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India needs more reforms to boost FDI: Lamy

India needs to press ahead with economic reform to boost low European investment flows to the country, European Union Trade Commissioner Pascal Lamy said on Thursday.

Although the 15-member European Union is India's largest foreign investor, it gets a scant 0.6 per cent of the EU's worldwide investments, Lamy told an EU-India business summit.

Lamy called it "a poor return for a country where 17 per cent of the world population lives" and said the "inadequacy of total investment flows to India reflects the need for continued economic and regulatory reform".

Economists say India's decade-old liberalisation programme has virtually stalled and a rash of political and financial scandals have meant that most of the measures in the government's reforming budget last February have yet to see the light of day.

Commerce Minister Murasoli Maran, who almost blocked a deal on a new round of free trade talks at a World Trade Organisation meeting this month in Qatar with calls for a better deal for developing nations, countered with complaints about hurdles faced by India in penetrating EU markets.

The exchange of views came on the back of a cut this week in India's sovereign ratings by credit ratings agency, Fitch, which cited an unfavourable political environment that hindered economic reform and "fiscal profligacy".

LOW ON LIST OF TRADING PARTNERS

Lamy told representatives from 300 Indian companies and 50 European firms that the EU was India's biggest trading partner. But India ranked only 19th among the EU's trading partners, accounting for just 1.3 per cent of the total EU imports.

China, the only other country with a population of more than one billion people, and the Association of South East Asian Nations export to the EU five times the volume that India exports to the EU, he said.

In reply, Maran, who emerged as the champion of poorer nations at the WTO talks in Qatar with demands for more access to rich-country textile markets, urged the EU to "revisit anti-dumping and anti-subsidy initiatives...in view of India's meagre share in the EU market".

"It's our understanding that the injury to EU trade and industry is minimal," he told the summit, the second since the forum was launched last year in Lisbon.

But he also stressed the need for India to implement more reforms. "India is less a tiger than an elephant. Its steps are measured and steady. But an elephant can also walk faster and we need to increase our pace to keep step with the fast-moving world."

Lamy said the payoff from further reform could be huge and the EU would watch India's progress in such areas as loosening competition and labour laws as well as fiscal responsibility.

More reform "should lead India towards the type of economic takeoff needed to realise its objective of doubling GDP and reducing poverty to 10 per cent within this decade," he said.

On Friday, European Commission head Romano Prodi and Indian Prime Minister Atal Bihari Vajpayee will address the summit.

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