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This is an archive article published on May 30, 2006

US wants FDI restrictions to fade

Deputy US trade representative Karan Bhatia today gave a clear signal that India should have a serious rethink about its restrictions on foreign direct investment.

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Deputy US trade representative Karan Bhatia today gave a clear signal that India should have a serious rethink about its restrictions on foreign direct investment. Speaking after the fourth meeting of the Indo-US Trade Policy Forum since its launch in November, Bhatia said, ‘‘Certainly, the investment issue has come up as it’s just another side of the coin of trade. Both trade and investment is necessary for building a strong economic relationship between US and India’’.

Refusing to elaborate on any specific sectors where the US would want higher limits, Bhatia, however, said, ‘‘It would be my hope that FDI restrictions would be removed. And I am not saying it from the US industry’s point of view alone, but in India’s own consumers’ interests’’.

Indicating that financial services in particular was a problem area, Bhatia said, ‘‘The world’s financial services capitals — London, Hong Kong, New York — have no restrictions. If India seriously hopes to become one of them, it’s hard to achieve with restrictions in investments’’.

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Bhatia, who met Union Commerce and Industry Minister Kamal Nath yesterday, was heading a 25-member strong US official delegation for the Trade forum meet. US president George Bush and Prime Minister Manmohan Singh in their recent meetings, have both expressed dissatisfaction at the current level of bilateral trade $30 billion and have committed to strive towards doubling trade in three years.

The goal of the meeting today, chaired by Bhatia and commerce secretary S.N. Menon, was to develop an action plan for moving to a higher level of bilateral economic engagement during Nath’s coming trip to the US. Nath will be co-chairing a forum meeting that begins on June 22 in Washington DC with the soon-to-be-named US Trade Representative Susan Schwab. ‘‘Minister Nath’s visit will be looked at very closely by US industry as well as the US Congress,’’ Bhatia remarked. Despite his reservations about India’s FDI restrictions, Bhatia did commend the FDI numbers between the two countries, especially the growth of Indian investment into US.

‘‘Substantial growth in these numbers would be needed for a stronger economic relationship, but there are some good signs. While US FDI into India increased by 28.4 per cent to $6.2 billion in 2004, Indian FDI into US increased by 82.5 per cent to 522 million dollars,’’ Bhatia said.

When asked if the US was worried it could face a trade deficit with India in the future, like it has with China today, Bhatia refused there was any worry on that front. ‘‘We believe in opening markets, in US as well as India. Let the trade flow where it will’’.

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