The government has questioned US President Barack Obama's perception of India's economic reality and asserted that policy making is a "sovereign" right of the country.
"There is always a difference between perception and reality. India remains one of the most attractive destinations for foreign investors," Commerce and Industry Minister Anand Sharma said in New Delhi.
"We have adopted a calibrated approach in liberalisation."
Sharma said India's foreign direct investment (FDI) policy regime is investor-friendly and the country had taken an array of steps to liberalise the economy and ease norms related to foreign investments.
Quoting a study conducted by the United Nations Conference on Trade and Development (UNCTAD), Sharma said in terms of attracting foreign investments, India was among the top three countries in the world.
The minister was reacting to Obama's interview to a news agency in which he expressed concern over the deteriorating investment climate in India and called for pushing up the reform process, especially allowing overseas investments in retail.
Sharma urged the US to "demonstrate leadership" in bringing down trade barriers and encouraging capital flows.
"The US should be taking forward the stalled Doha Development Round of the WTO to a meaningful conclusion."
Corporate Affairs Minister Veerappa Moily said fundamentals of the economy were strong and the corporate lobbies led by the companies like Vodafone were spreading negative view of India.
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"Certain international lobbies like Vodafone are spreading this kind of a story and Obama was not properly informed about the things that are happening in India," Moily said.
Deputy Chairman of Planning Commission Montek Singh Ahluwalia, however, said many countries had voiced such concerns and the government would take these factors into account while formulating policies.
"Many countries have been expressing concern over the investment climate. We should take these factors into account," Ahluwalia said, but there is no particular reform that would change these perceptions.
"We need to strengthen the investment climate. I don't believe that the agenda of reform is ever coming to an end," Ahluwalia said.
Political parties also reacted sharply and asked the government not to succumb to US pressure while taking decisions on economic reforms.
Former finance minister and senior Bharatiya Janata Party leader Yashwant Sinha said India should open up the retail sector for overseas investments as and when required and it may not be done under pressure from the US.
"If Obama wants FDI in retail and India does not want, then it won't come just because he is demanding it," Sinha said.
The Communist Party of India-Marxist (CPI-M) objected to the remarks by Obama that India open the doors to WalMart for retail trade and other American investments in India.
"The statement is a brazen attempt to pressurise the UPA (United Progressive Alliance) government to adopt such steps as opening multi-brand retail to FDI. The Manmohan Singh government should not succumb to this pressure," the party said in a statement.