US treasury secretary Timothy Geithner on Tuesday said India and the US economic relationship had far more things in common than areas of discord. ?If you look at the ratio of challenges and opportunities, we have remarkably few challenges and a lot of opportunities.? Geithner comment at a CII seminar on Tuesday came on a day when the two countries signed a framework for continuing engagement on economic issues.
Indian companies have complained that the US President Barack Obama should rollback a tax plan that will raise cost for those US companies which outsourced their business to countries like India. India has also been pressing the US to sign a totalisation agreement that would exempt employees of India-based IT companies working in the US from having to contribute to social security from their salary, even though they get no benefit from it.
In response to a query on US?s increasingly cautious attitude on outsourcing, the secretary said that this is kind of ?defensive imperative?. ?Outsourcing would make us weaker not stronger. The President is focusing on re-establishing the domestic market. There is defensive imperative and broader internal imperative to establish internal confidence and eliminate economic insecurity,? Geithner said.
The US President has been trying to expand trade despite the local pressures arising out of the slowdown and job losses, he said.
Geithner said though outsourcing enhances productivity and profitability, it also leads to unemployment. If you give the American people better retirement security, then the President has a better chance of convincing people that their fortune is lies with the world, he said.
He said a lot of companies are optimistic of investing in India and the economic and financial partnership will nurture those plans. ?We are trying to create the depth of relationships.?
Geithner said the US economy was recovering strongly from the financial crises, and that it would bode well for India?s economic growth. ?The US is substantially stronger. We are saving more, borrowing less. The Surveys (in the US) show that both consumer and business confidence is coming back.?
On Friday, a US Labor Department report showed the economy created jobs in March at the fastest clip in three years. ?I think we are healing the things that were broken,? Geithner said. He added that the US government was taking a lot of steps to reforms the capital markets. ?You see a very-2 substantial process of repair happening in our securities market.?
He lauded India for its approach towards economic growth and financial sector reforms. ?The interesting thing about you is that you don?t only focus on how fast you grow but (also) how you grow,? he said, referring the focus on inclusive growth that results in wider prosperity and lesser income inequality.
Speaking at the event, Planning Commission deputy chairman Montek Singh Ahluwalia said inclusive growth was a core element of the government?s strategy. He said the country is aiming to return to the 9% growth path and then aim for 10% growth rate. Ahluwalia said India is a substantially open economy to the foreign investors, barring a few sensitive areas, which should attract overseas and US investors and companies. ?I would be quite optimistic about the foreign inflows because of the growth differential and the hospitable regulatory and policy environment,? he said.
Earlier in the day, at the inaugural Partnership session, working group discussions focused on macroeconomic policies needed to sustain growth in incomes and jobs; measures to reform financial regulation, deepen capital markets as a means to improve growth and increasing financing for infrastructure investment critical to future productivity and economic growth.