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Clinton's visit to boost India-U.S economic ties

BOMBAY: U.S. President Bill Clinton's visit to India starting on Sunday is expected to boost economic ties between the two nations, after over two decades of strained business relations.

In 1977 the Indian government sent Coca Cola Co and IBM Corp packing when the socialist rulers decided India did not need foreign companies, except under its own terms. Many of the members of that government are now key figures in the present government.

Prime Minister Atal Behari Vajpayee was then foreign minister and Home Minister L.K. Advani was then in charge of information. Defence Minister George Fernandes was then industry minister and a prime mover behind the departure of Coke and IBM.

But the government is now actively wooing more foreign investment, particularly from the United States.

Officials of bilateral trade and industry chambers in India say American businesses are equally keen on entering the country.

Rigid bureaucratic controls, severe infrastructural shortfalls and a perception the country was a Soviet ally during the cold war days, meant U.S. investments have been traditionally very low in the country.

From 1990-98, U.S. foreign direct investment in India has averaged $452 million per annum compared to $1.1 billion in China, $2.2 billion in Thailand, $3.3 billion in Indonesia, $6.2 billion in Singapore and $20.5 billion in Japan.

But a 1991 economic crisis which prompted an economic reform programme has made India a more attractive place for foreign investment in recent years.

"We anticipate that there will be significantly greater interest in Indo-American trade and investment following this trip," David Good, the U.S. Consul General in India, said.

A survey last year of 118 firms showed the current market value of total U.S. investments in India at $10 billion.

U.S. companies planned to invest an additional $4.6 billion in India during 1999/2003, the survey, conducted by the American Embassy, said.

Since sanctions imposed by the U.S. following nuclear tests by India in May 1998 had choked investments in the following year, much of that money could come in the next four years as the sanctions have now been watered down, Darius Shroff, President of the Indo-American Chamber of Commerce's western region, said.

"American firms would like to come into India because there are enormous developmental lags here, which offer huge business opportunities," said Shroff.

India's medium term target is to attract foreign direct investment of $10 billion a year, a goal that was pushed out of its reach because of the fallout of the Asian crisis.

MANUFACTURING LED WAY IN PAST, NEW ECONOMY BECKONS

The American Embassy's survey showed over 55 percent of U.S foreign direct investment in India was in the manufacturing sector.

Along with Coca Cola, which returned to India after economic reforms began, other high profile entries in the country have been Enron Corp and General Motors Corp.

But India's strong foray into software services has thrown up a new dimension to Indo-U.S economic relations.

In 1999/00 (April-March), India's software exports were estimated at $3.9 billion, 58 percent of which went to the U.S.

Indian software engineers have made a name in Silicon Valley and Clinton's scheduled visit to the southern city of Hyderabad, nicknamed Cyberabad for its tech-savvy image, is seen as an acknowledgement of the sector's importance in Indo-U.S ties. -Reuters