PR No – 82
18th February 2026
New Delhi
India–France Pact: From import dependence towards controlled integration with global supply chains: PHDCCI
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 says Mr. 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.
Defence Collaboration as a force Multiplier
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.
Joint Ventures and Industrial Deepening
Joint ventures between French defence majors and Indian firms will add to India’s productive capacity through component manufacturing, engine assembly and maintenance, Avionics and missile subsystems, and Naval systems integration. The JVs will involve high-value design and systems integration, and the domestic value addition, he added.
GDP Implications
India’s defence manufacturing sector has expanded under localization policies and increased capital spending. According to official releases from the Ministry of Defence, the value of defence production crossed ₹1.2–1.3 lakh crore in recent years (FY 2022–23 onward). The impact on GDP becomes apparent through effects of Final Demand (Procurement Expenditure), Industrial Investment in plant, machinery, and R&D which not only adds to gross fixed capital formation but export potential, he added.
The much need employment focus
Defence manufacturing tends to be capital-intensive and skill-intensive, therefore, employment gains will be significant in high-skill categories. Over time, and this holds key for any developing country, skill upgrading will enhances wage levels and productivity.
The India–France relationship demonstrates how strategic alignments through targeted agreements will interact to shape industrial outcomes in both the nations in the long run said Dr. Ranjeet Mehta, CEO & Secretary General, PHDCCI.
The ultimate economic dividend will now depend on policy execution particularly domestic depth, supplier ecosystem development, and sustained innovation, he added.
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Warm Regards,
Media Division
PHD Chamber of Commerce and Industry