India’s Krishna seeks to reassure US businesses on economic reforms

By Doug Palmer, Reuters

WASHINGTON — India’s external affairs minister, S.M. Krishna, on Tuesday sought to reassure frustrated U.S. business leaders that India is committed to economic reforms after recent government decisions that have left them questioning future investments.

“In an era of global interdependence, not everything is within the powers of national governments. But we are confident we will restore investor confidence and regain momentum and growth,” Krishna said in a speech ahead of a meeting on Wednesday with U.S. Secretary of State Hillary Clinton. Regulatory uncertainty and policy gridlock have battered foreign corporate sentiment toward India, adding to a dramatic slowdown in the Asian democracy’s economic growth and exacerbating a widening current account deficit that has knocked the rupee to record lows. India’s industrial output growth flatlined in April, piling pressure on policymakers to take action to revive the economic fortunes of a country that Standard & Poor’s warned could be downgraded to junk status because of political inaction.

Speaking just before Krishna, White House international affairs adviser Michael Froman said U.S. companies have grown increasingly “concerned about the economic relationship, fearing that the investment environment has deteriorated, that domestic political challenges are slowly the pace of reforms.” He urged the government of Indian Prime Minister Manmohan Singh to recommit to economic reforms and market opening “as the best way to assure our bilateral relationship continues to deepen and broaden and the best way to ensure that India’s place as an emerging power remains secure.” In recent months, global business groups have raised concerns that new Indian policies on technology purchases would unfairly discriminate against foreign firms. Proposed changes in Indian tax provisions have also sparked criticism and warnings that investment plans by overseas companies could be reconsidered. New Delhi has also backtracked on plans to open its market to big multi-brand retailers like Wal-Mart.