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Tuesday, May 17, 2011

Ambassador Timothy Roemer says India Must Reform or Risks Slowdown (Wall Street Journal, 17 May 2011)

Courtesy: "Wall Street Journal (WSJ)", 17 May 2011
Roemer: India Must Reform or Risks Slowdown
By PAUL BECKETT
NEW DELHI—The U.S. ambassador to New Delhi said Tuesday that India needs to consider whether it is delivering on its side of the new close alliance with the U.S. and do more to tackle graft and encourage foreign investment or the nation's economic expansion risks losing steam.
"India needs to be asking itself: Is it delivering on the global partnership?" Timothy Roemer said in an interview with The Wall Street Journal as he prepares to leave the post next month and return to the U.S. "The international business community that was pouring money and investment potential into India last year and the year before is now pausing and saying: 'Where is India heading in terms of investment opportunities, the corruption challenge and inflation?'" If this perception doesn't change, he added, India could see downward revisions of as much as two percentage points to estimates for growth this year, considering the impact of higher oil prices and high inflation. Earlier this month, C. Rangarajan, chairman of the Prime Minister's Economic Advisory
Council, forecast Gross Domestic Product growth in the year ending March 31, 2012, of 8.5%, below the government's forecast of 9%, as a series of interest rate rises to combat high inflation crimps growth. A spokesman for the Prime Minister's Office had no immediate comment.
Foreign direct investment in India, after rising steadily for years, totaled $18.4 billion from April 2010 to February, down 25% from a year earlier, according to Indian government data, amid a series of corruption scandals that have paralyzed the government and a lack of progress on economic reforms that would make the market more attractive for foreign firms.
Mr. Roemer's warning comes after two years – his tenure in New Delhi -- in which the U.S. and India have, in many respects, dramatically expanded their cooperation and partnership on issues ranging from counter-terrorism to environmentally-friendly technology to coordination over regional policy in Afghanistan.
For decades since India's independence in 1947, the U.S. viewed India warily as the Indian government maintained strong ties with the former Soviet Union. But relations have warmed in the last decade, in part because the U.S. and India – the world's richest and largest democracies, respectively – see China as both a rising market and a rising threat. And the two nations have a mutual interest in combating violent Islamist extremism in the wake of the 2001 attacks on the U.S. and the 2008 terror attack on Mumbai.
Both countries have gone to some lengths to showcase the new alliance. Prime Minister Manmohan Singh was the guest for the first official state dinner of the Obama presidency in 2009. President Barack Obama addressed a joint session of the Indian parliament – and pledged support for India's efforts to gain a permanent seat on the United Nations Security Council – during a visit here in November. "We've made tremendous progress in elevating this to a global partnership," Mr. Roemer said.
But several areas of friction remain. A high-profile deal on civilian nuclear technology that was years in the making was stymied by an Indian law that puts liability for nuclear accidents on equipment suppliers rather than channeling all liability to operators, which U.S. officials say is the international standard. The U.S. also has been pushing India to open its markets further in areas such as banking, insurance and retail – reforms that have long been discussed in New Delhi but never implemented.
"There's no doubt this needs to be a two-way street," Mr. Roemer said, adding it was "frustrating at times to be awaiting the next 'Finance Minister Singh move' to open up the markets as happened in 1991" – a reference to Mr. Singh's landmark reforms, when he served as finance minister two decades ago, to liberalize India's economy and ditch its centrally-planned socialist model.
"These steps would help America and American business truly help India and Indian consumers," Mr. Roemer said. "But India needs to step forward and do this not for American interests but for India and India's interests."
Among the biggest frustrations for the U.S. was India's recent decision not to shortlist two U.S.-made medium-range fighter jets in the global bid process for a contract estimated at about $10 billion. Instead, India's defense ministry selected two European-made jets as finalists. "We're going to continue to have a strategic defense relationship with India -- one deal won't make or break it – but to not have one of the U.S. companies make it to the final two or three is puzzling," Mr. Roemer said.
He added, however, that he expected an announcement in the next few weeks that the U.S., as reported, would win a roughly $4 billion contract for Boeing C-17 military transport aircraft, a deal that he said would support thousands of U.S. jobs. A spokesman for the Indian Air Force confirmed the deal is expected to happen soon.
Mr. Roemer, 54 years old, said he will leave the post early next month and expects his replacement to be named shortly. In his resignation statement, he said he was leaving for personal reasons. He also has been reported to be one of the candidates being considered to replace Commerce Secretary Gary Locke, who was chosen by Mr. Obama as the next ambassador to Beijing. Mr. Roemer declined to comment on that. He also noted that with two kids heading to college before long "the private sector certainly is an attractive potential path." Mr. Roemer was formerly a Congressman from Indiana.
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