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Enron issue may hit FDI flow to India: US

US on Wednesday warned that the Enron debacle would dampen flow of foreign investments into India and asked New Delhi to find a prompt resolution to the issue.

"While it is not my intention to make specific suggestions for resolving this dispute, I do want to underscore that it will be hard for foreign investors to look seriously at India until this dispute is resolved in a satisfactory way."

"I encourage the Central government and the Indian business community to do everything they can to bring about a prompt resolution," Alan Larson, the US Undersecretary of State for Economic, Business and Agricultural Affairs, said at the US-India Business Council meet on Wednesday.

"Frankly speaking, the investment dispute between the Dabhol Power Company and the Maharashtra State Electricity Board is now casting a cloud over India's investment climate," he said.

Summarising two days of intensive discussions and debates, the council said, "The dispute over the Dabhol power project erodes the credibility of the Indian government, deters all other kinds of investment, may soften India's credit rating."

"This issue needs to be resolved, and it needs to be resolved quickly," Frank Wisner, chairman of the council and a former Ambassador to India, said.

In the review of overall economic conditions, the 400 business and government leaders attending the council's annual meeting, also expressed serious concern about several aspects of India's business climate.

Inadequate infrastructure was pointed out by many companies as the critical impediment to investment in India.

The council also pointed out that restrictions on foreign ownership in some business activities especially equity caps on foreign participation in insurance had no economic or commercial rationale and impeded competition and growth in the industry.

The council, however, welcomed the Bush administration's efforts to reach out to India, to recognise it as a major power, and to involve it more closely in the rethinking of a range of vital issues in the fields of international security and nuclear non-proliferation.

Business and government leaders from both sides also noted several positive signals on sanctions.

"We anticipate that the Bush administration's engagement with India will continue to deepen, and we are pleased by the prospect that President Bush may make a visit to India," Wisner said.

"We find major opportunities for expanding business and increasing bilateral cooperation in several vital and dynamic areas of the knowledge-based industries, especially IT-services, biotechnology and e-entertainment," Wisner added.

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