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Canada says FDI flows to India may be hit by riots

A wave of religious violence in Gujarat could hit foreign investment flows into the country, Canada's envoy to India said on Monday.

"If the situation is not brought under control quickly, it will have an impact on investments. The longer it continues, it will be harmful for India," High Commissioner Peter Sutherland told reporters at a seminar in Kolkata.

Since February 27, the communal rioting -- the worst in a decade -- has swept Gujarat, leaving more than 825 people dead.

The violence in Gujarat, India's second most industrialised state, began on February 27 when a train compartment was burned killing 59 people, triggering a wave of revenge killings and clashes.

Some 100,000 people have been left homeless in the state and hundreds of businesses have been burnt by mobs.

"The kind of publicity that the riots have generated internationally is not helpful," Sutherland said.

A Kolkata-based daily, The Telegraph, reported on Monday that a German manufacturing company and a US biotechnology firm had backed out of investing in Gujarat because of the riots. The report did not mention the names of the companies.

On Sunday, Finance Minister Yashwant Sinha said the Gujarat riots were unlikely to have any impact on foreign direct investment flows into the country.

In 2000, India set an annual target of attracting $10 billion in foreign direct investment but at the moment draws only $2.5-3.0 billion each year.

Canadian exports, mainly paper products, fertilisers, and electrical machinery, to India totalled $391 million in 2001 while the country's imports of Indian products, which include textiles and precious gems, were valued at $724 million.

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