The Hindu : Business : Legacy issues hamper FDI: U.S. envoy

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Friday, Sep 02, 2005

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Legacy issues hamper FDI: U.S. envoy

Special Correspondent

Reform process needs to continue

CHENNAI: "Legacy problems'' hamper foreign direct investment in India, said United States Ambassador to India David C. Mulford here on Thursday.

These problems — that relate to bad experiences of U.S. multinationals in India in the past — "undermine the image of India as a happy and receptive home'' for FDI, he told the Confederation of Indian Industry here.

There was a long list of issues that needed to be resolved and a long list of disputes. Citing one instance, he said U.S. companies that had invested in the electricity sector in Tamil Nadu were facing problems.

"Addressing these things and resolving them is central to improving the image and attracting much more foreign capital,'' he said.

The reform process had to continue if India wanted to improve its growth rate, raise the standard of living of the people and reduce poverty, he said. "Restriction on retail investment for example. The practice of law by foreigners. Restrictions in the financial sector... these are issues we need to discuss,'' he said.

On the financial sector, he said the Indian banking sector was a captive provider of resources for the Government. It was not a fully competitive sector. "You have one of the highest savings rates in the world. But you have one of the poorest mobilisation systems to employ them productively in the economy,'' he said and added that the system had to move "further and faster" to help achieve the desired growth rates.

The U.S. wanted to help India surmount its greatest constraints, he said and added that one of India's greatest constraints was in the energy field. "One of the only realistic solutions to that energy is civilian nuclear power. So it follows that the [U.S.] President wishes to see that [the] relationship [is] regularised between the two countries even though that is an incredibly difficult thing to do within the pre-arranged, pre-agreed non-proliferation structure that exists in the world of international nuclear architecture," he said.

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