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Canada-India trade talks overshadowed by corruption scandals

View of a crowded street in the southern Indian city of Bangalore. Bangalore, for the world, is the city of promise, a technology hub with hundreds of thousands of skilled but cheap workers who have tons of talent to keep global businesses running and help shape their future.

STRINGER/INDIA/Reuters

India's Trade Minister took pains to reassure Canada about his government's efforts against corruption as the two sides formally kicked off negotiations toward a free-trade agreement on Tuesday.

The Canadian delegation landed in New Delhi to find the capital awash with stories of dirty dealings, as several graft scandals erupted simultaneously, casting a pall over the ministers' speeches about how the two countries are natural business partners.

In his prepared text, Canadian Trade Minister Peter Van Loan praised India's similarities with Canada, describing its "similar rule-of-law system, where contracts are respected and you can rely on the courts if you need to."

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But many questions from a room packed with local journalists cast doubt on whether India can be trusted with investors' money. Three high-profile politicians have been forced out of their jobs in the last week amid allegations of financial wrongdoing, prompting some of the country's leading industrialists to make unusually blunt statements about their struggles with corruption.

India's Industry Minister, Anand Sharma, spoke at length about the allegations while sitting beside his Canadian counterpart.

"Let's be very clear," Mr. Sharma said. "India is a rule-based and rule-governed country."

He continued: "I do not see why any investors would hesitate, and I'm sure they would not. Investments made into this country are secure.

"Have you read anything that any investor has been hurt in any manner? Any investor has been cheated? The answer is 'No.' … The world has heard of much worse scandals elsewhere."

By Canadian standards, however, some of India's recent scandals are epic. Canada's Auditor-General estimated that the 2002 sponsorship scandal involved $100-million in misspent funds; this week, India's Telecommunications Minister, Andimuthu Raja, resigned amid allegations that he awarded mobile spectrum rights in a way that cost his government $40-billion. (He says he did nothing illegal.)

That resignation followed the ousting last week of Ashok Chavan from his post as chief minister for the powerful state of Maharashtra. He was accused of helping his relatives and friends get apartments in a housing project meant for war widows.

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On the same day, the government pushed out Suresh Kalmadi, lead organizer of the recent Commonwealth Games, who was jeered and booed during the opening ceremonies because many people blamed him for reports of widespread corruption in the event planning. (Mr. Chavan and Mr. Kalmadi also say they did nothing wrong.) Last month, Transparency International's annual rankings showed India has slipped to 87th of 178 countries, down three spots from the previous year.

"I'm not going to go by the reports and the ranking," Mr. Sharma said.

He also suggested that perceptions of Indian corruption may be a result of bias against the country's rise as a global power: "We've seen that sometimes it becomes a favourite pastime, because the fact is there's a clear shift taking place in the world and the economic and political architecture is undergoing a radical transformation."

Trade agreements can require years of negotiations, and neither the Indians nor the Canadians were willing to say what demands they will bring to the process.

In an interview, Mr. Van Loan said he feels confident about selling the idea of a free-trade pact to Canadians, because unlike Americans they are not so fearful about outsourcing jobs overseas.

"That's not an issue in Canada," Mr. Van Loan said. "I know when my wife ordered something from Sears she was talking to somebody from India, but it has not been the same politically charged issue that it's been in the United States."

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