The Delhi–Paris axis: building a strategic partnership in the defence sector

The Franco-Indian defence relationship is a key strategic pillar between Europe and India. Since 1998, cooperation has expanded across aerospace, naval, land, space and digital systems. This culminated in the elevation to a Special and Comprehensive Strategic Partnership in February 2026. The Strategic Defence Cooperation Pact was also renewed for ten years at the sixth India-France Annual Defence Dialogue in Bengaluru.

The same period saw stronger technological cooperation. Key developments include a DGA-DRDO agreement, the joint inauguration of the H125 final assembly line by Airbus and Tata Advanced Systems, Safran’s partnership with Hindustan Aeronautics on the Indian Multi-Role Helicopter, new MRO facilities for the LEAP and M88 engines, a joint working group on advanced technologies, the CNES-ISRO partnership and renewed cooperation on critical minerals and rare earths.

India has been the world’s largest arms importer since 2014, according to SIPRI. This reflects regional tensions and accelerated modernisation. French industry has secured major contracts, including the 2025 intergovernmental agreement for 26 Rafale Marine aircraft and the 2026 Acceptance of Necessity for 114 additional fighter aircraft. Other examples include SCALP missile orders and industrial cooperation between India Optel Limited and Safran.

In March 2026, the President of the French Republic encouraged defence industry participants to take greater financial and industrial risks. The EU-India Free Trade Agreement reached political conclusion in January 2026 will support broader industrial trade, although defence remains a national competence.

Access to the Indian defence market requires compliance with a dual regulatory framework. This combines French export controls and Indian investment, licensing and offset rules. The “Make in India” policy provides the policy framework for strengthening domestic capability and technology transfer.

French export control regime

Exports of defence materials from France require prior approval from the Commission interministérielle pour l’étude des exportations de matériels de guerre (CIEEMG) under the Code de la défense. Authorisation depends on the equipment, the end user and the geopolitical context.

The licence scope defines the operational parameters of joint ventures and often determines transaction timelines. French platforms used in Franco-Indian cooperation are generally outside the US ITAR regime. This means technology transfers are not subject to US re-export restrictions and access to third markets remains free from foreign government veto.

Indian regulatory regime

Foreign investment in India is governed by the Foreign Exchange Management Act 1999 and the Non-Debt Instruments Rules 2019. Investment is permitted under either the Automatic Route or the Government Route, depending on the sector.

In defence, foreign investment is allowed up to 100%. The Automatic Route applies up to 74% and the Government Route beyond that threshold. For some entities, a lower automatic threshold of 49% applies for additional investment. Higher levels require approval and must demonstrate access to advanced technology.

Changes in shareholding must be notified to the Ministry of Defence. Investment also requires security clearance from the Ministry of Home Affairs and compliance with national security requirements, including local capability in design, development and lifecycle support.

Manufacturing requires an industrial licence issued by DPIIT under relevant legislation. In addition, the Defence Acquisition Procedure 2020 imposes offset obligations for certain contracts, typically 30% for major acquisitions under the Buy (Global) category. Offset discharge may include local sourcing, investment, co-production or technology transfer.

Coordination between French and Indian approvals is critical. Misalignment can delay projects, while intergovernmental agreements can accelerate processes.

Memorandum of Understanding and technology transfer

The Memorandum of Understanding (MoU) is a key document agreed before the shareholders’ agreement. It defines the regulatory perimeter and allocates responsibilities.

The MoU identifies the technologies to be transferred, distinguishes existing and co-developed IP and defines the territorial scope of licences. It also sets out exit and reversion mechanisms.

Local content rules mean that technology transfer becomes essential for market access. Licensing structures typically include restrictions on sub-licensing, audit rights, reversion of improvements and safeguards on personnel mobility.

Shareholding structure

Defence joint ventures often combine majority Indian ownership with minority foreign participation. The foreign partner contributes technology, programme expertise and access to export markets.

Examples include Dassault Reliance Aerospace, Safran’s joint ventures, Airbus-Tata cooperation and Tata’s partnerships with Lockheed Martin and Boeing.

Shareholders’ agreements must balance regulatory compliance with investor protection. Governance typically includes reserved matters linked to regulatory obligations, such as technology scope, end-user approvals and changes of control. These are supported by veto rights, board structures and specific protections for technology-related decisions.

Intellectual property is usually retained at parent level, with a limited licence granted to the Indian entity. On termination, rights revert to the parent company. Exit mechanisms must also reflect regulatory approval requirements in both jurisdictions.