India's Reform Measures to Improve Growth: Geithner

New Delhi
India's Reform Measures to Improve Growth: Geithner
US Treasury Secretary Timothy Geithner today said India's reform measures like opening of multi-brand retail to foreign investment will offer a "promising path" to improve growth and investor confidence.

"The reforms outlined by the Government of India offer a very promising path to improving growth outcomes for the Indian economy," Geithner said at a joint news conference with Finance Minister P Chidambaram.

Later addressing the industry leaders, he said: "I feel very encouraged by the initiatives taken by the Indian government... It's good for us that we are here this time when there is so much change in the air."

Geithner's comments come nearly three months after US President Barack Obama's remarks that India restricted foreign investment in many sectors and cited concerns over deteriorating investment climate to endorse another "wave" of economic reforms.

In the past few weeks, the Indian government has taken a slew of reform measures, including opening the multi-brand retail chain to foreign investment up to 51 per cent and hiking FDI investment limit in insurance and pension to 49 per cent. It also liberalised FDI norms for aviation and broadcasting sectors.

"The recent reforms advanced by Prime Minister (Manmohan) Singh and Minister Chidambaram will help provide a foundation for stronger economic growth, an increase in investment, and more widespread gains in income," Geithner said.

Committed to strengthening bilateral economic ties, the two countries discussed ways to further lower barriers to trade and investment to facilitate stronger economic growth.

Stating that India was "deeply locked into the global economy", Chidambaram said he had raised concerns over the US Federal Reserve's quantitative easing (QE) with Geithner.

"I raised the concern that it (QE) may impact commodity prices and commodity prices may rise," Chidambaram said.

"There is also, of course, a beneficial side. Some of that money may come to India as investments. But we need to balance both the advantages and disadvantages."

He said that it was too early to conclude as to what would be the impact of this latest round of QE. Under QE3 the US Fed buys bonds backed by housing mortgages to lower interest rates and boost the economy.

Geithner and US Federal Reserve Chairman Ben Bernanke are on a two-day visit to participate in the 3rd Cabinet Level Meeting of Indo-US Economic and Financial Partnership. Among others, the meeting was also attended by RBI Governor D Subbarao. Later in the evening Geithner met Prime Minister Manmohan Singh.

Uncertain economic situation has impacted foreign fund flow into the country with FDI declining 67 per cent to USD 4.42 billion in the April-June quarter.

Geithner and Bernanke are scheduled to visit Mumbai tomorrow before leaving for Tokyo to attend the International Monetary Fund and World Bank meetings.

Geithner said today's meeting focused on lowering barriers to trade and investment and facilitating stronger and more inclusive growth.

The two sides said they realise that continued investment in "our infrastructure, in our people, and in our institutions" is critical to driving innovation, and increasing job creation and growth in the two economies.

"We are committed to make these investments to enhance competitiveness of our economies and to prepare our people to compete in today's globalised world that is ever changing in the way products and services are delivered," the statement said.
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