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US Concerned Over Stagnant US-India Economic Relations - 2002-01-28

U.S. Ambassador to India Robert Blackwill says economic ties between the United States and India are stagnant and a cause for concern.

Ambassador Blackwill says the India-U.S. relationship is being transformed every day, but economic ties between the two countries are stagnant and in some areas getting worse.

Saying he is worried about a fall in U.S. investment, high tariffs, redtape, and a lack of transparency in business dealings, Mr. Blackwill says poor economic relations could hurt growing ties between India and the United States.

During the past month, senior officials from both countries have visited each other's capitals and a broad consensus has developed between U.S. and Indian officials on fighting terrorism, sharing intelligence, and even the sale of sensitive military technology to New Delhi.

But Ambassador Blackwill says while U.S.-India diplomatic ties are being transformed, U.S. foreign direct investment in India has been cut in half from $737 million in 1997 to $336 million in the year 2000. He says U.S. exports to India have been stuck at about $3 billion a year for nearly a decade. He blames high tariffs that he says hurt both U.S. businesses and Indian consumers.

"Why should policymakers here second guess the price and quality-conscious Indian purchaser who will assuredly decide if imported dry-cell batteries are up to standard," he asked. "Does the Indian consumer need help from the government to know whether the batteries he or she wishes to buy are up to standard. If they are not, of course they will not be purchased."

Mr. Blackwill says a dispute between the controversy-plagued Enron Corporation and the state government of Maharasthra is also a lingering impediment to better economic ties. The state government has refused to pay what it says are unfairly high bills for power generated by the Dabhol power plant, which was built and owned by the Enron Corporation, despite signing a contract to do so.

The Dabhol plant has been shut down as a result. Ambassador Blackwill says if the $3 billion power project dispute is not settled, big foreign investors will stay clear of India.

"The Dabhol dispute feeds a chronic perception among the overseas investing community that India may not be ready yet for big-time international investment," he said. "I hear a frequent buzz from the United States that the sanctity of contracts here may now be in doubt. That is a concern that can spell death to potential investments. I hear this often from the giants of American business."

Ambassador Blackwill says the news is not all bad. He says U.S. companies like Citibank, the Ford Motor Company, General Electric, Owens Corning, and Colgate Palmolive have all committed to long-term investments in India.

He says such companies have all paid attention to the details, closely following government regulations, developing Indian-specific marketing strategies, and keeping their expectations about profits realistic. He says India has a window of opportunity to encourage similar big investments, but companies will not wait forever for the investment climate to improve.