United States’ Treasury Secretary Timothy Geithner on Monday said India needs further liberalisation in the financial sector if it wants to sustain the economic growth at pre-crisis level of 8-9%.
Speaking at a CII function on the Indo-US trade ties, Geithener said,”You have been growing pre-crisis at 8-9%. It seems it could be achievable that you sustain a growth over a period of time. It is going to require more reforms in the financial sector.”
Indian economy, now on the recovery path, has gathered pace and stood at 8.8% during the first quarter of this financial year. The government expects Indian economy to record 8.5% growth this financial year.
Financial sector is being considered as the next engine of growth and in line with this many financial sector reforms bills like those relating to pension sector, hiking FDI cap in insurance and increasing voting rights of foreign entities in private sector banks are pending.
Geithner also said reforms in infrastructure sector is required to speed up the growth process in India.
The US will emerge stronger from this economic crisis and India will be an engine of growth for global economy and both countries will have a major role in shaping the future of global economic development.
On inflation, he said it is starting to appear in emerging markets and said that a framework is needed to guard against excess volatility in emerging markets, as well as protectionism.
Further, on a question on any guidelines or cap on the compensation paid to CEOs, he said it is not the government’s role to set levels of executive pay at companies. He said reforms now in place will limit leverage across the financial sector.
He said emerging countries like India are at the early stages of sustained high-growth phase in productivity, investment and consumption, while in America – in the post-crisis era – consumption will reduce even as Americans will try to shore up their savings. This will lead to a shift in capital from developed countries like the US to emerging countries like India, Brazil and China. Such inflows of capital, while causing inflationary pressures, are good in the long run for India?s development needs.
On the forthcoming G-20 meet, he said it would be a big challenge for the leadership of G20 to find a way to manage global trade imbalances and the possibility of currency wars between major economies.
He proposed a multilateral effort towards developing a regime that ensures transparency in exchange rates and develops a mechanism through which trade imbalances can be rectified through international dialogue and cooperation.