NEW DELHI, Oct 29: The United States warned on Tuesday that India could be left behind in the economic doldrums if it did not intensify its free market reforms and improve a sagging political image warped by religious strife and tensions with Pakistan.
Addressing the Federation of Indian Chambers of Commerce and Industry in New Delhi, US Ambassador Robert Blackwill said American investors were more keen in doing business with China despite its authoritarian system rather than consider India as a viable destination.
“Within the US business community there is an erosion of confidence about whether the sanctity of contracts will be honoured in India,” Blackwill said. “There is also no question that tensions between India and Pakistan and communal violence further dampen investors’ urge to come into the Indian market.”
He listed rampant corruption as another difficulty with India.
President George W Bush has stressed that India and the US are the world’s “two largest democracies ... committed to political freedom” and to common national interests in creating a stable Asia, fighting terrorism, and enhancing the free flow of commerce,” Balckwill said.
He said Washington policymakers would continue to visit New Delhi, and there were nearly 100 in the past year.
“This is all occurring because there are no fundamental differences in vital national interests between the United States and India, including our identical objective of helping to bring about a peaceful and democratic South Asia — free from terrorism, either domestic or of the murderous cross-border variety. But, US-India economic relations lag far behind major advances in all these other areas,” Blackwill said.
He said Ken Juster - Under Secretary of Commerce; Alan Larson - Under Secretary of State for Economic Affairs; and Paul O’Neill - Secretary of the Treasury will all visit India in the coming month.
Partly because of a weakness in the Indian domestic market, total US-India trade last year was only $15 billion. By comparison, the threshold to be one of America’s top 10 trading partners is $33 billion. Even higher is the exclusive club of America’s top four trading partners — Canada, Mexico, Japan, and China. The threshold for admission there is $120 billion in two-way trade.
“We have a long way to go before India moves up from 25th place on the US bilateral trade list,” Blackwill warned.
He said Americans hesitate to invest in India because of the uncertainty over India’s economic reforms. “The disinvestment debate in the last two months is only the latest example,” he declared.
“The present American view is largely that China is a place where foreign companies can make money, and India is not,” Blackwill said.
Blackwill said the two countries launched their economic reform programmes from different historical experiences. Nonetheless, the fact remains that in the last 10 years, China has forged ahead on most economic measures.
Over the last 20 years, China’s GDP has grown at about 10% a year, compared with India’s 6% growth rate. A decade ago, India and China had close to the same per-capita income. Today China’s per-capita income is about $900, roughly twice that of India.
In 1991, India and China started off from about the same base, with less than one computer for every thousand individuals. By 2000 China’s rate is three times India’s, with more than 15 computers for every thousand persons, compared to 4.5 in India, Blackwill said.
“The global economy is like a high-speed train. More and more business executives and a much smaller number of government officials around the world get on it. The train does not wait. It is never cancelled,” Blackwill said.
