India's Poor Business Climate Scaring Away U.S. Investors

On the other hand Krishna said, “In an era of global inter-dependence, not everything is within the powers of national governments. But we are confident that we will restore investor confidence and regain economic momentum and growth.” He said that the response to the previous global economic crisis, international commotion and instability, policy challenges have contributed to the present situation.

Later on he said, “We have to respond to the aspirations of an increasingly young, empowered and energized India that has experienced enormous change in a short span of time, and we will do so. But, we will also need a stable and supportive international environment, including an open and growing US market, and the flow of capital and technology.”

At a press conference Banga said that there are going to be bumps along the way. He added, “They are caused by the political circumstances...What worries me is that along the way those bumps, if they pick up a degree of convincing investors overseas that the predictability of the Indian business environment is changing under their feet that would be complicated.”

The only thing that makes the American investors very comfortable about India is the legal and judicial system and the fact that there is predictability. In the end he concludes by saying, “When you start changing the rules on taxation...When you change retroactively, you are asking businessmen who have invested money in the country with a certain business model to say, 'oops I can't deal with this.' Can't. You can't deal with something that was not there when you were in.”