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Our Bureau

New Delhi , July 26

VIOLENT clashes between the workers of Honda Motorcycle and Scooter India and the local police in Gurgaon for the past two days has led to a larger fallout with the industry asking for more flexibility in labour laws and warning of a negative effect on FDI inflow into the country.

India Inc, though guarded in its response to any major impact the incident could have on the investment climate, advocated easing of labour norms and streamlining the legislative framework.

"Such incidents underline the imperativeneed to bring about effective legislative changes in labour laws and streamline the Industrial Disputes Act," the PHD Chamber of Commerce and Industry President, Mr K.N. Memani, said. He said the investment climate gets disturbed as such incidents send negative signals to both domestic and international investors.

The Assocham President, Mr M.K. Sanghi, too emphasised the need for flexibility in labour laws, particularly in a liberalised economy. He, however, ruled out any adverse impact on overseas investment inflow.

The Chairman of the American Chamber of Commerce in India, Mr Amrit Kiran Singh, also ruled out any negative effect on flow of FDI into the country.

The Confederation of Indian Industry said the industry is deeply disturbed at the developments in Haryana, especially as Gurgaon is a preferred base for the industry in general and overseas investors in particular. It hoped for an amicable resolution to the issue.

Auto majors, however, said this was an isolated case and would not have a bearing on the larger investment sentiment in the auto sector.

Mr B.V.R. Subbu, President, Hyundai Motors India said, "This is clearly a case which relates to a single company and is not a reflection of the industrial environment in India. It will not have any impact on FDI. As long as India is a profitable destination, FDI will come.''

The Government was unequivocal in its response that the incident was unlikely to deter investment into the country.

While the Prime Minister has sought an enquiry into the clashes, the External Affairs Ministry said in a statement, "An isolated incident involving a labour dispute should not become a benchmark for judging the investment climate in India. The country's democratic institutions and its legal system provide an effective mechanism to deal with such incidents in a transparent manner. The legal interest of foreign investors will be fully safeguarded."

Meanwhile, the Japanese Ambassador to India, Mr Yasukuni Enoki, while attending a CII conference here today, said on the sidelines that the incident could have an adverse impact on FDI inflow. However, he was quick to add the incident would also show Japanese management in a negative light and that the Japanese Embassy would not intervene in the matter.

Industry analysts pointed out that Japanese companies in India have faced labour unrest in the past as well. "Several Japanese companies in India, including Yamaha and Maruti, have faced labour related issues," they said.

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