Asia-Pacific

US Treasury chief urges economic reform by India

(Agencies)
Updated: 2011-06-28 11:03

WASHINGTON - US Treasury Secretary Timothy Geithner urged on Monday India to push ahead with reforms, particularly in the finance sector, to realize the "enormous potential" in economic ties between the two countries.

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Geithner was speaking alongside Indian Finance Minister Pranab Mukherjee at a conference in Washington hosted by the Confederation of Indian Industry ahead of high-level economic talks.

"We are just at the very beginning of unlocking the enormous potential of this relationship," Geithner said. "India is at the point now where future growth will depend on the success of the next wave of reform."

He said that India's economy had outgrown its finance sector. The United States was looking particularly for changes to provide more liquid markets for corporate debt financing and for India to allow greater access for American companies to that sector, he said.

India introduced free market rules to deregulate its economy and ease state control in the early 1990s. Its economy has grown rapidly in recent years, with growth of 8.5 percent in 2010, largely driven by domestic demand that could offer an expanding market for American exports. Two-way trade with the US was nearly $50 billion last year.

"Growth in India is good for the United States and no threat to the United States," Geithner said.

Further easing of trade and investment barriers could prove politically unpopular in India. The ruling Congress Party leads a coalition that has been shaken by corruption scandals, hobbling its ability to push a reform agenda.

Mukherjee described reform of fiscal policies as a "constant exercise."

He said key legislation for reform of the banking, insurance and pension fund sectors had been introduced in India's parliament, and the government was seeking consensus among political parties for its passage.

Geithner is hosting Mukherjee for the second annual meeting of the US-India Economic and Financial Partnership, the kind of high-level exchanges that reflect a deepening relationship between the world's two largest democracies. Their central bank chiefs and top regulators also are attending.

Among the issues for discussion will be how to finance the development of India's creaking infrastructure, which offers potentially major opportunities for US companies. India estimates it needs $1 trillion in infrastructure investment during the next five years.