Questions of market access remained unanswered at the close of the second round of the India-United States Financial and Economic Partnership and major policy announcements, if any, were left to July’s Strategic Dialogue meetings in New Delhi.
The Partnership dialogue however succeeded in building substantive bilateral engagement momentum flagging the key areas where potential policy breakthroughs could occur next month, including financial and economic reforms, continued trade and investment growth and broader and deeper cooperation in multilateral initiatives.
Going by the joint statement made here by Mr. Mukherjee and Mr. Geithner, talks surrounding financial and economic reforms are likely to focus on U.S. efforts toward getting India to open up its markets further to American companies.
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Policy attention would appear to have especially gravitated towards the vast demand, placed at $1 trillion, for infrastructure investment financing. Mr. Geithner in his statement said, “By 2017, India plans to raise $1 trillion in infrastructure financing, half of that coming from the private sector. The government’s recently announced debt financing framework will help encourage private investment...”
While the two countries are likely to find common purpose in this sector, it may be the second pillar of dialogue, on trade and investment growth, where thornier issues of market access and disappointments over the pace of reform in India may be further articulated.
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In response to a question from The Hindu on U.S. access to the Indian banking sector Mr. Mukherjee said, “Normally we go on the basis of reciprocity.” He added that with respect to the reforms an “important legislation” was an amendment introduced in the Banking Regulation Act, which is the in the Parliament awaiting comment by the Standing Committee. Similarly key reforms in the insurance and pension sectors were making their way through the parliamentary process, the Minister indicated.
Such developments notwithstanding, Mr. Geithner said, in his statement at the conclusion of the talks, “American companies still face barriers in India in sectors such as banking, insurance, manufacturing, multi-brand retail and infrastructure.”
Yet it may be precisely in the multi-brand retail sector that the U.S. may find joy next month, with some sources suggesting that a policy announcement of consequence was quite likely in this area. This was not confirmed by Indian government officials, however.
The Partnership talks also clearly represented a fillip to expanded cooperation between India and the U.S. in multilateral forums. The joint statement from the talks noted, “India and the U.S. will also work together in the G-20 on an effective mutual assessment process to bring about strong, sustained, and balanced global growth.”
However Mr. Mukherjee said that other elements of multilateral cooperation, including countering terrorism finance and tracing unaccounted money in offshore locations such as the Virgin Islands would be a priority.
Financial stability
Mr. Geithner too indicated that such cooperation could extend to other areas, in particular citing the role of India and the U.S. in global financial stability, which he said could be furthered by India working with the U.S.’ Financial Stability Board.
“India has made its commitment to exchange rate flexibility and domestic demand-led growth clear in the G-20, where we have shared interests and have been cooperating on important issues,” he said.