Geithner welcomes India's new drive for reform

Tue Oct 9, 2012 6:54am EDT
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By Manoj Kumar and Rajesh Kumar Singh

NEW DELHI (Reuters) - U.S. Treasury Secretary Timothy Geithner welcomed New Delhi's new-found appetite for economic reform on Tuesday, barely three months after Washington had voiced concern about India's deteriorating investment climate.

Hailing the latest reforms as "significant", Geithner told a news conference with Indian Finance Minister P. Chidambaram in New Delhi that the policies offered "a very promising path to improving growth outcomes for the Indian economy".

India's economic growth has slowed to its lowest in nearly three years and earlier on Tuesday the International Monetary Fund (IMF) sharply cut its projection for GDP growth to 4.9 percent in 2012, one of the lowest official forecasts so far.

"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," Geithner said.

Regulatory uncertainty and policy gridlock have battered foreign corporate investment towards India over the past year, adding to dramatic slowdown in growth.

Foreign direct investment into India has fallen 67 percent since the start of the 2012/13 fiscal year in April after a record high the previous year, and investors pulled $1.93 billion from India in the second quarter, helping send the rupee to a record low.

In an interview in July, U.S. President Barack Obama said India prohibited foreign investment in too many sectors, adding there appeared to be a growing consensus in India that the time was right for a new wave of reforms.

India has traditionally been sensitive to criticism from the United States, an ally but one that is viewed by some in New Delhi with suspicion.   Continued...

U.S. Treasury Secretary Timothy Geithner addresses students during his visit to the American Embassy School, his former elementary school, in New Delhi October 9, 2012. Geithner is on a two-day visit to India. REUTERS/Mansi Thapliyal