France President Woos India Against the United States

Article first published as French President Woos India Against the United States on Blogcritics.

France President Nikolas Sarkozy is now on India tour along with his wife Carla Bruni for fourSarkozy days from November 4 to November 7. The US president Barack Obama began his India visit with India’s business hub Mumbai. Sarkozy chose India’s technology hub to start his India tour. He brought 50 member business community and top cabinet officials including Economy minister Christine Lagarde along with him. Sarkozy seems to have come on a top mission along with signing some business contracts.

Strategic and Business Goals

During his speeches on November 4 and his interview to Times of India newspaper, Sarkozy outlined his top political and trade related priorities on global arena of his India tour. Very important offers extended to and requirements sought from India are as follows:

  • Supporting France’s G20 agenda to reform global monetary system during its G20 presidency in 2011
  • Improvements in global governance
  • Help maintain greater stability in commodity prices

In return, to the help in achieving the above-mentioned France’s goals, Sarkozy offered following package.

  • Helping Rupee to become one of the major currencies in the world
  • Support India’s long standing demand of securing permanent seat in UN Security Council

Some business contracts will be concluded during Sarkozy’s visit. Major one is a memorandum of understanding signed between a French nuclear group Areva and India’s Nuclear Power Corporation of India Limited (NPCIL) to supply at least two water-pressurised reactors worth 7 billion euros ($9.4 billion or Rs 43,240 Cr). France is competing with the US company Boeing to supply 126 fighter jets. France’s defence electronics group Thales is hoping to gain a contract to modernise 51 mirage 2000 planes.

Strategic Goals

Since the financial crisis in 2008, the US leadership on global political, strategic and economic arenas is increasingly facing challenges from other global financial and military centres. The EU under the leadership of Germany and France, emerging market economies (EMEs) under the leadership of China and Brazil with growing GDP growth and trade & current account balance surpluses, and somewhat Japan.

Some of the recent developments indicate decreasing influence of the US. During G20 ministerial meeting in South Korea, the US treasury secretary Geithner proposed to limit trade surpluses of the countries to 4% of their respective GDPs. This proposal attracted a fierce criticism from almost all quarters of the G20 members. Member countries were quick to grasp that the proposal was aimed at checking China’s growing trade surplus. Germany criticized it as state control way of thinking. China and Japan also rejected the proposal. As a result, Geithner had to withdraw the proposal in APEC meetings held one month after the G20 ministerial conference.

The US announced second Quantitative Easing (QE2) of $600 billion, which will be implemented over next 8 months through buying treasury bonds. This measure also attracted criticism from major powers of the world. China criticised the measure as “lacking any meaningful goal,” while Brazil criticised saying, “there will be no use with throwing dollars from the helicopter except gaining competitive advantage for the US exports by reducing the dollar value.

Germany equated the measure with China’s supposed pegging of Yuan value to dollar deliberately to win advantage for its exports. Even Japan also rejected the measure saying, because of the US keeping its interest rate at extraordinarily low level at 0.25%, Japan was suffering with deflation for tens of months. Unemployment rate in the US increased again to 9.8% in November. Its GDP growth rate slowed down in the second half of FY2010. All these developments indicate that the US influence in global economy is increasingly coming under scrutiny.

Of course, one cannot hastily conclude that the US leadership has ended. It has still recorded some successes to prove its upper hand. For example, It could force the EU to lose two seats in IMF as part of IMF reforms. It is still carrying out war in Afghanistan to gain strategic control in South Asia and the Middle East and to check China’s rise.

One of the important factors helping the US is along with the decline of the US as an economic power, no country or group of countries is in a position to replace the US supremacy. The European debt crisis is a big test as well as an impediment for the EU to prove its supremacy. Japan is reeling under deflationary economy with a little GDP growth rate. China is still a third world country with millions of people suffering with unemployment and poverty. Moreover, EMEs have not yet organised under a single umbrella to exert their combined influence. One of the major EME countries, India is believed to be the strong ally to the US.

Sarkozy’s offers to India have to be seen in this global background. Sarkozy’s attempts to woo India can be seen as attempts to encourage India to stand against the US interests to gain its desired place as a global player in the US and IMF. However, it is still a doubt whether India has that much gut to stand against the US, amid the US’ increasing presence in the South Asia region. Its ambitions are majorly limited to the regional supremacy in South Asia rather than global supremacy in actual terms.



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