Citigroup Inc, an international financial services company with some 200 million customers in more than 100 countries -- has said that the Naxalite insurgency could not only hamper India's economic growth but also restrict FDI in-flow.
Current trends in India politics are a source of worry, the report says. "Politics remains a concern, given the nature of India's coalition government. In addition, the current Maoist insurgency, if not adequately restrained could result in deteriorating governance and undermine investment activity,'' the report says.
The report, titled `India in 2007 - Managing the New Growth Paradigm', says there are four main challenges facing the group and the country. The four are ``higher infrastructure spends, overcoming the human resource paradigm, a need for inclusive growth and politics including the Maoist challenge.''
The Maoist movement or "Challenge #4" takes a full chapter and starts with the history of the Maoist movement. It also takes stock of the possible economic fallout because of the movement, which the report says has spread to "165 districts in 14 states covering close to 40 per cent of the country's geographical area and affecting 35 per cent of the population.''
Orissa, the report predicts, could suffer. It says that Orissa has 33 per cent of the country's mineral reserves including 51 per cent of bauxite, 25 per cent of coal and is the destination of the country's steel and aluminum plants. ``With major projects totaling over Rs 2509 billion, and several major companies including Posco and Vedanta proposing to set up plants in the state, naxalite disturbances remain a major threat,'' the report says.
Chhattisgarh, one state badly hit by the insurgency, too has a problem in hand. The report states that the state is expecting some Rs 130 billion investments in the steel and power sectors. "the Naxalite campaign against industrialisation remains a looming risk. Reports suggest that the Maoists have also issued a direct threat to multinational corporations, and view hi-tech industries as a `symptom of an oppressive capitalist system.''
In a nutshell, "the movement could impose a threat to governance and could hinder investment flows (particularly FDI flows) if not restricted in time,'' the report states.