India making it hard for investors: Obama

Opposition objects to US presidents remarks

In a not-so-subtle nudge to Prime Minister Manmohan Singh to speed up reforms and open up the economy, US President Barack Obama on Sunday said the American business community found it “too hard” to invest in India due to prohibitions and restrictions on foreign investment in “too many sectors”.

Obama’s remarks sparked off strong reaction across the political spectrum, with the Left and the BJP urging the government not to give in to US pressure and disregard policy prescriptions from outside.

India Inc agreed with the US President that the sluggish pace of reforms had slowed down the economy, but even the corporate community noted that solutions to the problem should come from within, not on prescriptions by outsiders.

In an interview to PTI, Obama referred to the concerns of the US business community over deteriorating investment climate in India. “They tell us it is still too hard to invest in India. In too many sectors, such as retail, India limits or prohibits the foreign investment that is necessary to create jobs in both our countries, and which is necessary for India to continue to grow,” Obama told the Indian news agency in Washington.

While Obama’s remark was apparently in sync with his campaign pitch in the run up to the US presidential polls, it also seemed to reflect Washington’s growing disappointment over the failure of the Congress-led UPA Government in New Delhi to speed up reforms open up retail and other sectors for foreign direct investment.

The US President referred to “a growing consensus” in India that the “time might be right for another wave of economic reforms” to make the country “more competitive in the global economy.”

Obama’s remark came almost 20 days after Singh took charge of the Ministry of Finance in the wake of the resignation of Pranab Mukherjee. It also comes close on the heels of a cover story on prominent US news magazine “TIME” that called Singh an “underachiever”, prompting the UPA Government to exude confidence that the Prime Minister would steer the economy out of the trough.

“And as India makes the difficult reforms that are necessary, it will continue to have a partner in the United States,” said Obama, adding: “There appears to be a growing consensus in India that the time may be right for another wave of economic reforms to make India more competitive in the global economy.”

Amid economic uncertainties in US economy, issues like growing unemployment and outsourcing of jobs have been at the centre-stage of political debates during the run up to the presidential elections in America. Obama on Saturday attacked his Republican challenger Mitt Romney with an advertisement that charged the latter of approving outsourcing of US jobs to India during his stint as Governor of Massachusetts. Though Singh and George Bush – Obama’s predecessor in White House – clinched the much-hyped civil nuclear cooperation agreement in 2008, the US companies are yet to reap its benefit, as they felt that India’s Civil Liability for Nuclear Damage Act 2010 had denied them “a level playing field”. With little progress on nuke cooperation, the Obama administration over the past few years focused on prodding the UPA Government in Delhi to open up the economy further and make opportunities for the US multi-nationals in the sectors like, retail, banking and insurance.

With TMC – the troublesome ally of the Congress in the UPA – red-flagging almost every move to open up the economy and opposition BJP not ready to help, Singh’s Government could not expedite reforms, much to the disappointment of the business communities both in India and the US.

The BJP, however, recently indicated that the party might support the Government to open up the insurance sector for FDI. This came amid renewed hope for early reforms with Prime Minister calling for bringing back the ‘animal spirit’ in the economy soon after taking over the finance portfolio. Acknowledging that the nation lagged in reforms in sectors like retail, aviation, defence and insurance, India Inc said Obama or any other outsider cannot be “dictating Indian government or Indian policy makers”. “The US has its own problem and India has its own. Our government will take decision as per our own compulsions and requirements,” said Assocham Secretary General D S Rawat.

Chandrajit Banerjee, director-general, CII (Confederation of Indian Industries), said: “India was resilient and was still growing at six per cent during the time of global economic uncertainties. However, there are some issues which need to be addressed.”