NEW DELHI, Jan 28: The United States said on Monday its stagnant economic relations with India were a source of “worry” and stood in the way of building strong diplomatic and political ties.

“Although broad US-India ties are being transformed every day under the leadership of (US) President George W. Bush and (Indian) Prime Minister Atal Behari Vajpayee, I am seriously worried about our systemic economic relationship which is largely stagnant,” US ambassador to India Robert D. Blackwill said at a business meeting.

Blackwill said a recent exchange of high-profile visits, including the US Secretary of State Colin Powell to India and India’s Home Minister Lal Krishna Advani to the US showed a new momentum in bilateral ties.

But he added that a US-India bilateral transformation would hinge “on a parallel invigoration of our economic relationship”.

US exports to India have barely moved from 3.3 billion dollars in 1995 to 3.7 billion dollars in 2000, although India’s exports grew from 5.7 billion dollars in 1995 to 10.7 billion dollars in 2000.

Blackwill blamed India’s high import tariffs, which average 30 percent and are among the highest in the world, as a key factor in the obstruction of trade.

“My message simply is that further reduction of tariff and non-tariff barriers, harmonisation of existing tariff structures and Intellectual Property Right protection in India will over time help to boost trade,” Blackwill added.

He also pointed out that US foreign direct investment in India fell from 737 million dollars in 1997 to 336 million dollars in 2000.

“Perhaps even more telling is that US firms ended up investing only 38 percent of that (the foreign direct investment) approved by India,” Blackwill said.

The US ambassador said despite liberalisation of the economy, red tape in India presented a formidable hurdle for any foreign investor.

“What foreign investor wants to be wait-listed for two years when boarding cards for a seven-day, one-stop shopping trip are immediately available.” He said, for example it takes only a week for securing investment approvals in certain sectors in Singapore.

Blackwill said a payment dispute between the American Enron Corp’s three billion dollar power project in India and the western Indian state of Maharashtra regarding contractual sales was another sore spot in trade relations.

“I hear a frequent buzz from the United States that the sanctity of the contract may now be in doubt here, a concern that can spell death to potential investments. The long-term repercussions of this case could be profound,” he said.

The US ambassador said the dispute should be settled as quickly as possible.

The 2,184 megawatt Dabhol power plant stopped generating electricity in the middle of last year when its sole client, the Maharashtra State Electricity Board (MSEB), refused to buy any more power following the dispute over tariffs.

“The Dabhol dispute feeds a chronic perception among the overseas investing community that India may not be ready yet for big time international investment,” Blackwill said.—AFP