U.S. and India consider negotiating investment pact

WASHINGTON (Reuters) - The United States and India are discussing whether to negotiate a bilateral investment agreement as part of ongoing efforts to expand and deepen economic ties, a U.S. official said on Friday.

Gretchen Hamel, a spokeswoman for the U.S. Trade Representative's office said there was "definitive interest" on both sides in negotiating an investment pact.

But for now, the two countries have decided to hold another round of exploratory talks before moving ahead, she said.

U.S. Trade Representative Susan Schwab and India Commerce and Industry Minister Kamal Nath discussed various ideas for expanding economic ties at the fifth ministerial-level meeting of the U.S.-India Trade Policy Forum this week in Chicago, Schwab's office said in prepared statement.

Those included a recommendation from a private sector advisory group that the two countries negotiate a bilateral investment treaty by the end of 2008, while pursuing other longer-term initiatives to "achieve the freest possible environment for trade, investment and technology transfer."

Although most sectors of the Indian economy are at least partially open to foreign investment, many restrictions remain in politically sensitive sectors such as agriculture, retail trading, railways and real estate.

U.S. foreign direct investment in India totaled about $8.5 billion in 2005 and was concentrated largely in the information, manufacturing and banking sectors.

A bilateral investment treaty would establish terms and conditions governing investment flows.

Two-way trade between the United States and India has grown rapidly in recent years and totaled $41.5 billion in 2007, compared to $15.9 billion in 2002.