and aerospace.3
Tax is a critical aspect of Make in India that should be taken into consideration by French companies while establishing their plans in India. Interesting to mention the Production Linked Incentive (PLI) Scheme which purpose is to bolster investment in defence, automobiles and consumer goods. Tax incentives continue to play a significant role to boost investments in India. The corporate tax rate for foreign companies has been reduced from 40% to 35%4. Additionally, in case a non-resident sets up a subsidiary in India, in the form of a private limited company, the corporate tax rate is 22%.
French companies must also pay attention to the tax consequences of rendering services or transferring know how to their Indian partner. Fortunately, the India- France tax treaty is quite efficient although some divergent interpretations have arisen in the past years on the interpretation of the Most Favored Nation Clause, in particular regarding technical services. To solve these divergences, India and France have very recently reached to a technical agreement which hopefully will give more tax certainty and avoid risks of double taxation.
India-France partnership continues to offer significant opportunities in emerging sectors such as renewable energy, digital transformation, healthcare, and sustainable transportation. France's expertise and innovation in luxury goods, aerospace, and nuclear technology complements India's strengths in IT services, pharmaceuticals, and manufacturing workforce.
1 <https://www.mea.gov.in/bilateral- documents.htm?dtl/36806/Horizon_2047_25th_Anniversary_of_the_IndiaFrance_Strategic_Partnership_Towards_A_Century_ of_IndiaFrance_Relations>
2 <https://www.pmindia.gov.in/en/major_initiatives/make-in-india/>
3 <https://economictimes.indiatimes.com/news/economy/foreign-trade/trade-between-india-france-has-increased-slightly- to-20-billion-primarily-focused-on-defence-and-aerospace-coumar-ananda/articleshow/118102029.cms?from=mdr>