India eases investment limits, criticizes U.S. export controls

McClatchy NewspapersMarch 18, 2010 

WASHINGTON — India Thursday criticized U.S. export controls as it prepares to a further liberalization of foreign investment in India following the signing of a bilateral trade pact in Washington.

The agreement concluded Wednesday, signed by Anand Sharma, the Indian minister of commerce and industry, and Ron Kirk, the U.S. trade representative, aims to encourage investment flows between the two countries.

"The United States is by far the largest and oldest investor in India and we hope the United States will continue to see India as a hot investment place," said Gopal Krishna, the Indian joint secretary of the department of industrial policy and promotion at the Ministry of Commerce and Industry. As of last year, U.S.-India bilateral trade stood at $37.6 billion.

However, Indian officials said they're still concerned about the U.S. export controls. Many Indian entities, including space and nuclear research organizations, are required to seek licenses for export, re-export and transfer of items.

The items that are subject to export administration regulations of the U.S. Bureau of Industry and Security include purely commercial items as well as those that have commercial and military applications, they said.

"Protectionism of any kind, which discourages economic engagement, is counterproductive," Sharma said. "The need is to enhance trade engagement."

Meera Shankar, the Indian ambassador to the U.S., said the export controls, devised at the height of the Cold War, need an overhaul.

The two governments also launched an initiative to integrate small and medium enterprises in both countries into the global supply chain, with the hope of expanding trade and creating more jobs.

The Framework for Cooperation on Trade and Investment was signed at a time the Indian Parliament is debating the civilian nuclear liability bill that failed to pass this week. Some members of Parliament say the U.S.-India civilian nuclear agreement, which will allow General Electric to sell nuclear fuel and technology to India, doesn't provide enough compensation in case of a nuclear disaster.

India, which has opened up its economy to foreign funds, is still wary of large investments. New Delhi imposes 29 percent ownership limits on foreign investors in insurance companies, for example. Parliament is debating a bill proposing to increase the limit to 49 percent.

To encourage foreign direct investment, Sharma said his government already has doubled the limit of foreign direct investment proposals to $240 million. India will also introduce a single policy document on foreign investment, combining 177 documents detailing policies for greater clarity for businesses at the end of this month, Sharma said.

Some of the difficulties that foreign investors face in India are a slow judicial process for closing businesses and settling disputes and an inefficient tax structure.

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