Date:04/10/2002 URL: http://www.thehindu.com/2002/10/04/stories/2002100403801200.htm

National

Industry welcomes PM's stand on disinvestment

By Our Special Correspondent

NEW DELHI OCT. 3. Industry and trade bodies have welcomed the assertion of the Prime Minister, Atal Behari Vajpayee, on irreversibility of reforms and continuance of the process of disinvestment.

Hailing it as a clear message to potential investors, these bodies asked the Government to address the issues impeding the smooth flow of foreign investment in India.

The Associated Chambers of Commerce and Industry of India (ASSOCHAM) had identified seven basic hurdles that constrained the flow of investment and asked the Government to zero in on them without any delay.

Citing negative demonstration effect as a major hurdle, ASSOCHAM said that investment in India was governed and influenced by what was happening in other emerging markets in Asia and Latin America. China, on the other hand, was somewhat insulated from these external influences.

The precarious health of public finances, particularly at the State level, also hampered foreign investment as in some sectors, including infrastructure, the State Governments were the only consumers of the products offered by foreign companies.

There was a growing feeling amongst foreign investors that over-capacity and lack of demand was responsible for the non-implementation of investment projects, ASSOCHAM said adding that the Government needed to erase the perception that its policies relating to investment lacked transparency and continuity.

Slow speed of project implementation in the infrastructure sector, regulatory bottlenecks and cumbersome clearance mechanism and lack of transparency and operational efficiency of the financial sectors were other issues that needed to be tackled.

It also observed that there were significant disadvantages for investors in terms of power costs, interest rates, customs delay and regulatory encumbrances which far outweighed the marginal advantages that the economy enjoyed or offered in terms of value added per unit of labour cost in comparison to other emerging economies.