Nokia says committed to India despite difficulties

Finnish telecom giant Nokia said Saturday it is in talks with India's government about how to create a better business climate and remains "committed" to its manufacturing plant in the country.

The statement followed an Indian Express newspaper report Friday that said the mobile maker had told New Delhi the country is now its "least favourable market" in which to operate and it made better sense to export its products from China.

"Nokia can confirm that it has been in discussions with the central government and state government over ways to bring greater clarity to the business environment in India," the company said in an emailed statement to AFP.

"These discussions have been both constructive and productive, and both sides have worked in a true spirit of cooperation," the company added.

Foreign direct investment in India has slowed sharply amid mounting domestic economic woes including a plunging rupee, a huge current account deficit, slowing growth and perceived government policy paralysis.

A string of tax disputes embroiling Nokia and other multinationals including Cadbury Royal Dutch Shell and Vodafone has also deterred investors.

Nokia, fighting a 20-billion rupee ($311 million) tax demand from Indian authorities, did not elaborate on the contents of its talks with the government.

The Indian Express report Friday said Nokia had urged the government to "act quickly to correct the wrong perception of India as a place for business".

It quoted the phonemaker as saying "the political risk of operating in India" has become "suddenly substantially higher and may inevitably influence future decisions to develop one's operations in India".

But Nokia said in its statement it remained "committed" to India which remains a "priority market" and its Chennai plant plays an "integral part in our global manufacturing strategy".

The Chennai plant is one of Nokia's biggest worldwide.

India has stepped up its pursuit of alleged tax delinquents to reduce a hefty budget deficit. Nokia insists software downloaded onto its mobiles in India should to be taxed in Finland under a bilateral treaty between the countries, but India's tax authorities view it differently.

India -- one of the world's fastest-growing mobile phone markets -- is the second largest market for Nokia which began operations in the country in 1995 and employs 8,000 workers directly in Chennai.

Nokia, which had been India's leading handset maker for 14 years, recently ceded its crown to South Korea's Samsung.