The US is optimistic about India’s growth prospects and hopeful that the Manmohan Singh Government’s new economic reform drive will bolster private investment and incomes, US Treasury Secretary Timothy Geithner said.
Terming India’s flurry of reform measures as “significant”, Geithner said, “The recent reforms advanced by Prime Minister Manmohan Singh and Finance Minister P. Chidambaram will help provide a foundation for stronger economic growth, an increase in investment, and more widespread gains in income.”
He was addressing a joint press conference with Chidambaram, after a meeting between the two counterparts.
His statement came on a day the International Monetary Fund slashed India’s growth forecast to 4.9 per cent for 2012. The Fund, in July, projected a growth rate of 6.1 per cent. The growth rate has been revised even after a spate of reform decisions in last one month.
However, Geithner said, “The reforms outlined by the Government of India offer a very promising path to improving growth outcomes for the Indian economy.”
QE3 issues
Geithner and Chidambaram discussed how US business could contribute to India's infrastructure and investment needs, and improving coordination on bilateral tax matters. Chidambaram said he had raised issue related to US Federal Reserve's new round of quantitative easing (QE3) with Geithner.
Under QE3, the Federal Reserve will buy bonds backed by housing mortgages to lower interest rates and boost the economy.
“I raised the concern that it may impact commodity prices and commodity prices may rise,” Chidambaram said, adding, “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 did admit it was too early to conclude what the impact of this latest round of easing, known as QE3, would be.
Referring to the joint meetings, the Finance Minister remarked that this forum had given a “much better opportunity” to be able to talk to each other and understand each other.
Later, addressing an interactive meeting with CII members, Geithner expressed optimism about India’s growth prospects.
“Don’t be too hard on yourself,” he said referring to concerns expressed by CII members on recent growth slowdown in India.
Geithner said that India was moving in the right direction. He, however, declined to offer any advice to India.
Both Geithner and US Federal Reserve Chairman Ben Bernanke later met Prime Minister Manmohan Singh.