Nisha Biswal, U.S. assistant secretary of state for South and
Central Asia, said future economic growth in South Asia hinged on
India as the region's growth engine.
However, Biswal said that while Indian leaders had targeted $1
trillion in infrastructure investment over five years to close gaps
preventing growth in manufacturing, policies still inhibited foreign
investment. She said India ranked a poor 134 out of 189 countries as
a place to invest and start a business.
"India, the world's largest democracy, must decide its own path to
the future," Biswal said in a speech at Harvard University's Kennedy
School of Government.
"Will it make the reforms necessary to attract investment? Will it
capitalize on the opportunities that lie in front of it?
"Those are the questions that India's voters are asking as they cast
their ballots and those are the questions that we want to see
answered," she said.
Growth in Asia's third-largest economy, has almost halved to below 5
percent in the past two years on weak investment and consumer
demand, the worst slowdown since the 1980s.
Polls show the nationalist Bharatiya Janata Party (BJP), the main
opposition party, is on course to win most seats in the election
that began on April 7.
In its election manifesto, the BJP said it would welcome foreign
direct investment in all sectors that create local jobs, — except
for supermarkets, a setback to global chains such as Wal-Mart Stores
Inc and Carrefour
It remains unclear though whether the BJP will follow through on the
supermarket ban or whether its announcement was just pre-election
BJP POLICY CAUTION
BJP insiders remain cautious about laying out specific plans because
the party may need to adjust its policies after the election to win
over allies and form a coalition government if it falls short of the
parliamentary majority required to rule.
Biswal said India had the potential to exceed all expectations
economically, but needed to adopt investment and tax policies
designed to lure, not deter, capital flows and a system of timely
regulatory approvals and contract enforcement.
It also needed to protect intellectual property rights, she said.
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"The more integrated India is into global markets and into the
economic architecture of Asia, the more India's economy will grow
and benefit the entire global economic system," she said.
Biswal said the United States wanted to see bilateral trade grow to
$500 billion a year. It is about $100 billion currently.
Arun Jaitley, a senior BJP leader tipped to be finance minister in
the new government, said in an interview this weekend that the party
should give direction in five broad areas: infrastructure, building
suburban and new urban townships, massive skill development
programs, tourism, and lowering costs for business.
Capital investment contributes nearly 35 percent to India's $1.8
trillion economy, but it barely grew in the fiscal year that ended
in March as delays in clearances from various ministries and funding
issues grounded many major projects.
In its manifesto, the BJP said it would seek friendly relations with
neighbors, but in an apparent reference to the historical troubles
India has experienced with its rival Pakistan, vowed to "deal with
cross-border terrorism with a firm hand" and take a "strong stand
and steps" when required.
Biswal said an improved climate between Indian and Pakistan could
"pay enormous economic dividends."
"India-Pakistan trade in 2013 was still a paltry $2.5 billion," she
said. "There's no reason that number can't quadruple in a few years'
time to $10 billion."
"We have heard some positive murmurings in Islamabad and Delhi that
both governments are moving in this direction and we are hopeful
that they will make progress after the Indian election."
(Reporting by David Brunnstrom; editing by Lisa Shumaker)
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