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Wednesday, 9 January, 2002, 16:26 GMT
India business hit by 'high costs'
Shopworker by candlelight
Unreliable power supply is a fact of daily life in India
India may have cheaper labour costs than its competitors, but a report suggests that this advantage is offset by other costs.

High interest rates, import and export delays at custom houses, poor power infrastructure, and regulatory hassles, all add to the costs faced by Indian business, a joint report by the World Bank and the Confederation of Indian Industry suggests.

The report surveyed four industries - textiles, consumer electronics, drugs and diamonds - across ten states.

"What we find is India has - compared to south east Asian countries, particularly in garments and textiles - a wafer thin...labour cost advantage," the Confederation of Indian Industries' Omkar Goswami, told the BBC's World Business Report.

Power reform

The head of the macroeconomic division in the World Banks' Development Research Group David Dollar outlined the areas in which reform was needed.

"It is clear that India has a number of problems with the investment climate...the power sector clearly needs to be reformed, the financial sector, the high interest rates, so there are a number of very specific areas where the country really needs to address reforms at the national level and also at the state level," he added.

The power sector is one of the most contentious issues of reform in modern India, with foreign investors made wary by Enron's clash with the state of Maharashtra.

The Confederation of Indian Industry's Omkar Goswami said: "It is a national issue in the sense that almost every state faces varying degrees of power problems.

State governments "must understand that over time, the salvation of the sector and the growth of it, lies in people paying for the power," he added.

"If you are going to subsidise power in the way you do - and because of that have a huge theft of power in the name of transmission and distribution losses - then no one is ever going to come in and invest in power," he added.

World Bank's David Dollar and CII's Omkar Goswami
discuss the need for reform in India
See also:

13 Dec 01 | Business
Power giant to quit India
25 May 01 | Business
India's power crisis escalates
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