WASHINGTON: The United States has asked India to adopt sweeping reforms, including lifting ownership caps and reducing high tariff rates, to draw foreign investments and fuel rapid growth in the world’s second most populous nation.

The call came on Tuesday as the two countries braced for a new era of investment and trade ties capped Monday by US President George W. Bush’s signing into law of a landmark bill for Washington to transfer nuclear fuel and technology to India.

Although India in recent years has embraced reforms which have helped fuel the country’s current rapid economic growth, “significant challenges” exist, US Under Secretary of Commerce Franklin Lavin said, suggesting key reforms.

He called for the opening of India’s retail sector to foreign multi-brand retailers, saying it would allow Indian consumers access to the “best products at the lowest prices” and improve supply chain efficiencies in the world’s second most populous nation.

“Despite recent news stories about cracks in the dam on retail access, the fact is that barriers remain,” he said, apparently referring to American retailer Wal-Mart’s penetration of the Indian retail market through a local partnership.

Lavin, in charge of the US Commerce Department’s international trade portfolio, also suggested that India eliminate foreign equity caps in the financial services, banking and insurance sectors.

“Right now, investment caps are very low,” he said, citing particularly the 26 per cent equity limit in the insurance sector which prohibited foreign firms from participating in the lucrative pensions sector.

Lavin, who just returned after leading the largest US trade mission to India, said that India should realise that long term funding provided by insurance companies could help pay for much-needed infrastructure development.

He also urged India to bring down its “high” tariffs and formulate laws that protect patents and copyrights, and sought joint ventures for open access to foreign broadcasting and cable TV.

As India entered its fourth year of booming economic growth, Lavin asked whether the government would continue with long term reforms.

“It will be very easy for anybody in leadership position looking at eight, nine, 10 per cent growth numbers to say, we’ve broken the code, we have done it, its not a bad bit of work,” he said.

“Will these reforms continue or will India pull back? I think it’s somewhat an open question what the long term prospects for reforms are. It’s a question that can be answered by the Indian people and government.” Comparing the Asian giant with tiny but business friendly Singapore, Lavin said India had immense potential to draw investments if it pursued reforms.

Overall, as of 2005, India received $45 billion in foreign direct investment with $8 billion from the United States compared with Singapore’s $186 billion in foreign direct investment with $48 billion from the United States, he said.

Lavin then compared India’s average tariff on industrial goods of 12.5 per cent to four per cent of the United States, saying “India’s tariffs are still high.” Some 258 American executives from 200 companies participated in the one week trade mission to six Indian cities.

They included 14 US civilian nuclear companies eyeing $100 billion worth of opportunities that could arise from the bilateral civilian nuclear deal.—AFP