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.

Saritha Rai
New York Times
August 14, 2006

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 hospitals.

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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