The Telegraph
Since 1st March, 1999
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US firms still prefer to pussy-foot on investments

New Delhi, Jan. 16: US investors are willing to make “cautious investments” in India despite the government’s current unwillingness to relax foreign direct investment cap in various sectors, the drought situation and the political instability.

Out of some 88-member-companies in India, 47 per cent respondents said they are willing to increase their investments, while 44 per cent stated investments will remain at the current levels.

The Business Outlook Survey 2003, which was jointly conducted by Amcham (American Chamber of Commerce) and Gallup, found that 5 per cent of those willing to invest were keen to put in more than Rs 500 crore, 12 per cent were willing to invest between Rs 50 crore and Rs 500 crore, 28 per cent wanted to put in Rs 50 crore and the rest below Rs 50 crore.

Responding to a query on whether the respondents were satisfied with the new policies announced by the government on inviting more foreign direct investment (FDI), almost 39 per cent stated they were dissatisfied. However, 32 per cent expressed satisfaction. It is to be noted that the study was conducted after the N. K. Singh Committee report on FDI was released.

The three main barriers to foreign investments cited by the Amcham study are — comparatively better investment climate in competing FDI destinations, such as Asean countries; red tape and lack of stable policies and regulatory framework.

The study also reveals that US companies here are disenchanted with the myth about purchasing power of the Indian middle class. It also reveals the chamber members’ unhappiness with sluggishness of the Indian economy, political instability and perceived security fears.

The survey also states that simpler tariff structure, reduction in fiscal deficit and a cut in unplanned expenditure are the three main challenges facing the economy which need to be addressed by the finance minister in the coming six months.

Speaking on a positive note about the US mindset, the survey states “Indian economy (is) seeming to recover faster than the world economy in the coming six months”.

However, the majority of respondents feel economic recovery of the world and Indian economy is likely only in the year 2004.

Members of Amcham also “don’t see much movement on two key financial indicators — the rupee and the interest rates”.

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