: International News
India returning to high growth path: Pranab Mukherjeee
Washington, June 28, 2011
Assuring American investors that
India was firmly set on a continuous reform path, Indian
Finance Minister Pranab Mukherjeee has said that with recent
"major steps" India is back on its high 8.5 plus percent
"That does not mean that we are returning to growth path
without problems," he told a India-US business forum Monday
with US Treasury Secretary Timothy Geithner ahead of the
second round of Economic and Financial Partnership talks here
While India's growth is largely domestically driven, inflation
pressures have been a "serious constraint which we shall have
to tackle" to check the recent deceleration of growth,
Apart from high oil prices and commodity prices, it is supply
problems that have caused inflation problems, he said
suggesting that while 5 to six percent inflation would be
ideal, he believed the Indian economy could handle inflation
of up to 6.5 percent.
"Monetary policy and fiscal policy thus must move in tandem.
In India, we are doing so," he said.
"Tolerable level of inflation is very difficult to define, but
in our economy we feel that if we can keep the inflationary
pressure within five to six percent it would have been ideal,
but we can deal with six, six-and-a-half percent," Mukherjee
Outlining a series of reforms underway from bringing greater
clarity and predictability to foreign direct investment
regulations, banking, insurance and pension funds, he hoped
the planned measures would get parliamentary approval with
talks on to bring about a consensus.
Geithner acknowledged that the US economy benefits from
India's rapid growth while not impeding India's economic
objectives saying, "Growth in India is good for the United
States, no threat to the United States."
"The most rapidly growing and the strongest parts of the
American economy are the ones that are most able to benefit
from the rapid growth in India," Geithner said adding emerging
markets provide "tangible benefits to more export
However, he asserted that financial system reform were the key
to India's future growth and to realise the "enormous
potential" in economic ties between the two countries.
"We are just at the very beginning of unlocking the enormous
potential of this relationship," Geithner said. "India is at
the point now where future growth will depend on the success
of the next wave of reform."
"From our perspective, the most important things we'd like to
see are our progress on financial reforms, that provide a
deeper more liquid market for corporate debt financing that
allow a little more access to American companies and their
technology," he said.
"I don't see any conflicts with our objectives there,"
Geithner said suggesting "Our interests are pretty
complementary as a whole."
Geithner also said for the global economy to reach its maximum
potential of growth and sustainability more balance is needed.
He said more modest current account surpluses from countries
like China and smaller deficits in the US, would help growth
and reduce volatility in capital markets.
Later Geithner hosted a working dinner for Mukherjee, Reserve
Bank of India Governor Duvvuri Subbarao and Federal Reserve
Chairman Ben Bernanke ahead of Tuesday's formal talks at the