India’s recent reform measures are “very significant” and will fuel private investment in the economy, U.S. Treasury Secretary Timothy Geithner said during a visit to New Delhi on Tuesday.
India has announced a series of measures, including raising the price of subsidised fuel and opening the retail sector to foreign supermarkets, to revive economic growth, which has slowed to a near three-year low.
“The reforms outlined by the government of India offer a very promising path to improving growth outcomes for the Indian economy,” Geithner said at a joint news conference with Indian Finance Minister P Chidambaram.
Giethner also said that he and Chidambaram discussed ways to lower trade barriers between India and US.
Chidambaram, saying that India was “deeply locked into the global economy”, told the news conference that he had raised the US Federal Reserve’s new round of quantitative easing with Geithner.
“I raised the concern that it may impact commodity prices and commodity prices may rise,” Chidambaram said. “There is also of course a beneficial side. Some of that money may come to India as investments. But we need to balance both the advantages and disadvantages.”
Chidambaram added that it was too early to conclude what the impact of this latest round of easing, known as QE3, would be.
Under QE3 the Federal Reserve will buy bonds backed by housing mortgages to lower interest rates and boost the economy.
Geithner said he and Chidambaram discussed how U.S. business could contribute to India’s infrastructure and investment needs, and improving coordination on bilateral tax matters.
The reform measures announced by the Indian government over the past month have included raising the price of subsidised fuel to rein in the budget deficit, and opening the retail sector to foreign supermarkets.
The greatest challenge facing Singh, however, is curbing a deficit that a government panel warned last month had taken the country to a “fiscal precipice” and could hit 6.1 percent of GDP this fiscal year.