New Delhi, July 23: Vice President Joe Biden arrived in New Delhi on Monday as part of a continuing effort by the Obama administration to convince the country's elite of its good will after decades of strong support for India's arch rival, Pakistan.
Biden's trip is the first by a US vice president in nearly 30 years, and it comes one month after Secretary of State John Kerry traveled to New Delhi, the capital, to discuss climate change and diplomacy.
Biden's itinerary calls for him to spend a day with political leaders before flying Tuesday night to India's financial capital, Mumbai. During his two days there, he is expected to voice growing concerns about India's economy and its openness to foreign investment before leaving for Singapore on Thursday night. Investors from the United States and around the globe once flocked to India, drawn by its rapid economic growth, gradual economic liberalization and huge population. But in the past decade, many U.S. companies have found the going far tougher than expected, and their complaints are beginning to resonate in Washington.
The problems that companies confront here - endemic corruption, shifting government rules and poor infrastructure, among others - seemed less dire when the Indian economy was growing at a blistering rate. But growth has slowed to 5 percent over the past year, and those issues have become far greater irritants.
Biden's complaints about India's investment climate are likely to be greeted with some sympathy in Mumbai, since even Indian companies have begun looking for growth outside their country's borders. Investments by both foreign and domestic companies have fallen over the past five years to 31 percent of the country's gross domestic product from nearly 38 percent, said Subir Gokarn, director of research at Brookings India, with crucial sectors like manufacturing and mining doing especially poorly.
Prime Minister Manmohan Singh acknowledged in a speech to a prominent business group here Friday that the nation's economy was under stress.
"We, like most other countries, are going through a difficult period," Mr Singh said in his barely audible whisper. "I know that business is deeply concerned about the slowdown in our economy."
The Indian rupee has lost about 9 percent of its value against the dollar in recent months. India has substantial budget and current account deficits, and inflation is running at nearly 10 percent annually.
The country's central bank has been faced with the difficult task of defending the currency by trying to raise short-term interest rates without pushing up long-term rates, which would further slow growth. The Reserve Bank of India took the unusual step last week of withdrawing a bond sale after investors insisted on interest rates that were higher than the government's bankers wanted to pay.
Ajay Shah, a professor at the National Institute of Public Finance and Policy in New Delhi, said these problems guaranteed that India's rapid economic growth would not return for many years.
"There's been a tremendous collapse in confidence," Mr Shah said.
India's government has taken steps to put its fiscal house in order by reducing fuel subsidies, a hugely expensive program that largely benefits the rich. And last week, the government announced a loosening of restrictions on certain foreign investments.
But national elections scheduled for next year are likely to mean that the government will be loath to make additional cuts to popular welfare projects, said Sreeram Chaulia, a professor and dean at the Jindal School of International Affairs. A new food security bill could even expand such social spending significantly.
"Right now, this government is concerned about winning the next election," Mr Chaulia said.
Biden also intends to push India for further defense cooperation and more arms purchases from the United States, according to a senior Obama administration official.