10.10.12

Change in the air


India’s recent burst of reforms will lead to stronger economic growth, visiting US Treasury Secretary Timothy Geithner has said, reflecting the turnaround in global sentiment towards the country after the government relaxed foreign direct investment norms.
Geithner, who was in Delhi along with Fed Reserve Chairman Ben Bernanke, also sought to address the concerns of IT professionals over visa rejections and said he expected a significant rise in visa issuance.
In a joint statement after the India-US Economic and Financial Partnership meeting, Chidambaram and Geithner said they had discussed ways to lower trade and investment barriers and steps to strengthen cooperation to fight money laundering and terror financing.
The third partnership meeting was attended by RBI Governor D Subbarao and his US counterpart, Ben Bernanke, among others.
The reforms have been welcomed around the world, Geithner added, voicing the restoration of faith in India after the world view turned largely negative when the government amended the Income-Tax Act retrospectively, put out tax avoidance rules and deferred urgent reforms. “I feel very encouraged by the initiatives taken by the Indian government,” Geithner said later in the day, at an interactive session organised jointly by CII and US-India Business Council. “It’s good for us that we are here this time when there is so much change in air,” he added.
Since mid-September, the government has unleashed a number of measures to attract foreign investments, address tax concerns and improve business sentiment — announcements that have been greeted by markets and foreign investors.
Chidambaram said he had raised concerns that the third round of quantitative easing by the US could raise commodity prices, but admitted some of the money could come to India as well. Under its QE3 programme, the Federal Reserve will buy bonds back to lower long-term interest rates to give a push to the US economy.
While Geithner was positive about the US economy, saying it was growing at close to its potential and was in a stronger position than any other major developed economy, his projections on Europe were grim.
Geithner said he and Chidambaram discussed ways to increase the contribution of US businesses to India’s infrastructure and investment needs. The duo also took up measures to improve coordination on bilateral tax matters. India’s economic growth, which slowed to 5.5% in the first quarter of the fiscal, may drop to a decade-low of 4.9% this year due to stalled investments, according to IMF’s World Economic Outlook.

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