O'Neill tells India it must loosen up

US Treasury Secretary Paul O'Neill said yesterday India needs to remove trade barriers and encourage respect for property rights to attract foreign investment.

Addressing of the Confederation of Indian Industry here, O'Neill said the biggest impediments to India's growth are poor governance and lack of economic freedom.

"In India, average import tariffs are over 32 percent, more than three times higher than many other Asian economies -- Indonesia, Malaysia, Philippines and Sri Lanka to name just a few," O'Neill said.

He said various indices of trade and investment restrictiveness rate India among the most restrictive countries in the world.

O'Neill, in New Delhi to attend the Group of 20 (G-20) economic summit, said that while several large companies have invested in India, many more have stayed away.

"Respect for property rights and protection against public or private thievery is an essential requirement for economic success," he added.

The treasury secretary said India had come a long way, moving from a command economy towards a more market-based system.

"But economic freedom has not yet sprouted in many major industries where the government remains deeply involved in production, which limits competition," he said, pointing also to the country's weak fiscal policy.

O'Neill in the Indian city of Hyderabad on Wednesday night, spending a day seeing the two faces of India -- from a glittering high-technology centre to abjectly impoverished AIDS clinic patients before flying to New Delhi where he will attend weekend meetings of the G-20 finance officials.