Hazy reforms keeping away foreign investors: Roach

Stephen Roach, chief global economist and managing director of Morgan Stanley, said foreign players were skeptical about investing in India due to the country's "on-again, off-again commitment" to reforms and poor infrastructure.

"Investors are very interested in India. There is huge domestic demand. But India has an on-again, off-again commitment to reforms. There is a lot of ignorance about India. If India is to maintain its current growth path, it has to dispel the skepticism, which has increased after the Asian crisis," Roach told reporters on the sidelines of a function organised by the Confederation of Indian Industry (CII). He said investors need not choose between India and China, and instead invest in both countries.

In his address at the CII seminar, Roach said the US dollar would depreciate further and interest rates could increase.

"Despite the protests, the dollar will go down. The euro will appreciate further, while China is not expected to devalue it currency. Interest rates will increase and the US Federal Reserve will have to lead the charge," he said.

On the outsourcing backlash, Roach said there was a view that unfair treatment was being meted out to the US in the global trade arena. While the US was itself responsible for increasing imports, due to falling savings rates, politicians were trying to shift the blame to India and China, he added.

Similarly, despite the economic recovery in the US, the 8.3 million jobs shortfall was attributed to offshoring, he added.

"There is no validity in blaming India or China. It is simply politics at its worst and the view is being spread by elected men and women, who are not the smartest people," he added.

Roach said in the worst possible scenario, which could arise if US President George W Bush slipped on the popularity charts before the presidential elections, the US government could put curbs on imports from China.

Citing the imposition of safeguard duties on steel imports in 2001, he said: "Whatever the issue is, the overriding philosophical commitment has nothing to do with trade liberalisation or globalisation but with getting re-elected. The Bush administration will not stop from doing anything to get re-elected."

On the Chinese economy, Roach said it was destined to slow down since there had been overheating on infrastructure and credit.