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US threaten to cut investment in India
US power firm AES is threatening to cut its Indian investments because it is unhappy with the way it is regulated while UK soft drinks group Cadbury Schweppes wants to take full control of its Indian subsidiary.
US power firm AES is threatening to cut its Indian investments because it is unhappy with the way it is regulated while UK soft drinks group Cadbury Schweppes wants to take full control of its Indian subsidiary.
That, analysts say, reflects the contradictions in India's policies towards foreign companies. A decade after dropping the welcome mat for overseas investors, economic reforms are faltering in areas where funds are needed most while less essential industries are doing fine.
Bankers say a host of foreign firms have dug in for the long haul. But many others have fled, driven away by policy flipflops, archaic laws and powerful lobbies. Typical of the policy changes that anger investors was the government's decision to let fixed-line telephone firms offer wireless services within a limited radius. Mobile operators were aghast, saying the new competition threatened their huge investments in operating licences.
"The fundamental impediment to foreign investment is rules and transparency. Foreign investors want the rules of the game spelt out clearly and not changed too frequently," said Sunil Gulati, managing director of ING Barings India.
After abandoning long-held protectionist policies, the government has allowed foreign firms to set up fully owned subsidiaries in such sectors as refining, pharmaceuticals, power and roads -- in most cases without prior approval. When full ownership is barred, investors have set up joint ventures or bought stakes in local companies. In the largest such deal, Singapore Telecom was part of a group that pumped $460 million into telecoms firm Bharti Group.
These foreign companies have been investing often modest sums to build plants and warehouses, distribution networks and shops to cater to India's estimated middle-class population of 150 million to 200 million.
From Coke to Kellogg's, Hyundai to Ford, LG to Samsung, middle-class Indians have seen their choice of fast foods, cars and electronics explode. Sectors like engineering, pharmaceuticals, software and cement have got a fair share of investment too.
But the country has failed to attract much larger sums needed to finance big infrastructure projects, like building new power plants, roads, bridges, dams, ports and airports.
Bureau Report
Bankers say a host of foreign firms have dug in for the long haul. But many others have fled, driven away by policy flipflops, archaic laws and powerful lobbies. Typical of the policy changes that anger investors was the government's decision to let fixed-line telephone firms offer wireless services within a limited radius. Mobile operators were aghast, saying the new competition threatened their huge investments in operating licences.
"The fundamental impediment to foreign investment is rules and transparency. Foreign investors want the rules of the game spelt out clearly and not changed too frequently," said Sunil Gulati, managing director of ING Barings India.
After abandoning long-held protectionist policies, the government has allowed foreign firms to set up fully owned subsidiaries in such sectors as refining, pharmaceuticals, power and roads -- in most cases without prior approval. When full ownership is barred, investors have set up joint ventures or bought stakes in local companies. In the largest such deal, Singapore Telecom was part of a group that pumped $460 million into telecoms firm Bharti Group.
These foreign companies have been investing often modest sums to build plants and warehouses, distribution networks and shops to cater to India's estimated middle-class population of 150 million to 200 million.
From Coke to Kellogg's, Hyundai to Ford, LG to Samsung, middle-class Indians have seen their choice of fast foods, cars and electronics explode. Sectors like engineering, pharmaceuticals, software and cement have got a fair share of investment too.
But the country has failed to attract much larger sums needed to finance big infrastructure projects, like building new power plants, roads, bridges, dams, ports and airports.
Bureau Report