India targets renewed investment

Ford is one of the few US firms to thrive in India

Indian business leaders are looking to restore the country's reputation as a place for foreigners to do business in the wake of the failure of Enron's Maharastra power project.

It was India's biggest foreign investment project and was once considered as a symbol of the country's commitment to globalisation and economic reforms.

Economic reform has not always been easy

But a bitter row over electricity charges at Maharastra has done little to encourage foreign companies to invest in the country.

Foreign direct investment from America into India more than halved to $336m in 2000, from $737m in 1997, a fact that US Ambassador Robert Blackwill last month attributed to "innumerable rolls of red tape stretching to the horizon".

Huge potential

With a population of 1 billion people, the potential market in India is enormous, says Sanjeev Guenka the president of the Confederation for Indian Industry.

But, he says, it is necessary to create a climate in which decisions can be made quickly.

In order to attract more investment, India needs to cut back on bureaucracy and speed up its reforms in key financial sectors, says Kenneth Dam the US deputy treasury secretary who is in the country looking at ways to unlock the country's economic potential.

"The successful reforms of the early 1990s have now slowed down and need to be re-invigorated", he said.

Investors look around the world and they have a choice.

Kenneth Dam, US deputy treasury secretary

Some areas such as IT and software have already attracted investment and are relatively free of regulation.

But, he added, foreign investment will not go into areas subject to "the whim of individual bureaucratic regulations".

In order for India to move up the "value added chain", management must use its tremendous skills and entrepreneurship so that they're not competing with the lowest cost manufacturing of countries such as China, he said.