| Singh & O’Neill in Delhi on Friday. (AFP)
New Delhi, Nov 22: The US today asked India to open up its insurance and banking markets further to foreign investments, a subject which has proved contentious in domestic politics besides asking the country to further reduce its tariff rates, especially farm tariffs.
US companies have long been demanding the lucrative insurance market where foreign investment is capped at 26 per cent be opened up further while the banking sector where FDI is capped at 49 per cent should see permission for majority foreign stake.
US Treasury Secretary Paul O'Neill, who met finance minister Jaswant Singh today, stressed American desire to see India opening up its economy, especially in these two sectors.
The BJP government had wanted to do exactly that but had to stay away from taking such a decision after objections from NDA partners and Sangh parivar front organisations which raised various issues including that of national security.
The BJP government had not only sought to open up insurance and banking sectors further but also aviation, pharmaceuticals, telecom, broadcasting. Besides opening windows in sectors where foreign investment is still not permitted like real estate and plantations.
The only relaxation in FDI limits which the BJP finally made up its mind over was allowing 26 per cent FDI in newspapers and magazines and 74 per cent in technical journals.
Singh apparently explained to O'Neill that political consensus on these issues would take some more time in being worked out. Similarly, the US official wanted India to bring down its average customs rate from 32 per cent to nearer the 10-15 per cent charged by East Asian nations.
The Kelkar Committee on tax reforms, which recently gave its report to the government, also suggested a median rate 16 per cent. However, opposition from Indian industry and opposition leaders looks like putting paid to this demand too.
The US Treasury Secretary was obviously unhappy with these developments and with complaints from US investors about red tape and corruption hampering their businesses here.
At a seminar organised by CII here, he took the unprecedented step of criticising his hosts rather too openly: “Various indices of trade and investment rate India among the most restrictive countries in the world. Barriers to enhanced trade on the sub-continent remain very high. With regard to good governance, corruption and bribery are widespread, frightening away honest businessmen and investors.”