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Can India, U.S. Up the Investment Game?

Author: Evan A. Feigenbaum
October 3, 2011
Business Standard


Nirupama Rao, India's new ambassador to Washington, says that India is open for business, and the good news is that many in the United States agree with her. Bilateral trade has grown rapidly, more than doubling from 2004 to around $60 billion in goods and services trade in 2009. The investment story is positive too. In 2008, US foreign direct investment in India was $16.1 billion, a 10.8 per cent increase over 2007, while Indian FDI in the US totalled $4.5 billion, a 60.4 per cent increase from 2007.

As a US official in the Bush administration, I embraced these trends. Expanded trade and investment can both diversify and solidify a partnership to which both governments are deeply committed. That means bilateral initiatives to unlock an investment treaty, free up trade, grant visas, streamline the investment process, and remove regulatory barriers. Such initiatives can matter greatly to the trajectory of trade.

But last month, I left Washington after ten years and moved to the American heartland. Moving from Washington to Chicago, I'm struck by how a change of scene can yield a change of context.

Yes, macro policies matter. But living in a business city, not an “official” one, you get a different perspective on just how much of an advantage India could derive from structural reforms.

Chicago likes India a lot — and, by the way, the sentiment is mutual. An India business forum last month attracted the new mayor, Rahm Emanuel, along with commerce and industry minister Anand Sharma and a few dozen companies.

But the Midwest is an agribusiness centre. And so there are limits to the scope and scale of how far investment can go in the absence of change to India's supply chain processes and infrastructure.

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