Barriers hampering trade growth, says US

The US Embassy yesterday said in clear terms that India's prosperity lies in trading more with the world, though many tariff and non-tariff barriers remain.

Economic minister counselor, Lee Brudvig, said further development of financial markets would be a critical part of expanding trade and investment between the two countries. Brudvig was speaking at an interactive session organised by the Indian Chamber of Commerce (ICC).

Brudvig pointed out, recent institutional innovations in India's equity markets, such as nationwide trading, paperless settlement and elimination of counter-party risk were impressive.

"These positive steps have resulted in a reduction of costs and an increase in both volume and quantity" he said.

But, in the same breath, Brudvig said while there had been some liberalisation of interest rates in the banking sector, greater competition for capital and strengthened prudential guidelines were needed.

He said, some private commercial banks were making inroads in India's new markets and modest improvement in the performance of Indian banks were visible, but the large overhang of non-performing assets in publicly held banks and an inadequate legal framework for recovering bad debts was a cause for concern.

"India urgently needs rapid expansion of its markets for long-term debt, commodity futures and derivatives. Large-scale and efficient capital markets, from the short-term out to 30 years are an absolute necessity for India's economic development and sustained prosperity" said Brudvig.

On the change in the political scenario and the new government, Brudvig said that though some people have suggested that a Left Front partner in the government could harm economic prospects, the West Bengal government could be seen as a guiding force.

"Seeing its effort to promote growth and its welcome of foreign investment, its willingness to adapt labour laws to the special circumstances of the IT industry and its willingness to close loss-making enterprises, I am optimistic that the Left Front will be pragmatic in its approach to economic policy-making" he said.

Anup Singh, president ICC said, several regional trading agreements were being envisaged in this region and the establishment of these agreements would have a profound effect on Indo-US relations, by opening markets on one side and more avenues for investments.