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Last Updated: Thursday, 22 June 2006, 06:12 GMT 07:12 UK
UK losing race to invest in India
Bombay Stock Exchange on Dalal Street
The Indian economy is roaring ahead
The UK is wasting its "unique relationship" with India and falling behind other nations in the race to invest in the country, says a report.

The report from MPs in the Trade and Industry Committee said UK firms have a limited understanding of the growing Indian economy.

Many see India as a source of cheap labour rather than an emerging market.

The MPs said the higher education, manufacturing and automotive industries offered great investment opportunities.

'Opportunities'

The Indian government still has some limits on foreign investment in areas like the financial and retail sectors.

But it is loosening these controls gradually as it comes under pressure to open up its markets.

It also needs foreign investment and expertise to help improve and modernise the roads, ports and airports needed to keep its economy growing quickly.

"Levels of interest in the Indian economy are growing year upon year - but UK investors don't yet really understand the opportunities that India presents," said committee chairman Peter Luff.

Government support

MPs said they were worried that the UK's perception of India had been distorted by media focus on the perceived threat to UK jobs from outsourcing of services like call centres.

This has created a view that such call centres are a dominant feature of the Indian economy.

However, the British Chambers of Commerce(BCC) claims British exporters are well aware of the opportunities in India, but are not getting much help from the government.

"They have seen export support reduced in recent years as the Treasury switched its focus to encouraging inward investment," said the BCC director general David Frost.

The Indian economy grew at a rate of 8.4% in the year to March 2006.

Despite this growth, foreign investment in the country has been slow to take-off.

According to investment bank Merrill Lynch, there was $8bn worth of foreign investment in India during 2005, well behind the $60bn pumped into China.

During 2004/2005, the UK was India's fourth largest trade partner in goods, behind the US, China and Belgium.




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