INDIA BUSINESS WORLD - AUGUST 2006
THE MONTH THAT WAS...

COLA BAN MAY HIT INVESTMENTS: US

JUST ahead of a large American trade mission's arrival in India , the US government has warned that the recent ban on soft drinks by state governments could affect investment. Undersecretary for international trade Franklin L Lavin, who is leading what is billed as one of the biggest ever US delegations, said the ban is a setback for the Indian economy, according to an agency report.

Mr Lavin reportedly said at a time when India is trying to attract and retain foreign investment, it would be unfortunate if the discussions were dominated by those who did not want to treat foreign companies fairly.

Last week, environmental group Centre for Science and Environment had accused Coca-Cola and Pepsico of high levels of pesticides in their soft drinks, leading to full or partial bans in six states.

There is fear among the business community here that US companies might be discouraged from investing in India due to this ban, especially at a time when many high-level interactions are planned between the US and India . The US department of commerce has been inviting companies from across sectors to participate in the trade mission that will arrive in India in late November this year. The mission's aim, ironically, is to give US companies an insight into India 's investment climate.

The CEO Forum is also to meet in October in New York with Indian and US officials, consequent to which, there might be a top-level investment mission to India a few months later.

US assistant secretary of state for South and Central Asia Richard Boucher had, during his recent visit, said a large number of American companies were signing up to be part of the US trade mission. “We have been really impressed by the response from American companies for this trade mission. It is almost unprecedented how quickly they have signed up, and it looks like this will become the largest bilateral trade mission the United States has ever sent to any country in the world,” he had told Ficci in Delhi .

The mission would participate in the Mumbai Business Summit on November 29 and 30. US companies then have the option of going on six spin-off business matchmaking missions to Bangalore , Kolkata, Chennai, Hyderabad , Mumbai, or New Delhi .

However, American Chamber of Commerce executive director Romesh Bajpai believes that the ban would not impact investments at this stage. COLA companies need to be ready by next year for a composite standard for the maximum permissible pesticide level in their finished products, in addition to the norms for sugar that go into soft drinks. The Union health ministry will also notify the protocols to test samples from the market by April next year. However, the ministry does not agree with Pepsi's demand that the calibration of the equipment and the testing protocols should be validated internationally by peer review.