Geithner hails economic partnership with India

Discussion in 'Foreign Relations' started by LETHALFORCE, Apr 7, 2010.


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    Feb 16, 2009
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    Geithner hails economic partnership with India

    NEW DELHI -- India and the United States have launched a new economic partnership that offers "huge opportunities" for both countries, U.S. Treasury Secretary Timothy F. Geithner said Tuesday during a two-day visit to India.

    The trip is part of the Obama administration's efforts to strengthen relations with one of the world's fastest-growing economies.

    Although few specifics were disclosed, Indian Finance Minister Pranab Mukherjee invited U.S. companies to invest in the fast-developing country's booming construction industry, which is building airports, railroads and 4,400 miles of highway a year. The last reflects the government's goal of making freight traffic more efficient while spreading wealth into India's vast countryside.

    The world's second-most-populous nation, with 1.2 billion people, desperately needs better roads to support its thriving economy, India's leaders say, especially as it emerges as an economic power on the world stage. Nearly 40 percent of India's world-class agricultural products, such as mangoes and tomatoes, spoil because there are delays getting them to market, according to Indian economists.

    "These are vast areas," Mukherjee said at a news conference with Geithner in New Delhi, adding that the country's infrastructure could absorb up to $600 billion in foreign investment over five years. "It will make the relationship between the two nations more vibrant and also help address global challenges."

    India permits 100 percent foreign investment in road building. But it has long restricted many other forms of foreign investment, including importing wine, opening retail chain stores and credit and insurance investments. The new partnership could eventually result in other openings, because the United States is eager to gain access to India's vast markets, especially as it recovers from the worst recession since World War II.

    "We meet at a time of encouraging prospects for the U.S. and Indian economies, and the beginnings of global economic recovery," Geithner said. "We're at a time of great optimism in the United States and around the world about the prospects for growth and reform in India. And I think we have a chance to demonstrate together this economic relationship offers very promising growth and opportunities for American firms just as it does for Indian firms."

    India began to open its economy in the early 1990s. As a result, U.S. private investment here is worth $16.1 billion, about 10 times what it was in the late 1990s, according to the Indian government. But the cap on foreign direct investment continues to frustrate outside investors. For example, Wal-Mart had to team up with an Indian retail outlet before being allowed to open here, and sales are restricted to wholesalers.

    Tensions also persist between India and the United States over American farm subsidies and India's refusal to open its markets to foreign farmers. Those disagreements are blamed for scuttling global trade negotiations in 2008.

    But economists here say that Geithner was careful not to lecture India about specific reforms, especially in view of the U.S. credit collapse.

    "The fulcrum of economic power in the world is shifting eastward," said Paranjoy Guha Thakurta, a New Delhi economist who is writing a book on how India's economy survived the economic meltdown. "Maybe our model has worked well -- with controlled and careful reforms. Maybe India will be able to help Americans find jobs over here in our markets."

    Relations between the United States and India have warmed since then-President George W. Bush and Indian Prime Minister Manmohan Singh signed the framework for their historic nuclear deal in 2005. But Geithner's visit was also meant to calm India's more recent worries that the Obama administration is spending too much time on China, India's economic rival, and Pakistan, its political nemesis, experts said.

    "Geithner's goal in the talks in India on Tuesday will be to give more prominence to U.S.-Indian relations, which have taken a back seat to Washington's ties with China in recent years," said Rani D. Mullen, assistant professor at the College of William and Mary and a South Asia expert. "The visit by Treasury Secretary Geithner clearly sends a strong signal by the Obama administration about the priority it places on maintaining a strong relationship with India."

    This is Geithner's first trip to India as Treasury secretary, but he lived in Delhi for several years as a child when his father worked with the Ford Foundation. Geithner will travel to Mumbai on Wednesday to meet with personnel from American financial companies and Indian business leaders.

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    Geithner in India for Economic Talks

    NEW DELHI — China’s currency and role in global trade may be on economic policy makers’ minds in the United States and India, but it certainly was not on their lips here on Tuesday.

    The United States’ Treasury secretary, Timothy F. Geithner, started his first official trip to India on Tuesday morning with a visit to a village to see a “mobile bank,” which serves customers far from bank branches. Next, he met with his economic counterparts in India, including the finance minister, Pranab Mukherjee.

    China was never mentioned in a joint press conference afterward in New Delhi, and Indian officials said later that they had no plans to intervene in China’s currency policies.

    Instead, Mr. Geithner and Mr. Mukherjee, who met to cement an economic partnership first announced during Prime Minister Manmohan Singh’s state visit to Washington last November, pledged increased cooperation on macroeconomic issues and finance. They did not cite specifics but said they would meet again in Washington.

    The two countries may “come from different positions,” Mr. Geithner said, but they have common problems, including the need to finance infrastructure projects and future innovation and to extend financial services to people outside the banking system.

    Cooperation between the nations is “critically important to the success of global efforts to create conditions for a more stable global financial system,” he said. The two nations can help create economic growth that is “less dependent on the willingness of Americans to live beyond our means,” he said.

    Fast-growing emerging-market countries like India, Brazil and China make up an increasing share of the world’s economy and are expected to account for more than a third of global gross domestic product this year.

    India is an “indispensable partner in securing the future prosperity and security of the world,” Mr. Geithner said, quoting President Obama’s remarks last year. As the world recovers from the global financial crisis, India has emerged “stronger and faster than most large economies,” Mr. Geithner said.

    India’s economy is expected to grow more than 8 percent this year as a rising middle class increases domestic consumption. The country avoided some of the worst effects of the global financial crisis in part because its banking system remains fairly isolated.

    Mr. Mukherjee said Tuesday that discussions with Mr. Geithner had focused on “global development with a special emphasis on U.S. and Indian economies” and that both sides had discussed monetary and fiscal policies, banking regulations and managing capital flow, and infrastructure finance.

    Later on Tuesday, Mr. Geithner told the Indian television channel NDTV that he was “confident that China will decide it is in their interest to resume the move to a more flexible exchange rate that they began some years ago and suspended in the midst of the crisis.” Still, he stressed that it was China’s “choice” to do so. The United States Treasury Department said over the weekend that it would delay a report to Congress that could have charged China with currency manipulation.

    India’s finance secretary, Ashok Chawla, told reporters Tuesday that the Chinese currency debate was a “bilateral issue between the U.S. and China.” India has “no role to play in that,” he said.

    During Mr. Geithner’s visit to India, the Indian foreign minister, S. M. Krishna, was on a four-day trip to Beijing. On Tuesday, Mr. Krishna spoke forcefully about increasing ties between India and China.

    “India and China, who share so much which is in common between our two countries, should work together and try to move much closer together so as to make an impact on global affairs,” he said Tuesday in a speech at the China Institute of International Studies, a research group in Beijing, The Associated Press reported.

    “Just as we advanced decolonization and independence movements in the ’50s, today we are striving to rewrite the rules of the world a little more in our favor,” Mr. Krishna said.

    Heather Timmons reported from New Delhi and Vikas Bajaj from Mumbai.

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    US seeks greater cooperation from India for global economic stability

    NEW DELHI: The US has sought closer ties with India, saying it is crucial for the ongoing global effort to create a framework for strong,
    sustainable and balanced growth.

    “Our ability to cooperate on economic and financial issues will be critically important to the success of global efforts to create conditions for a more stable global financial system, more balanced economic growth,” visiting US treasury secretary Timothy Geithner said at a joint press conference with finance minister Pranab Mukherjee on Tuesday.

    The two countries launched a financial and economic partnership to focus on macroeconomic stability, financial sector reforms and infrastructure issues. The details of the partnership will be worked out by the officials of the two countries.

    Trade policy experts said the agreement was significant, despite the lack of big announcements. “This shows that US wants to bring India at the same level as China and Japan where economic and financial engagement is concerned and hopefully will expand to other areas and further build trust,” said Rajiv Kumar, director and chief executive of New Delhi-based think-tank ICRIER.

    Mr Geithner, who is on a two-day visit to India, will travel to Mumbai on Wednesday to meet the officials of the Reserve Bank of India and other regulators, underscoring the importance the US gives to greater financial cooperation.

    The economic co-operation framework provides for at least once a year cabinet-level interactions and more frequent working level meetings during the year.

    The US has been seeking greater access to India’s financial sector, particularly insurance. Foreign investment in insurance ventures in India is capped at 26%.

    In an indication that the US might not press for rapid opening of the Indian financial sector, the treasury secretary said that the successful
    model of opening up financial system in India ensured that the economy became less vulnerable to global shocks.

    “India has navigated this financial crisis with a steady hand,” Mr Geithner said, adding that the country achieved this ahead of most large economies.

    The US was expected to seek India’s support in its ongoing tussle with China over Yuan, but Geithner refused to the disclose if the two countries discussed the issue.

    India also refused to be drawn into the issue. “We have no role to play on that (yuan issue). That is a bilateral issue between the US and China,” finance secretary Ashok Chawla said.

    The 48-year-old Geithner said that technology transfer curbs were a legacy of the Cold War era and that India will benefit from reforms in the US.

    Mr Mukherjee said US companies were invited to invest in projects in ports, roads and telecommunications, which he said could absorb up to $600 billion in foreign investment over five years.

    Mr Geithner also met Prime Minister Manmohan Singh and Planning Commission deputy chairman Montek Singh Ahluwalia.

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