Considering that the United States is India’s largest foreign investor as well as its leading trading partner, the state of the American economy is of vital concern to Indian industry and policy makers. And the US economic outlook “is clouded by a great deal of uncertainty created by the Gulf crisis”.

Lauding India’s liberalised industrial and import policy, Mr Rosenberg observed that “India’s large internal markets offset much of its vulnerability to fluctuations in the US.” But he added, “Liberalising or at least clarifying its foreign investment laws will ease the transfer of technology, encourage foreign investment and abstract increased development capital.” Bank of America economists believe, he said, that India is seeking a balance whereby rural growth will not deplete export growth.

RACE FOR CAPITAL: However, Mr Rosenberg had a word of caution, “India is not alone on the path towards opening its economy.” Chile, Mexico, Venezuela have begun to open up their economies in a big way; the Asian economic tigers are drawing substantial foreign investment and now, the political reform in Eastern Europe has opened up new avenues for investment. “The sweep and scale of this shift was not foreseen even five years ago,” he said.

“Unfortunately,” Mr Rosenberg said, “capital supplies are not likely to keep pace, at least not from traditional European and North American commercial bank sources.” Competition for available development capital is “likely to become even more heated for some time”. India’s liberalisation, particularly the clarification of its investment requirements is needed for it to compete effectively for this investment Mr Rosenberg warned.

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