Washington, D.C. (June 28, 2011) – U.S. Secretary of the Treasury Timothy Geithner and Indian Finance Minister Pranab Mukherjee convened in Washington, D.C. on Tuesday, the second ministerial meeting of the U.S.-India Economic and Financial Partnership.
The two spoke as two of the world’s largest economies, noting that the U.S.-India relationship offers enormous economic opportunities for Americans and Indians alike. They pledged stronger collaboration and coordination amongst economic and financial policymakers, for the partnership to deepen bilateral and multilateral engagement in order to fully capitalize on the wealth of economic opportunities between the two nations.
The comprehensive inter-agency participation from both the United States and India, including Federal Reserve Chairman Bernanke and Reserve Bank of India Governor Subbarao, is the highest level economic and financial meeting ever between India and the United States. The meeting furthered a commitment that the United States and India together share in expanding economic opportunities for citizens through greater trade and investment.
The U.S.-India economic relationship has made significant progress in recent years. Private sectors share a common entrepreneurial spirit and belief in the pursuit of business innovation. Over the past decade, trade and investment between the two countries has expanded across a variety of industries and sectors.
Between 2000 and 2010, Indian exports to the United States grew by nearly 180 percent and American exports to India increased over four times. Meanwhile, combined bilateral U.S.-India foreign direct investment grew by nearly 165 percent between 2005 and 2009.
Despite the progress, the leaders recognized that especially given the size of the two respective economies, that they recognize untapped potential and opportunity to expand trade and investment linkages of mutual benefit.
“American companies still face barriers in India in sectors such as banking, insurance, manufacturing, multi-brand retail and infrastructure,” said Geithner. “Easing those barriers, which are limiting economic growth and job creation in both our countries, would be an important step toward integrating our economies. We understand that addressing these barriers can be politically challenging, but the long-term benefits clearly outweigh the short-term challenges for both our countries.
“Second, we hope to see more progress toward economic and financial reform in India,” he said. “We know that the economic reforms and market opening that began in India in the early 1990s have had a significant impact on both economic growth in India and the global competitiveness of Indian companies.
“The Indian government recognizes that to realize its aspirations of strong growth, it will need to attract sufficient investment, both from abroad and domestically,” he added. “India will need to advance pending economic and financial reforms to make this possible.”
The two discussed the challenges that both economies face in ensuring a strong recovery and price stability in the short term, as well as the range of policies necessary to reach growth at full potential domestically.
The outcome stated that the U.S. is committed to making the investments in technology, skills, and infrastructure necessary to maintain and enhance U.S. competitiveness in the global economy. The leaders said India intends to take steps to marshal private and public saving to meet the infrastructure needs of a rapidly growing Indian economy.
The leaders said the U.S. and India would continue to work together to expand trade and investment links between the two economies, and to develop and strengthen its financial systems. The two will also work together in the G-20 on an effective mutual assessment process to bring about strong, sustained, and balanced global growth.
Leveraging our combined knowledge, experience, and shared interests, the two sides agreed to a robust agenda for the coming year that includes deeper engagement in the following areas within each pillar of the Partnership:
• Macroeconomic challenges, including growth, unemployment, inflation, global liquidity, commodity prices, international capital flows and fiscal consolidation.
• Financial sector reforms, including deepening of capital markets, financial inclusion, and ensuring the stability, transparency, and integrity of the financial system.
• Infrastructure finance, including innovative strategies to mobilize capital for infrastructure development, and sharing best practices and building capacity for design and successful execution of Public Private Partnerships.
Since the April 2010 launch in Delhi, Geithner said the Partnership has led to deeper institutional relationships and exchanges between U.S. and Indian economic and financial sector regulators – both of which have proven critical to technical cooperation, capacity building, and the removal of impediments to realizing our relationship’s full economic potential.
“By 2017, India plans to raise $1 trillion in infrastructure financing, half of that coming from the private sector,” said Geithner. The government’s recently announced debt financing framework will help encourage private investment, as well as its plan to develop a more formal framework on public-private investments.
“Reducing government demand for credit will help increase the available credit for infrastructure, as will addressing obstacles to creating a robust corporate bond market,” he added. Potential ways to address bond market challenges include giving greater scope for institutional investors to invest in fixed income assets, raising aggregate and individual investment caps to boost liquidity, and developing a liquid government securities market.”
Building on the success of the first year of the Partnership, the two said the countries would continue to strengthen our economic and financial partnership in order to realize the full economic and strategic potential of the U.S.-India partnership to achieve maximum benefits for Americans and Indians.