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Conventional wisdom says that doing business in India is a difficult proposition, given its unstable politics and restrictive investment environment.

But foreign investors may find that the Indian subcontinent has become more fertile lately thanks to its many ongoing reforms, according to Zarir Cama, group general manager and CEO of Hong Kong and Shanghai Banking Corp. in India.

“In India, you might not make money tomorrow,” said Cama, who oversees HSBC’s operations there. But that doesn’t mean people have to wait 10 years for their investment to turn a profit, he said during a recent speech at Keidanren Hall sponsored by the Keizai Koho Center in Tokyo.

Since 1997, foreign direct investment in India has generally been declining. In 2000 it surged to 370.394 billion rupees (about 910.274 billion yen today), but in 2001 it plunged to 268.747 billion rupees (660.468 billion yen).

Cama attributed negative foreign perceptions of India to the burgeoning high-tech upstart’s failure to promote itself.

“The biggest enemy to India is India itself,” Cama said. “It has been very bad at projecting its image to the world.”

Cama explained how India’s “enormous” transition is making the country more attractive as a destination for foreign investment.

Touching on the country’s traditionally tight government control over business activity, Cama emphasized that active privatization efforts by New Delhi over the past few years have opened many sectors to foreign investment.

As examples, he cited two “strategic sectors” that the government has recently opened — the tea plantation business and the print and media sector.

The Indian government recently agreed to allow 100 percent foreign investment in tea plantations and up to 26 percent in print and media firms.

Cama said that the liberalization taking place in print and media is significant because historically, foreign participation in that sector has been banned.

He said that privatization efforts have already brought tangible benefits to his country’s economy, noting that some loss-making, state-run enterprises that were allowed to be taken over by private entities have now become profitable.

In addition, several major Indian companies plan to go public over the next one or two years, including Tata Consultancy Services Ltd., India’s biggest software maker, automaker Maruti Udyog Ltd., and National Aluminum Co., the largest aluminum producer in the region. The estimated value of the initial public offerings will reportedly exceed $6 billion.

Cama urged foreign companies to look into Indian agriculture for potential opportunities. Agriculture still plays a significant role on the subcontinent, with 65 percent of the population involved in the sector — a fact he said is not well known.

Food processing and storage management are particularly promising areas, he said, because “there’s too much food in the distribution system without proper disposal methods . . . at least 20 to 30 percent of food is wasted, left rotting in warehouses and eaten by rats.”

While he went to great lengths to paint a rosy picture of India’s economic future, numerous destabilizing factors remain that could leave foreign investors uneasy about committing to India.

One of them is the ongoing standoff with neighbor Pakistan. Recently heightened tensions between two nuclear-armed rivals are causing great international concern.

Cama admitted that the uncertainty created by the tension has meant missed opportunities for economic growth and foreign investment. But he was adamant that the impact of the chronic conflict on the overall domestic economy has been less dramatic than the impact from the Sept. 11 attacks in the United States.

Cama also held out hope that greater U.S. involvement resulting from the war against terrorism will help bring the two warring parties together.

Domestically, Cama said his biggest concern is the growing fiscal deficits of the central and state governments, which are growing by more than 10 percent annually.

“This is where the governments should focus. This is where the next crisis will come from, not foreign exchange,” he said, referring to the 1991 foreign-exchange crisis that engulfed the country.

When asked about the prospect that China will lure foreign investors away from India, especially in the information technology sector, Cama said that the rivalry with China will provide some good stimulation for domestic industry, noting that some Indian firms have already set up shop in China.

While China is becoming a formidable competitor in hardware production, Cama argued that India’s edge in software will not be easily matched.

He attributed his confidence to India’s large English-speaking workforce.

“That’s the biggest differentiator. It is the single greatest legacy left by the British,” he said.

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