Political India: Engaging America

From The Hindu

The question of whether economic reforms in India have been progressing quickly enough is likely to be a major debating point during the second India-United States Financial and Economic Partnership talks, if comments by Indian Finance Minister Pranab Mukherjee and U.S. Treasury Secretary Tim Geithner indicated the general mood here.

Speaking at a panel discussion organised jointly by the Confederation of Indian Industry and the Brookings Institution Mr. Geithner hinted that the U.S. hoped for a more rapid pace of reforms. He said, “From our perspective the key thing is the outlook for reform... India is now at the point where future growth will depend on the success of the next wave of reforms, not just in the financial sector, but importantly in the financial sector.”

Arguing that the Indian economy had “outgrown its financial system,” Mr. Geithner also said he would be speaking to Mr. Pranab “about things that are important to us as the Indian authorities look for ways to improve the quality of the investment environment.”

Yet Mr. Pranab appeared to disagree with such an assessment of the investment climate and pace of reform. He said that in India “the rate of savings and investment is reasonably high” and “the various structural reforms that we had undertaken and which will come in the course of time... will ensure that there is an investment-friendly environment, which can attract investment from different parts of the world.”

The Minister added that while questions had been raised over the drop in foreign institutional investment flows in the Indian economy earlier this year, “Almost every year, in the first few months of the calendar year, FII flows slow down.” However this gets offset by a rise in flows in later parts of the year, he said.

Deeper social-structural concerns also appeared to be topmost on the minds of Indian officials speaking at the event, including the thorny question of land acquisition for infrastructure and other projects.


While both the Minister and the Secretary admitted that there was $1 trillion worth of untapped potential for investments to meet India’s infrastructural demand, R. Gopalan, Secretary of the Department of Economic Affairs of India, said, “There are issues such as land acquisition, environmental clearances, rehabilitation of displaced persons which cause concern on account of their potential to introduce time and cost overruns.”



Mr. Mukherjee also sought to defend the case that India was expending considerable effort toward reform by citing the Direct Tax Code, India’s role in the Financial Action Task Force, the fact that foreign entities meeting Know-Your-Customer conditions could invest directly in mutual funds, and the evolving National Manufacturing Policy as examples of actively debated policies.

Even as the Minister explained that “To make the FDI policy more user-friendly, all prior regulations guidelines have been consolidated into one comprehensive document, which is reviewed every six months,”, Mr. Geithner pressed him further on the question of what the U.S. hoped to get out of this dialogue with India.

Mr. Geithner said that even though the U.S. valued “the relative absence of drama” in its strategic relationship with India, the most important thing that the U.S. wanted to see was more progress with financial sector reform that provided deeper, more liquid capital markets, but also for India “allow a little bit more access” of U.S. firms to participate in those markets.

The Treasury Secretary also predicted that with the gradual rise in wages in India, the outsourcing industry may be impacted as some economic activities shifted back to the U.S. However this “modest shift” would pose no risk to India’s growth, he added.

There was however strong appreciation from the U.S. side on India’s role in the G-20, as indeed for the expanded role of the G-20 itself in addressing major global issues.

From The Hindu

India-based companies with United States operations actually saved, through their acquisition of U.S. firms, 2,585 jobs from being eliminated during the global economic downturn, a new survey by the Confederation of Indian Industry (CII) has found. Further, the survey suggested that 35 top Indian companies in the U.S. employ over 60,000 people across 40 states and over 80 per cent of these are local hires.

Unveiling the insightful and wide-ranging survey, Indian Roots, American Soil, at a star-studded event at the U.S. Capitol Building on Wednesday, Indian Ambassador to the U.S., Meera Shankar said, “Indian businesses have cooperated with U.S. companies in developing globally relevant products, processes and technology solutions.”

Ms. Shankar noted that these companies, which span a diverse range of sectors from services to manufacturing, had not only generated and sustained thousands of direct and indirect jobs in the U.S., but had also “contributed to the global competitiveness of U.S. companies.”

The survey’s results show progress made even since U.S. President Barack Obama’s November 2010 visit to India, which saw the inking of trade and commercial deals exceeding $14.9 billion in value with $9.5 billion in U.S. exports leading to the creation of an estimated 53,670 U.S. jobs.

Some of the results are likely to dispel concerns expressed by Senators last year about U.S. jobs being lost through outsourcing to countries such as India — in particular, the evidence showing the number of jobs saved and created on U.S. soil. Expressing optimism about the future of the bilateral relationship Senator John Cornyn, Republican of Texas and co-Chair of the Senate India Caucus said, “The relationship between the U.S. — the world’s oldest democracy — and India — the largest democracy — has grown by leaps and bounds in recent years.”

Senator Cornyn further said that trade in goods and services between the two countries had grown “exponentially”, and created economic opportunities in both nations.

Kiran Pasricha, Deputy Director General of CII underscored the fresh perspective that the survey results provided on Indian companies in the U.S. She said, “This is CII’s first major attempt in bringing together Indian companies with operations in the U.S. as a group, to interact with members of the U.S. Congress.”

Ms. Pasricha also said to The Hindu that Congressional leaders were increasingly becoming aware of Indian companies’ footprints in their own districts, and this awareness would help further improve the prospects for Indian companies that sought to make investments in U.S. states in the future.

Among the major companies involved in the event on Capitol Hill this week were Bharat Forge, Essar Americas, Export-Import Bank of India, HCL America, Infotech Enterprises, Infosys, Larsen and Toubro Ltd., Larsen and Toubro Infotech, Larsen and Toubro Hydrocarbons IC, Mahindra Satyam, Mahindra USA, Mindtree, Polaris, Ranbaxy, State Bank of India, Tata Communications, Tata Consultancy Services, Taj Hotels, Resorts and Palaces, Tata Sons, Welspun, Wipro, Wockhardt, and Zee TV.