Pranab-Geithner talks to focus on broad pillars of macroeconomic policy
A top official of the United States Treasury made a strong pitch for economic reforms that would remove “barriers having to do with market access” that are impeding greater bilateral trade and investment. The official was speaking to the media here a few days ahead of the second round of the U.S.-India-Financial and Economic Partnership (FEP).
While next week's discussions between Finance Minister Pranab Mukherjee and U.S. Treasury Secretary Tim Geithner will focus on the broad pillars of macroeconomic policy, financial sector reforms and infrastructure finance, Under Secretary Lael Brainard, talking to a select group of journalists, spoke about the need for more competition and openness in sectors such as banking, insurance, pension products and, most importantly, multibrand retail.
Responding to a question from The Hindu whether India opening up these sectors too soon might put domestic players and smaller producers at risk from foreign competition, Ms. Brainard said: “If you look at the areas where India made some huge steps forward in previous decades, such as telecoms and IT — look at how competitive your providers are now. Our general theory of the case is that competition leads to world-class competitors and sheltering leads to companies that cannot compete very well on the world stage.”
Ms. Brainard indicated that financing of infrastructure investments was also likely to be at centre stage of the discussions, explaining that besides the question of reforms to remove market barriers in this area too, the two sides would “talk very specifically about municipal bond markets. In this country, we do a lot of infrastructure investment at the municipal level and we have very active bond markets at that level.”
On broader issues such as the controversy over the alleged fall in U.S. visa issuance to Indian IT companies, she said: “My understanding is that in the area of H1-B visas India is the biggest by far — something like 50 per cent more than any other country — beneficiary of the H1-B programme.”
Acknowledging that there were concerns in this area, the Under Secretary, however said, “In fact, Indian access has not changed in any way in the H1-B area. But it is an area that we will continue, obviously, to look at, because we know it is important to you.”
She also spoke of the long-standing and unresolved question of totalisation or the issue of Indian companies in the U.S. that contributed over $1 billion annually towards U.S. social security programmes but did not derive any benefits or refunds from that owing to the short-stay nature of their visas.
Ms. Brainard expressed doubt that there would be many options for resolution in the near future. “On social security equalisation at the moment it is not clear how far we are going to be able to proceed there because our systems are so very different but we are certainly in principle willing to engage in discussions and will continue to do so to see whether there is more potential there.”
Other key themes of the talks that would touch upon social dimensions of economic growth in both countries included anti-corruption measures and inclusive-growth strategies, the official said.
To another question from The Hindu whether the recent corruption scandals in India had fouled the trade and investment climate for foreigners, Ms. Brainard said: “We know from a lot of research and economics that one of the key factors in explaining the health of the investment environment is how much transparency there is and how effective are safeguards against corruption.”
She specifically touched upon anti-money laundering and countering terrorism financing as areas where the U.S. was “very eager to deepen co-operation” with India. “We are looking forward, during the discussions on Tuesday next week, [to] talking further about the challenges both sides are facing” in this regard.
Regarding inclusive growth, Ms. Brainard reflected on her visit earlier this year to India, where she witnessed firsthand the transformations brought about by community banking programmes based on peer monitoring and gradual scaling-up of small business operations.
“There is a lot of innovation that is possible in that area and we look forward to sharing those experiences because we can also learn a great deal.”
Touching on the overall tenor of the FEP talks, the Under Secretary said: “We will talk about the reform agenda on both sides and how we can each participate in each other's growth. We will talk about macroeconomics. We have different challenges but we work closely together on the G20 in particular.”