NEW DELHI: Hasty decisions taken to accelerate the process of economic reforms could have negative consequences, Defence Minister Pranab Mukherjee said here on Wednesday.

"There could be minor hitches in the process of reforms, but as you know only too well, democracy is about checks and balances. Decisions can be taken only after debate and due consideration," he said at an Indo-U.S. business meeting here.

His remarks came just after U.S. Ambassador David Mulford said there were signs of a "pause" in the economic reforms process.

"Privatisations have stopped, and political reality suggests that reform of other key sectors and policies of central interest to investors will take longer than envisioned."

According to Mr. Mulford, it was "important to bear in mind" that there were "economic costs" to any loss of momentum on the reform front.

"The Prime Minister has expressed his hopes of even higher than eight per cent growth per annum for India. But he has also indicated that higher growth requires continued reforms."

Defence cooperation

The envoy said American firms had "many unresolved legacy" issues involving prior investments in India.

"We know that there is a substantial body of capital wanting to be invested in India if the right conditions materialise. One needs only think of the positive impact on the future rate of economic growth from large-scale retail and financial liberalisation to appreciate India's potential."

Mr. Mukherjee referred to the possibilities of defence cooperation with the U.S. He pointed out that India had streamlined its defence procurement process.

New offset policy

The Government, which had come out with a new offset policy, was also looking at a "roadmap" for indirect offsets in defence purchases.

A Defence Offset Facilitation Agency had been set up for implementing the new policy.

According to the new offset policy, 30 per cent of the value of foreign defence contracts over Rs. 300 crore would need to be offset by purchases, investments and transfer of technology to India — running concurrently with the original contract.

"It is true that implementation of new policies brings up many problems and the defence sector had problems that are unique to it, given its size and structure. You have my assurance that timely corrective measures will be taken to smoothen the rollout of the new policy framework," Mr. Mukherjee told Indian and American businesspersons.

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