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June 5, 1998


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US firms face bleak future in India

C K Arora in Washington

US companies face bleak business and investment prospects in India in the wake of economic sanctions that the Clinton administration had slapped on New Delhi last month after its nuclear tests.

Their representatives expressed concern at a day-long meeting in Washington of the US-India Business Council -- a body comprising representatives of trade and industry from the two countries. This was their first meeting after the imposition of the sanctions.

Since its deliberations were closed to the media, a two-page statement, released after its day-long deliberations, expressed hope that India and Pakistan, with the indispensable support of the United States, would take steps in the near future to address effectively the issue which separated them.

The meeting was orginally planned to be inaugurated either by President Bill Clinton or Secretary of State Madeleine Albright, but they cancelled their programme at the last moment, apparently after India's nuclear tests.

Transport Secretary Rodeny Slater, who represented the Clinton administration, spoke on increasing investment in India's transportation and infrastructure sectors.

Planning Commission Deputy Chairman Jaswant Singh inaugurated the Council session and India's Ambassador to the US Naresh Chandra gave details of the security environment of India which compelled its government to test nuclear devices.

Besides business executives from the two countries, former US ambassador to India Frank G Wisner was also present.

Highlighting the fact that the sanctions weighed heavily on the United States, the statement said their effectiveness as an instrument of policy was limited for want of multilateral support. Without waiver provisions, they afford little discretion to the presidents of the US. Too often business opportunities lost due to sanctions simply flow to other, more opportunistic competitors.

Slater spoke on increasing investment in India's transportation and infrastructure sectors.

In some cases, it pointed, the application of US sanctions against the Indian government might actually strenthen its monopolies. This militates against the very concept of liberalisation.

By imposing an increasingly onerous burden on US companies, sanctions are seriously undermining American companies's competitiveness abroad, the statement noted.

It said the cancellation of credit from the US Export-Import Bank and the Overseas Private Investment Corporation might impact the cost of financing its manufactured products and the competitiveness of u s companies in the Indian markets.

Beyond this, the requirements of American law which forbid the extension of credit to the Indian government -- implying a possible lightening of export controls -- might impose severe constraints on the ability of US companies to conduct business operations in India, it added.

In the area of economic policy, as in foreign policy, the Council wanted India to take unilateral steps to encourage economic investment and growth. Perhaps, the most important measure that can be taken is to prepare, adopt, and sustain the strongest possible reform agenda.

The Council, which acts as a bridge between the companies of the two countries, wanted the United States to continue to recognise the broader national interests that are engaged in India.

It said the democratic and pluralist, English-speaking open society of India presented an attractive long-term opportunity for partnership at all levels.


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