NEW DELHI // The Indian government's decision to open up the economy to foreign businesses and investors will bring in private investment and strengthen economic growth, the US treasury secretary, Timothy Geithner, said yesterday in New Delhi.
India has been embroiled in widespread protests over the government's decision to liberalise the retail, aviation and broadcasting sectors to foreign investment, with critics charging it of catering to the wishes of foreigners at the expense of Indians.
The Indian government claims these "Big Bang reforms" are designed to alleviate fears and bolster international investor confidence in India, which has been dampened by stalling economic growth. The gravity of India's economic woes was highlighted yesterday when the International Monetary Fund sharply cut its projection for India's gross domestic product growth to 4.9 per cent in 2012, adding that the outlook in the country was "unusually uncertain".
Mr Geithner met India's finance minister, P Chidambaram, after attending the third annual meeting of the US-India Economic and Financial Partnership, which was hosted by the Confederation of Indian Industry and the US-India Business Council.
"The recent reforms advanced by prime minister [Manmohan] Singh and minister Chidambaram will help provide a foundation for stronger economic growth, an increase in investment, and more widespread gains in income," Mr Geithner said at a joint news conference with Mr Chidambaram.
Mr Geithner also said the new policies offer "a very promising path to improving growth outcomes for the Indian economy".
"We meet at an important time in the global economy, and during a period of significant economic reform in India and the United States," he said.
Mr Chidambaram, who took over as finance minister in August, said India was "deeply locked into the global economy", and that he had raised concerns about how that may impact commodity prices.
Mr Geithner said he and Mr Chidambaram discussed how US business could contribute to India's infrastructure and investment needs, and improving coordination on bilateral tax matters.
Mr Geithner and Ben Bernanke, the US Federal Reserve chairman, are in India on a two-day visit to boost economic ties between the two countries.
The visit is significant, because "they are showing their excitement for the fact that policy paralysis has ended", said Uma Purushothaman, associate fellow of the US Studies Programme at the Observer Research Foundation in New Delhi.
In July, the US president, Barack Obama, said India was being hamstrung because it was not permitting foreign investment in too many sectors.
However, Ms Purushothaman said that not too much should be read into the visit, which comes barely a month before presidential elections in the US.
"I am surprised this [visit] even came through," said Ms Purushothaman. "They [US] will play it safe. India should wait till the end of the elections to see any results or declare any big statements because until the elections are over, we should know we are not going to affect anything."
Before meeting Mr Chidambarm, Mr Geithner visited the American Embassy School in New Delhi, where he spent a year as a fifth-grade student in 1971-72, when his father, Peter, worked for the Ford Foundation in India .
Mr Geithner and Mr Bernanke are expected in Mumbai today to meet Duvvuri Subbarao, the governor of the Reserve Bank of India.