The US on Wednesday urged the Indian government that emerges from ongoing elections to follow economic policies that encourage investment, saying Washington would like to see bilateral trade grow to US$500 billion a year.
Nisha Biswal, US assistant secretary of state for South and Central Asia, said future economic growth in South Asia hinged on India as the region’s growth engine.
However, Biswal said that while the Indian government had targeted US$1 trillion in infrastructure investment over five years to close gaps preventing growth in manufacturing, policies still inhibited foreign investment.
She said India ranked a poor 134 out of 189 countries as a place to invest and start a business.
“India, the world’s largest democracy, must decide its own path to the future,” Biswal said in a speech at Harvard University’s Kennedy School of Government.
“Will it make the reforms necessary to attract investment? Will it capitalize on the opportunities that lie in front of it? Those are the questions that India’s voters are asking as they cast their ballots and those are the questions that we want to see answered,” she said.
SLOWED GROWTH
Growth in Asia’s third-largest economy has almost halved to below 5 percent in the past two years on the back of weak investment and consumer demand, in the worst slowdown since the 1980s.
Polls show the nationalist BJP, the main opposition party, is on course to win most seats in the election that began on April 7.
In its election manifesto, the BJP said it would welcome foreign direct investment in all sectors that create local jobs — except for supermarkets, a setback to global chains such as Wal-Mart Stores Inc and Carrefour SA.
However, it remains unclear whether the opposition party will follow through on the supermarket prohibition or whether its announcement was pre-election rhetoric.
BJP insiders remain cautious about laying out specific plans, because the party may need to adjust its policies after the election to win over allies and form a coalition government if it falls short of the parliamentary majority required to rule.
REGIONAL INTEGRATION
Biswal said India had the potential to exceed all expectations economically, but needed to adopt investment and tax policies designed to lure, not deter, capital flows and a system of timely regulatory approvals and contract enforcement.
The governement also needed to protect intellectual property rights for companies, she said.
“The more integrated India is into global markets and into the economic architecture of Asia, the more India’s economy will grow and benefit the entire global economic system,” she said.
Biswal said the US wanted to see bilateral trade grow to US$500 billion a year. It is about US$100 billion currently.
CAPITAL INVESTMENT
Arun Jaitley, a senior BJP leader expected to be finance minister in the new government, said in an interview this weekend that the party should give direction in five broad areas: infrastructure, building suburban and new urban townships, massive skill-development programs, tourism and lowering operating costs for business.
Capital investment contributes nearly 35 percent to India’s US$1.8 trillion economy, but it barely grew in the fiscal year that ended last month, as delays in clearances from various ministries and funding issues grounded many major projects.
PAKISTAN
In its manifesto, the BJP said it would seek friendly relations with India’s neighbors, but in an apparent reference to the historical troubles the nation has experienced with its rival Pakistan, vowed to “deal with cross-border terrorism with a firm hand” and take a “strong stand and steps” when required.
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