With the U.S. recently lodging a formal complaint with the World Trade Council against India on entry barriers to companies, an India-U.S. Infrastructure Fund that was set up in 2010 is still in a wait-and-see mode.

Meanwhile, in India's reformed business environment, the Chinese, South Koreans and Malaysians are investing. Recent reports indicate overseas investors have shelled out close to $2 billion in the past year, despite hard economic conditions. However, many U.S. firms are shying away from investing in India's infrastructure sector.

Past problems have created a poor perception of work in India. In the early 1990s, when the reform process was in its infancy, two large American corporations, Enron and Cogentrix, focused on India's power sector. Both companies ran into rough waters and withdrew. These experiences affected U.S. investor sentiment.

Delays in land acquisition, mandatory environmental and other government clearances, problems with fuel linkages, high-tariff structures and red tape, among other issues, lately have been making projects in India unattractive. Plus, over the past couple of years, several infrastructure projects worth several billion dollars have been delayed due to similar issues.

The problem is so bad that the government of India now has set up a Cabinet Commission on Investment (CCI). In the first week of July 2013, CCI already has cleared projects worth $10.5 billion. These approvals have sent a positive signal to stakeholders.

Course Correction

U.S. corporations have pointed out some of the bottlenecks in the power sector: sluggish public-sector-unit (PSU) utilities, lack of unbundling of power—that is, generation, transmission and distribution with only one entry—and power theft. These issues have been largely addressed. In this light, U.S. investment should have picked up at least a few years ago; while the global economic slowdown greatly affected the U.S. economy, there is now a positive change in the profile of the U.S. economy.

It is therefore possible that, in the next year or so, there will be a perceptible change in infrastructure investments by the U.S. The opportunities include a greater visibility of U.S. companies in the railway sector, especially in the Dedicated Freight Corridors and the Delhi-Mumbai Industrial Corridor. Rail-wagon manufacturing and leasing could be a very important segment, which the U.S. industry should consider seriously. An memorandum of understanding has been signed between the U.S. Port of Baltimore and India's Mundra Port, but much more can be done.

Last year, India became one of the elite group of countries to handle over 1 billion tones of cargo annually. The U.S.-India Infrastructure Fund, started in 2010 with Tata and Honeywell taking the lead, was a confidence-building exercise for further economic diplomacy. However, the fund can bear fruit only when the projects move on the ground.