ANALYSIS - Maoist insurgency can hurt industry in India - experts

By Bappa Majumdar

NEW DELHI (Reuters) - The growing Maoist insurgency in India over large swathes of the mineral-rich countryside could soon hurt some industrial investment plans just as the country suffers an economic slowdown.

The government banned the Communist Party of India (Maoist) on Monday, bracketing it with Islamist militant groups, but experts said the ban would have little impact in the battle against the rebels.

On the ground, police fight Maoist insurgents with outdated weapons and are often outnumbered by rebels, who are skilled in jungle warfare and are well-equipped with rocket launchers, automatic rifles and explosives.

Last week, hundreds of Maoists declared the town of Lalgarh about 170 km (100 miles) from Kolkata, capital of West Bengal, as a "liberated zone", sparking unease among investors.

While the economic impact may be small compared with India's trillion dollar economy, the insurgency and the sense that it is worsening signals that India does not fully control its own territory and adds to risks for companies mulling investments.

The Lalgarh incident worried the country's third-largest steel producer, JSW Steel, which is setting up a $7-billion, 10-million tonne steel plant near Lalgarh.

"We are waiting and watching, so are the others," Biswadip Gupta, chief executive officer of the company's West Bengal operations, told Reuters on Tuesday.

"On top of the economic woes, you have the problem of Maoists now. It is very jittery," Gupta said by telephone from Kolkata.