Tuesday, August 23, 2011
Pace of economic reforms a point of contention?
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.
Untapped potential
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.”
However, Mr. Gopalan assured, there is a “sustained and continuous policy churn which is happening in these areas, with a view to resolving these impediments.”
Direct Tax Code
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.
Labels: CII, FDI policy, India-U.S. economic ties, Indian economy, Pranab Mukherjee
Saturday, October 09, 2010
Consensus can resolve imbalances: Pranab
From The Hindu
Conflicts over currency valuation cannot be resolved through confrontation but only by building consensus, Indian Finance Minister Pranab Mukherjee said.
Following his speech on the “Emerging global economic architecture” Mr. Mukherjee responded to a question on the U.S.-China trade and currency relationship, saying, “In respect of the currency valuation, my approach is that we should try to engage the countries [concerned] in negotiations and try to build up a consensus through which the matter could be resolved.”
However, in his speech at the Woodrow Wilson Center in Washington he noted that in order to achieve sustained growth and stability, global structural imbalances had to be addressed, “sooner rather than later.”
In particular, the huge build-up of reserves in some countries and deficits elsewhere, massive trade surpluses in some economies and deep trade deficits in others were not sustainable, the Minister said.
Mr. Mukherjee said that by way of resolving these issues, more nations ought to come forward and share the responsibility for contributing to global prosperity and “critical gaps” in international policymaking and regulation, in risk management and international development cooperation needed to be bridged.
Conflicts over currency valuation cannot be resolved through confrontation but only by building consensus, Indian Finance Minister Pranab Mukherjee said.
Following his speech on the “Emerging global economic architecture” Mr. Mukherjee responded to a question on the U.S.-China trade and currency relationship, saying, “In respect of the currency valuation, my approach is that we should try to engage the countries [concerned] in negotiations and try to build up a consensus through which the matter could be resolved.”
However, in his speech at the Woodrow Wilson Center in Washington he noted that in order to achieve sustained growth and stability, global structural imbalances had to be addressed, “sooner rather than later.”
In particular, the huge build-up of reserves in some countries and deficits elsewhere, massive trade surpluses in some economies and deep trade deficits in others were not sustainable, the Minister said.
Mr. Mukherjee said that by way of resolving these issues, more nations ought to come forward and share the responsibility for contributing to global prosperity and “critical gaps” in international policymaking and regulation, in risk management and international development cooperation needed to be bridged.
Labels: currency valuation, Pranab Mukherjee
Friday, October 08, 2010
Pranab hopeful of UNSC seat; positive on Indian economy
From The Hindu
With an eye on the approaching India visit of United States President Barack Obama, Finance Minister Pranab Mukherjee expressed hope that India would be made a permanent member of the United Nations Security Council, and that despite the global economic slowdown the Indian government would neither curb foreign investment flows nor allow itself to slip into an inflationary crisis.
Mr. Mukherjee also tacitly advanced arguments to quash any notion that outsourcing of economic activities to India adversely affecting the U.S.. He said that trade between India and the U.S. had more than doubled between 2004 and 2008 and as Indian companies sought to position themselves better in the global market place, they have invested over $25 billion between 2004 and 2009 in the U.S., “creating jobs and prosperity.”
Regarding the UNSC Mr. Mukherjee said, “I do hope that as and when the expanded Security Council along with the general reforms of the United Nations takes place, India’s claim for being a permanent member of the Security Council will be considered and accepted.” In his speech on Thursday he further said that international financial institutions needed to reflect in their functioning the realities on the ground and pressed for a “more dynamic and equitable economic architecture for global trade and sustained growth.”
While the Minister emphasised lessons learned in the aftermath of the global economic slowdown, for example regarding the need for financial market regulation, he, however, equally assured the attendees at an event at the Woodrow Wilson Center in Washington that he did not consider Foreign Institutional Investment and Foreign Direct Investment flows to be too volatile presently.
Mr. Mukherjee added that while it was the responsibility of the Reserve Bank of India to “watch the situation and as and when it is necessary to intervene appropriately,” he did not believe that the inflow of FII or FDI had distorted the market sentiments. “Therefore there is no question of putting any cap,” on such flows, he noted.
Responding to a question on whether inflation risk had become worrisome in the Indian economy, Mr. Mukherjee struck a cautious note. He said, “I do agree that there is an inflationary pressure in the system and you will have to agree with me that when we have massive financial expansions we cannot expect to have non-inflationary impact on the economy at all.”
He admitted that he was particularly concerned about inflationary pressures on food items, and in this area the Indian government had taken steps to improve the supply side by importing scarce goods. Overall, he said, the government was following a policy trajectory that sought to strike a balance, “so that the growth is not retarded and at the same time the inflationary pressure is being reduced.” This ought to produce an end-of-financial-year inflation rate of “around six per cent,” he said.
Mr. Mukherjee also highlighted a recently concluded agreement between India and Switzerland relating to double-taxation avoidance. The Minister noted that in order to introduce an amendment to a clause in the agreement, concerning the exchange of relevant information between the two countries, there had been an ongoing bilateral dialogue. However, the negotiations had recently been completed and India was now awaiting the ratification of this agreement as per Swiss laws, he added.
Labels: India, India-US ties, Pranab Mukherjee, United Nations Security Council
Saturday, April 03, 2010
Geithner spells out India visit prospects
From The Hindu
“I think it’s interesting that India has been remarkably effective at extending the reach of the financial sector to people living outside the formal economy,” U.S. Treasury Secretary Tim Geithner said, on the eve of a key visit to India.
Touching on some of the lessons that he hoped he could bring back from India to the United States, he said that close to 40 million Americans do not have bank accounts and “it would be nice for us… to understand how they’ve been so effective, starting from a much lower base, at substantially increasing access to the banking sector.”
Mr. Geithner’s comments came at a select press gathering at the Treasury this week, ahead of his departure. He will be in India on April 6-7. In New Delhi he will launch the U.S.-India Economic and Financial Partnership with Finance Minister Pranab Mukherjee. In Mumbai he will meet with Indian and American business leaders.
The newly-formed Partnership aims to strengthen bilateral engagement and understanding on macroeconomic, financial sector and infrastructure-related issues, a statement from the Treasury said. After the Partnership’s Cabinet-level meetings between Mr. Geithner and Mr. Mukherjee, Working Groups will meet through the year to advance discussions on specific economic areas.
Mr. Geithner touched on a range of issues relevant to his upcoming interactions in India. Besides the basic agenda for financial reform and cooperation to be discussed in India, he commented on President Obama’s plan to aim for tax neutrality but not for penalising outsourcing companies, India and multilaterals such as the International Monetary Fund (IMF), the question of deepening capital markets access, curtailing the financing of terrorism, and confidence in the dollar as a reserve currency.
Taxing outsourcers
On India’s concern’s over the U.S. administration’s moves towards raising taxes on companies engaged in outsourcing operations overseas, Mr. Geithner said: “What we have in the U.S. is a tax code where if you have two companies operating the same business in the same State, [the] same part of the country, and one decides it is going to build its next plant outside the U.S. and another decides it is going to build its next plant in that State — the first one, the one that puts its plant outside has a substantially lower tax treatment on its local income.”
On this basis, Mr. Geithner argued, the incentives were “not neutral to the location of the investment. “We’re just trying to get reform that achieves neutrality; it is pretty good policy to be neutral on these kinds of things.”
Multilateral engagement
To a question on the U.S. view on India’s pitch for more rights at the IMF, the Secretary responded: “As part of the reforms we agreed to in the G20 process in London, we initiated and committed to support a substantial rebalancing of the basic voting rights in the institutions, not just in the IMF but in the multilateral development banks.”
The U.S. was negotiating a series of agreements across those institutions and that might come to closure later this year, he added, confirming that such reform that could affect India’s role was “absolutely” on the table and moving forward.
As an example, he said, the U.S. had reached a conditional agreement around the Inter-American Development Bank and IDB reform agenda where voting shares were not central to it but there was a parallel process similar to the World Bank and the IMF.
The issues under consideration at the multilateral institutions are three, Mr. Geithner said: the financial structure of the institution; the governance structure of the institutions and the broad programme priorities, instruments; and the question of what the focus of these institutions should be.
Financial regulation
Among the issues that the Secretary will discuss in India a few stand out. These include deepening capital markets access by foreign entities and measures to curb terrorism financing – an issue that Mr. Geithner confirmed he would take up with Indian officials.
On the issue of capital markets access, Mr. Geithner denied that there was any tension between India and the U.S. given that India might desire to keep its financial system protected from some types of capital market flows. He said that political leaders in India recognised that “they are not at the end of the process of reform in the financial sector; and there is a range of things that will be in India's interest to manage through going forward.”
Mr. Geithner responded to questions on overly restrictive export controls, saying, “We have in the U.S. an export control regime designed in a different period, different time strategically and the President has done the consequential thing of setting in process a broader review [and] reform plan to update and modernise that regime.”
Strength of the dollar
On the dollar’s role in the financial system over time, Mr. Geithner said: “The future is going to depend primarily on how well the U.S. manages our economic challenges and I think that it is very encouraging and good and reassuring for the system as a whole and the U.S. in this financial crisis, [that] at times where there was the greatest concern about the basic stability of the financial system, about the risk of a great depression, deflation, in that period of time people generally still sought the safety of U.S. financial assets…”
Nevertheless, he said: “We’re going to make sure that we are working very hard to demonstrate that we are going to manage are economic challenges as carefully and wisely as we can.”
Childhood memories
The Secretary expressed some fond memories he had of his early years in India, where he lived during 1968-1973, when his father was the Deputy Resident Representative for the Ford foundation in New Delhi.
“I went to the American International School; I lived in Friends’ Colony,” he recalled. He valued being exposed to India at an early age “to learn to see as much as [possible] of Indian lives, not just extreme poverty but… a country with India's great opened dynamism tradition.”
Labels: India visit, Pranab Mukherjee, Timothy Geithner, U.S. Treasury Secretary, U.S.-India Economic and Financial Partnership
Thursday, September 10, 2009
Anyone welcome to join Congress, says Rahul Gandhi
From The Hindu (partial contribution)
CHENNAI: While ruling out senior positions for cine stars who gain lateral entry into the party, All-India Congress Committee secretary Rahul Gandhi on Thursday said that anyone who wanted to join the party and the Youth Congress were welcome as long as they were not “terrorists or fundamentalists.”
Actor Vijay had met Mr. Gandhi in New Delhi some time ago amid reports that the Congress was planning to rejuvenate the organisation using film stars.
On the “open system” for entry into the Congress, Mr. Gandhi said: “When we started this process, Mr. Vijay expressed an interest in understanding the process… and we explained our process to him.”
Speaking to presspersons, Mr. Gandhi said, “Anybody who wants to come into our system is more than welcome to come. As long as the person is not a criminal, and I don’t think Mr. Rajinikant is a criminal, he is more than welcome to come.” The Congress did not create any roadblocks; however, the party was not reaching out to any particular person, he said.
Sri Lankan Tamils issue
Denying the allegation that the Centre had not done anything to mitigate the sufferings of Tamils in Sri Lanka, Mr. Gandhi said: “India is applying massive pressure on Sri Lanka to protect the rights of Tamils affected by the ethnic strife. It had sent two senior functionaries, including the then Foreign Minister Pranab Mukherjee, to Colombo to talk to Sri Lankan President Mahinda Rajapaksa. The Centre would do everything to protect the rights of Tamils,” he said. Moreover, his family, right from his grandmother Indira Gandhi and father Rajiv Gandhi, had deep sentiments for Tamils, not only in Sri Lanka but across the world, he said.
He said his three-day visit to the State was to monitor elections to various posts in the Youth Congress. Whether the party would go it alone in the next Assembly elections and issues regarding sharing of power with the DMK would have to be decided only by the high command .
Mr. Gandhi said he was overwhelmed by the response from the youth for elections to various posts in the Youth Congress. He made it clear that it would be a shallow idea to follow the Uttar Pradesh model, where the party successfully contested independently in the last general elections, as issues differed from one State to another. In the case of Uttar Pradesh, the party considered various options and finally decided to go it alone. That could not be a standard formula for all States, he added.
Stating that factionalism in the Congress in Tamil Nadu was not a major issue, he said it existed in all parties and in all States.
CHENNAI: While ruling out senior positions for cine stars who gain lateral entry into the party, All-India Congress Committee secretary Rahul Gandhi on Thursday said that anyone who wanted to join the party and the Youth Congress were welcome as long as they were not “terrorists or fundamentalists.”
Actor Vijay had met Mr. Gandhi in New Delhi some time ago amid reports that the Congress was planning to rejuvenate the organisation using film stars.
On the “open system” for entry into the Congress, Mr. Gandhi said: “When we started this process, Mr. Vijay expressed an interest in understanding the process… and we explained our process to him.”
Speaking to presspersons, Mr. Gandhi said, “Anybody who wants to come into our system is more than welcome to come. As long as the person is not a criminal, and I don’t think Mr. Rajinikant is a criminal, he is more than welcome to come.” The Congress did not create any roadblocks; however, the party was not reaching out to any particular person, he said.
Sri Lankan Tamils issue
Denying the allegation that the Centre had not done anything to mitigate the sufferings of Tamils in Sri Lanka, Mr. Gandhi said: “India is applying massive pressure on Sri Lanka to protect the rights of Tamils affected by the ethnic strife. It had sent two senior functionaries, including the then Foreign Minister Pranab Mukherjee, to Colombo to talk to Sri Lankan President Mahinda Rajapaksa. The Centre would do everything to protect the rights of Tamils,” he said. Moreover, his family, right from his grandmother Indira Gandhi and father Rajiv Gandhi, had deep sentiments for Tamils, not only in Sri Lanka but across the world, he said.
He said his three-day visit to the State was to monitor elections to various posts in the Youth Congress. Whether the party would go it alone in the next Assembly elections and issues regarding sharing of power with the DMK would have to be decided only by the high command .
Mr. Gandhi said he was overwhelmed by the response from the youth for elections to various posts in the Youth Congress. He made it clear that it would be a shallow idea to follow the Uttar Pradesh model, where the party successfully contested independently in the last general elections, as issues differed from one State to another. In the case of Uttar Pradesh, the party considered various options and finally decided to go it alone. That could not be a standard formula for all States, he added.
Stating that factionalism in the Congress in Tamil Nadu was not a major issue, he said it existed in all parties and in all States.
Labels: AICC, DMK, factionalism, Mahinda Rajapakse, Pranab Mukherjee, Rahul Gandhi, Rajinikant, Sri Lanka, Uttar Pradesh, Vijay, Youth Congress
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