India Inc. Worries that Soda Bans will Deter Investment
The bans of Coke and Pepsi in six
Indian states have led to concerns that the move might cool the enthusiasm
of foreign investors to expand into the country. The drink makers
say their products meet E.U. safety standards.
BANGALORE, INDIA - Industry groups in India are concerned that recent
bans on Coca-Cola and Pepsi-Cola could harm the country's image as
an attractive place for foreign investment.
At least six Indian states imposed whole or partial bans on Coke and
Pepsi after a research group said in a report Aug. 2 that the soft
drinks contained harmful levels of pesticides.
The parent companies, Coca-Cola and PepsiCo, account for more than
80 percent of India's $2 billion soft-drink market. Each company says
testing proves that its beverages are safe, and the companies have
mounted big advertising campaigns against the report.
The bans in India "could send the wrong message to investors at a
time when there are vast opportunities for businesses in both countries
to work together," said Prabhakar Bothireddy, president of the Indo-American
Chamber of Commerce, a trade group of 2,600 companies based in Bombay,
also known as Mumbai, with members such as IBM, Motorola and Caterpillar.
India, with a population of 1.1 billion and an annual growth rate
of 8 percent, has been an important draw for foreign investors, especially
from the United States. U.S. companies have led the trend in outsourcing
jobs, much of them to India, accounting for more than 1 million positions
in the country. U.S. exports to India have doubled in the past four
years, rising to $8 billion in 2005.
The controversy is occurring as the Bush administration prepares to
send a large business delegation to India in November.
Kiran Pasricha, the U.S.-based senior director of the Confederation
of Indian Industry, said, "I hope that U.S. companies do not use this
as a measure to decide whether to invest in India."
After the report by the research group, the Center for Science and
Environment, the southern state of Kerala banned all sales of Coke
and Pepsi. In other states, including neighboring Karnataka, the government
has forbidden the sale of soft drinks in schools, public offices and
In 2003, the research group said soft drinks contained unacceptable
levels of pesticides. Consumer organizations in India have urged the
government to set stringent standards for pesticide levels, not just
in soft drinks but in milk and food, including grain. But Indian officials
in New Delhi have not yet acted on the report or set limits on pesticide
levels in food and drink.
In Palakkad in southern Kerala, formerly Palghat, people have agitated
to shut down local Coca-Cola operations, asserting that they were
draining groundwater. Supporters of the campaign said they were happy
that the government had banned the soft drinks.
"If both the plants close down, about 800 people will lose their jobs,"
said Shaji Karaukaveetil, an organizer of the action against Coke.
"But millions of lives will be saved, as these drinks are not safe."
Last week, Coca-Cola India said in response to such accusations that
an independent laboratory had determined that its soft drinks met
European Union safety standards.
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