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U.S. Treasury Secretary spells out prospects of India visit

Narayan Lakshman

Access to the banking sector is impressive in India, he says

A file picture of young Tim Geithner playing softball while he was in India from 1968 to 1973.

WASHINGTON DC: “I think it's interesting that India has been remarkably effective at extending the reach of the financial sector to people living outside the formal economy,” U.S. Treasury Secretary Tim Geithner said, on the eve of a key visit to India.

Touching on what he hoped he could bring back, he said that close to 40 million Americans do not have bank accounts, and “it would be nice for us… to understand how they've been so effective, starting from a much lower base, at substantially increasing access to the banking sector.”

Mr. Geithner's comments came at a press gathering at the Treasury. He will be in India from April 6 to 7. In New Delhi, he will launch the U.S.-India Economic and Financial Partnership with Finance Minister Pranab Mukherjee. In Mumbai, he will meet with Indian and American business leaders.

The Partnership is aimed at strengthening bilateral engagement and understanding on the macroeconomic, financial sector and infrastructure-related issues, a statement from the Treasury said. After the Partnership's Cabinet-level meetings between Mr. Geithner and Mr. Mukherjee, working groups will meet through the year to advance discussions on economic areas.

Mr. Geithner touched on issues relevant to the interactions in India. Besides the basic agenda for financial reform and cooperation, he commented on President Obama's plan to aim for tax neutrality, but not for penalising outsourcing companies, India and multilaterals such as the International Monetary Fund, the question of deepening capital markets access, curtailing the financing of terrorism, and confidence in the dollar as a reserve currency.

On India's concern's over U.S. moves towards raising taxes on companies engaged in outsourcing operations overseas, he said: “What we have in the U.S. is a tax code where if you have two companies operating the same business in the same State, [the] same part of the country, and one decides it is going to build its next plant outside the U.S. and another decides it is going to build its next plant in that State — the first one, the one that puts its plant outside has a substantially lower tax treatment on its local income.” He argued that the incentives were “not neutral to the location of the investment.” On India's pitch for more rights at the IMF, he said: “As part of the reforms we agreed to in the G20 process in London, we initiated, and committed to support, a substantial rebalancing of the basic voting rights in the institutions, not just in the IMF but in the multilateral development banks.”

The U.S. was negotiating a series of agreements across those institutions, and that might come to closure later this year, he added, confirming that such reform that could affect India's role was “absolutely” on the table and moving forward. The issues under consideration at the multilateral institutions are three: the financial structure of the institution; the governance structure of the institutions and the broad programme priorities, instruments; and the question of what the focus of these institutions should be.

Among the issues he will discuss in India, a few stand out. These include deepening capital markets access by foreign entities and measures to curb terrorism financing.

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