Treasury Secretary Timothy F. Geithner said the U.S.-India relationship has “vast untapped potential” even as American banks and insurers confront obstacles in Asia’s third-largest economy.
U.S. companies “still face barriers in sectors such as banking, insurance, manufacturing, multi-brand retail and infrastructure,” Geithner said at a press conference today with India’s Finance Minister Pranab Mukherjee after bilateral meetings in Washington. Still, the relationship “presents both our countries with vast untapped potential for greater trade, investment and economic opportunity,” Geithner said.
Closer ties would help American companies expand sales to India’s 1.2 billion people. India’s government wants foreign investment in infrastructure to improve its congested transportation network and ease power shortages that are limiting economic progress.
Prime Minister Manmohan Singh’s government plans to double infrastructure spending to $1 trillion in the five years through March 2017 to expand highways, ports, airports and railways. About 50 percent of the funds are expected to come from the private sector, including overseas investors, Mukherjee said.
“There is a huge opportunity” for American investors, he said. He was visiting Washington to participate in the second U.S.-India Economic and Financial Partnership meetings.
Cooperation between the two countries, previously limited to mercantile exports, has expanded in recent years to areas including defense procurement, Mukherjee said. That’s why U.S. exports to India grew fourfold in the past decade, he said.
The U.S. wants India to be one of its top 10 trading partners, Geithner said in a statement today. The South Asian nation moved up to 12th last year.
The U.S. is looking for more access to industries such as financial services, education and legal services. India’s laws, aimed at protecting small-store owners, don’t yet allow foreign investment in multi-brand retail, and have limited it only to single-brand retail or wholesale operations.
Easing the “barriers, which are limiting economic growth and job creation in both our countries, would be an important step toward integrating our economies,” Geithner said. “We understand that addressing these barriers can be politically challenging, but the long-term benefits clearly outweigh the short-term challenges for both our countries.”
India on June 24 unveiled options it is considering to help investors set up infrastructure debt funds to finance road, port and power projects.
The Indian government framework for debt financing “will help encourage private investment,” Geithner said.
India is ranked 91 out of 139 countries for its infrastructure, according to the World Economic Forum’s Global Competitiveness Index. India’s deficiencies in logistics infrastructure cost the economy $45 billion, or 4.3 percent of gross domestic product, each year, according to McKinsey & Co. estimates.
Combined foreign direct investment between the two nations rose by 165 percent from 2005 to 2009.
More trade with India would also help President Barack Obama’s goal of doubling U.S. exports globally in five years, Francisco Sanchez, undersecretary of Commerce for International Trade, said in a speech at the U.S.-India Business Council in Washington on June 23. India last year became the 17th largest export market for the U.S., up from 31st in 2000, Sanchez said.
At a business forum in Washington yesterday, Geithner called for India to take more steps in opening up financial services.