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As on : 20-Feb-2026

Economy - Reports
20-Feb-2026 10:41

India'France partnership will influence capital formation, offer boost for long-term productivity growth

The India–France partnership should not be seen from the realm of just diplomatic engagement but from the perspective of deeper structured economic and industrial collaboration. The contours of the pact which include the all-important Double Taxation Avoidance Agreement (DTAA) providing fiscal design for cross-border investment also include well timed economic effects of defence manufacturing, joint ventures (JVs), and industrial capability development on Indian economy, according to Rajeev Juneja, President, PHDCCI.

These elements will influence capital formation, sectoral output, employment generation, a much need boost for long-term productivity growth in India, he said. France is a key defence partner of India, particularly through procurement and technology collaboration involving Dassault Aviation (Rafale aircraft programme), Safran (engine and propulsion systems) and Naval Group (submarine construction), he added.

In macroeconomic terms, domestic defence manufacturing affects GDP through three key channels. Direct Effect – Manufacturing of aircraft components, engines, missiles, and naval platforms adds to gross value added (GVA) in manufacturing. Backward supply value chain linkages – Through domestic sourcing upstream industries such as metallurgy, electronics, precision machining, and logistics stand to gain. Productivity – Technology transfer improves total factor productivity in high-skill sectors.

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