'Enron dispute will hit foreign investment in India'

WASHINGTON, JUNE 21. The United States today warned that the Enron debacle would dampen flow of foreign investments into India and asked New Delhi to find a prompt solution to the issue.

``While it is not my intention to make specific suggestions for resolving the dispute, I do want to underscore that it will be hard for foreign investors to look seriously at India until this dispute is resolved in a satisfactory way,'' the U.S. Undersecretary of State for Economic, Business and Agricultural Affairs, Mr. Alan Larson, said at the U.S.-India business council meet on Wednesday.

``The investment dispute between the Dabhol Power Company and Maharashtra is now casting a cloud over India's investment climate,'' he said.

Mr. Larson said it was important for India to move on to higher annual growth rate of eight to 10 per cent and felt that the coming World Trade Organisation ministerial meeting at Doha, Qatar, in November, provided an opportunity to push up India's exports by taking measures to reduce trade barriers.

He urged both countries to work together to build ``innovative economies'' where knowledge and technology were constantly expanded to generate higher productivity.

Mr. Larson emphasised that both India and the U.S. needed high and sustained rates of economic growth in order to reach their national goals.

New Delhi, he said, needed growth rates of 8 to 10 per cent annually in order to lift hundreds of millions of its citizens out of poverty and Washington needed rates of economic growth of around four per cent annually ``in order to educate our children and provide health care and income security for an ageing population''.

Summarising two days of intensive discussions and debates, the council said, ``the dispute over the Dabhol power project erodes the credibility of the Indian Government, may soften India's credit rating, and deters all other kinds of investment.

``This issue needs to be resolved, and it needs to be resolved quickly,'' Mr. Frank Wisner, chairman of the Council and former Ambassador to India, said.

In the review of overall economic conditions, the 400 business and Government leaders attending the Council's annual meeting, also expressed serious concern about several aspects of India's business climate.

The inadequacy of infrastructure and the fiscal deficit was singled out by many companies as the critical impediment to investment in India.

The council also pointed out that restrictions on foreign ownership in some business activities especially equity caps on foreign participation in insurance had no economic or commercial rationale and impeded competition and growth in the industry.

The council, however, welcomed the Bush administration's efforts to reach out to India, to recognise it as a major power, and to involve it more closely in the rethinking of a range of vital issues in the fields of international security and nuclear non- proliferation. Business and government leaders from both sides also noted several positive signals on sanctions.

- PTI

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