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Faced with the threat of a US slowdown impacting Indian BPO and KPO industries, India should seek opening up of European markets for its services and take up the issue with French President, Nicolas Sarkozy during his visit to India, the ASSOCHAM has recommended. In a paper on Indias Stance on French President Visit, the industry chamber has also suggested that in its dialogue with French delegation, headed by Sarkozy, India should attempt to increase the investment flow from French companies and bilateral trade, which is currently at low level of USD4 billion and negotiate over the visa issues.
In view of the expected slowdown in the US economy and rupee appreciation hurting the IT and ITes exports, ASSOCHAM President, Venugopal N. Dhoot has recommended that the government should encourage teaching of European languages particularly French and German in the country as there is a huge scope of outsourcing opportunities for the Indian IT firms.
India has been able to take advantage of its huge English speaking population in building a strong IT industry. But the fiscal 200708 has witnessed erosion in the bottom lines of these companies largely due to appreciation of Rupee against Dollar and the subprime crisis in the US and UK economy.
In order to diversify the risk arising from increasing global integration, the country needs to expand its presence in European countries like France and Germany. But at present, there is huge shortage due to the lack of educational facilities and awareness about the French and German languages.
The ASSOCHAM has also urged the government to increase the number of foreign language departments in existing central and state universities, improve faculty and encourage students to take up French and German courses. At present, there are about six universities in India providing courses in French language, while for the courses in Chinese and Japanese languages are available in 11 and 8 institutes, respectively.
The size of Indian exports of software and IT enabled services is more than USD31 billion, accounting for 12 per cent of world’s total offshore market. The largest proportion of these exports is directed towards US. As the US economy is facing slump in the credit market, high energy costs, falling housing demand, increasing unemployment, the chances of recession in US are high.
This would compel the companies to cut down their IT expenditure budgets which could hit the Indian IT market. Hence, the sector is in a compelling need to expand in the European markets like France and Germany. Since majority of the businesses in these countries are carried out in their native languages, it is necessary to take measures in order to impart French and German language skills to larger section of Indian population.
In view of the ageing population of France and the problems faced by Indian companies in France due to strict visa requirements, it is necessary for its government to introduce flexibility in the existing visa norms in order to facilitate movement of professionals across the countries, said Dhoot. The cumulative foreign direct investment till September 2007 from France stands at eighth rank at USD660mn accounting for only 1.68 percent in total FDI. The total outward investment of France in the year 2006 was USD115bn, out of which India’s share was mere USD18mn.
In the Financial Year 2006 07, India exported goods worth USD2.11bn, which were 8.19 percent of exports to European Union and 1.67 percent of total exports. There was a decline of 1.65 percent in India’s exports to France even as the exports to EU had surged by 23.7 percent.
Decline in Indias exports in FY07 has been major on account of fall in their key products of exports like readymade garments 2.46 percent, textiles 8.47 percent, engineering goods 18.5 percent, transport equipments 47 percent and machinery and instruments 9 percent.
India imports amounted to USD4.16bn from France, constituting 2.18 percent of its total imports. The main items of imports are transport equipment USD2.39bn, nonelectrical machinery USD398mn, electronic goods USD292mn, chemical and related products USD240mn, iron and steel USD123mn. The imports remained almost same after witnessing 117 percent growth in FY06.
The buyout activity between the two economies has also been laggard considering the zeal in the crossborder acquisitions during the year. Around 6 deals took place between India and France in the first three quarters of fiscal 08, out of which 4 deals were the acquisitions by French companies in India worth USD187.5mn. The acquisitions by Indian companies in France amounted to a paltry sum of USD97.5mn, considering the total crossborder deals by Indian companies in Europe during this period were worth USD3.6bn.
The size of French economy is USD2.5trillion, recorded the growth of 1.8 percent in the fiscal 2007. The total size of their trade is USD1.1trillion. Services account for 83 percent of the total size of their GDP.
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