India and the US on Tuesday launched the “India-U.S. Financial and Economic Partnership”, an initiative aimed at easing the entry of foreign capital, especially in the financial and infrastructure sectors.
The partnership is part of the U.S. initiative to encourage other countries to open up their economies even as the Barack Administration attempts to limit domestic consumption, increase the savings rate and reduce borrowings.
Speaking to newspersons soon after launching the partnership with Union Finance Minister Pranab Mukherjee, U.S. Treasury Secretary Timothy Geithner said the move would spur trade, investment and job creation in both countries.
Next meeting
The partnership's next Cabinet-level meeting will be in the U.S. while senior officials and experts will interact during the year on specific economic policy areas. While the first meeting discussed the issues broadly, officials would discuss the finer details of translating the “great optimism in the U.S. and the world on the prospects of reforms and growth in India” into policy changes. The inaugural partnership session and the meeting of officials focussed on deepening capital markets, ensuring easy flow of foreign funds through different instruments in the infrastructure sector and alterations required in macroeconomic policies. Mr. Mukherjee said in the immediate-term changes could open up the possibility of attracting more funds for the infrastructure sector which required over $600 billion in the next five years. “Details will be discussed at the official level. We also emphasised on the public-private partnership,” he said in response to a question.
Explaining the rationale from the U.S. viewpoint, Mr. Geithner said the Obama Administration wanted other countries to step up their internal consumption and increase opportunities for the U.S. corporate sector even as Washington embraced the virtues of limiting consumption and stepping up domestic savings after years of profligacy.
Critical challenge
“The critical challenge as the US moves away from consumption financed by borrowing is that we want to see broader reforms and changes outside…this requires changes in rest of the world,” Mr. Geithner observed.
In a joint statement, both leaders said the `Partnership' intends to focus on three broad areas — macroeconomic policy, financial sector reforms and infrastructure financing — by taking forward the existing dialogue on regulatory issues, promoting financial sector reforms, deepening capital markets, including more liquid debt markets and increased financing for investments.
The genesis of the ‘Partnership' was last year's G-20 London summit on the global economic crises at which the West agreed to the demand by the developing world led by China and India to democratise multilateral financing institutions. In return, it is now seeking a more open global trading and investment architecture. “The world today required a balanced global economic growth that is less dependent on the willingness of Americans to live beyond our means,” added Mr. Geithner.
“The Minister and his colleagues outlined the opportunities and challenges ahead for the Indian economy and the policy reforms they are undertaking to raise the rate of overall economic growth…. With those strengths and the Minister's proposed reforms, India's economic growth will be even stronger in the future,” he hoped.
During a busy day of engagements, Mr. Geithner visited a mobile banking centre on the edges of the national capital in keeping with his professed admiration for the ability of the Indian banking system to reach out deep into the interiors. This was followed by a call on Prime Minister Manmohan Singh and a meeting with Mr. Mukherjee.
Following a joint press conference addressed by the two Finance Ministers, officials interacted for two hours over an earlier agreed agenda. In the evening, the U.S. Treasury Secretary had a public discussion with Planning Commission Deputy Chairman Montek Singh Ahluwalia and a former industry chamber official Tarun Das on prospects of financial and economic reforms in both countries.
