US treasury secretary Tim Geithner and finance minister Pranab Mukherjee will launch the US India Economic and Financial Partnership here this week, modelled on the highly successful economic dialogue platform that China has with the US.
The Strategic Economic Dialogue has been the institution where the US and the Chinese economic leadership have thrashed out most of their tricky issues in the current decade. Government officials in New Delhi are hopeful that the new financial and economic partnership with the US will do the same job for India. It is also expected to put on the fast track the setting up of an Infrastructure Development Fund that will serve as a vehicle for US investment into Indian infrastructure.
Once it is in place, topics like India?s discomfort with the proposed higher taxes for US companies that outsource, proposed by the Obama administration and the US government?s keenness for India to open up its insurance sector to more foreign equity, will be thrashed out. Correspondingly, India wants to push for more branch licences for Indian banks in the US.
While at present there are a large number of platforms where the two democracies talk on economic issues, those are limited in their mandate. This includes the US-India CEO Forum and the two commerce ministry?s dialogue on an eventual free trade agreement. The two governments, therefore, want to have a broad-based year-round structure, instead.
According to a statement put out by the US Treasury ahead of the visit, ?The Partnership is aimed at strengthening bilateral engagement and understanding on the macroeconomic, financial sector and infrastructure-related issues?.
So from now on, working groups from the two administrations will meet throughout the year to take up subjects on all aspects of economic cooperation.
For the US, the platform with China was a crucial bulwark in the course of the global financial tumult. China kept its faith in the US currency which was helped by the institutional framework of the Strategic Economic Dialogue. The governor of the Chinese central bank and its other senior officials were regularly briefed by the top US government officials, including the then treasury secretary Hank Paulson.
Some of the key areas that the Partnership will ease out are a dispute resolution mechanism. US investors have often pointed this out as a stumbling block to more investments in India. US companies are pushing to enter sectors like defense and nuclear technologies for which they feel India offers a huge market.