The Hindu Business Line : FDI flow into infrastructure projects<br>Dispute resolution mechanism must: US

THE US has said that a clear-cut dispute resolution mechanism for large investment projects is necessary to ensure a sustained flow of foreign direct investment (FDI) for infrastructure projects.

In a meeting organised by the Federation of Indian Chambers of Commerce and Industry (FICCI), AMCHAM and the US India Business Council (USIBC), the US Treasury Secretary, Mr John Snow, reiterated that to attract large inflows of FDI for infrastructure, India must shed its reluctance to move forward rapidly in opening up its markets, particularly the financial system.

"The cost of gradualness will impact growth as constraining FDI in financial markets like options, futures and derivatives will stall the realisation of benefits to the real sector of the economy," Mr Snow said.

He added that a well functioning financial system will energise the rest of the economy, will ensure that savings yield adequate returns, get converted into investments and make capital available in the short and long term for financial intermediation and support for the infrastructure sector.

"As the benefits of strong capital markets deepen and encourage capital formation, the prime candidates for further liberalisation would be the intermediate bond market, banking and lifting of the equity caps on the insurance sector," he pointed out.

"What is happening in India is important to us. India's engagement in world affairs matters to us. And we care about your aspirations to improve the health, well being and education of the people," he said.

Mr Snow said reforms have to reach out to the people, for which there has to be a political constituency.

"The difficulty lies in creating a constituency in the future as the gains from growth can be visualised but not realised in the short run. That creates opposition to reforms because of the displacement and loss of jobs that it entails," he pointed out.

The US Ambassador to India, Dr David Mulford, said India's future hinges on the continuation of economic reforms and consistency of its GDP growth.

This alone would ensure the incomes of the people rises and poverty levels decline.

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