India insisted that its economy would regain vigor and satisfy foreign investors as it fended off US accusations of a worsening business climate ahead of high-level talks.
Secretary of State Hillary Clinton on Wednesday holds an annual dialogue on the shape of the growing relationship, fresh after clearing a main impediment by exempting India from US sanctions over its purchases of Iranian oil.
The world's two largest democracies have been stepping up cooperation on issues as diverse as Afghanistan and higher education, but US businesses have been disappointed by the pace of economic liberalization in India.
Michael Froman, President Barack Obama's adviser on international economic issues, said that the mood of US businesses should be "worrisome" as companies had led the push to improve a relationship that was frosty during the Cold War.
"US firms have increasingly grown concerned about the economic relationship, fearing that the investment atmosphere has deteriorated or that domestic political challenges are slowing the pace of reform," Froman said at the US-India Business Council.
Foreign Minister S.M. Krishna, who will lead India during the talks on Wednesday, responded that the emerging economy was firmly committed to growth.
"In an era of global interdependence, not everything is within the powers of national governments, but I am confident that we will restore investor confidence and regain economic momentum and growth," he told the business group.
In data released Tuesday, India's industrial output in April grew just 0.1 percent from a year earlier, fueling concerns that Asian nations whose growth once seemed inevitable can no longer offer the boost the global economy needs to overcome a sluggish Europe.
"Over the past two decades of extraordinary change in the Indian economy, there have been periods when the growth seemed to lose its steam and the agenda of reform seemed to be slowing," Krishna said.
"But time and again, our economy rebounded with new vigor on the strength of strong fundamentals and supported by some policies and prudent economic management," he said.
US corporations such as Walmart have voiced disappointment after Prime Minister Manmohan Singh's center-left government backed down on plans to remove restrictions on foreign firms.
Foreign companies say that they can improve efficiency and consumer choice, but owners of India's ubiquitous mom-and-pop stores fear that they will be crushed.
US nuclear energy companies have resisted entering India as the parliament has not gone as far as they want in exempting them from liability in the event of an accident.
The lack of investment comes even though India and the United States signed a 2008 agreement on nuclear cooperation, which both sides hailed as a landmark after India endured years of cold shoulders due to its nuclear weapons program.
Krishna hit back that India had its own concerns with the United States including "the refusal to even consider" an agreement that would exempt Indian non-immigrant workers from social security payments.
The minister also criticized "the worsening environment for mobility of professionals," a reference to Indian concerns over costs and restrictions on US visas for professionals working in the United States.
According to India's software industry group NASSCOM, Indian tech businesses support 300,000 jobs either directly or indirectly in the United States.
Despite the disagreements, a much larger dispute was resolved on Monday when Clinton exempted India's banks from sanctions under a new law that aims to pressure Iran over its contested nuclear program.
Clinton ruled that India had cut back on oil purchases from Iran. She has exempted 18 nations since March of the sanctions.