Into the hushed, worried atmosphere of a CII-arranged meeting at the Leela Hotel in Delhi’s diplomatic enclave, US Treasury Secretary Timothy Geithner – speaking quietly yet with surprising firmness – dropped a message of confidence and optimism. It was “good to be here”, he said of his trip to New Delhi, “when there’s a spirit of change in the air."
Even as the International Monetary Fund broke the 5% barrier in growth projections for India’s economy in 2012-13, Secretary Geithner insisted that his meetings in India had led him to believe that there was a “renewed sense of initiative”. In fact, when the IMF’s growth projections were mentioned to him, he downplayed them. The IMF, he said, has a job to do: “to remind policy makers of the risks”. But he was “very encouraged” by the measures the Indian government was taking.
Mr Geithner’s optimism about India and its government took the audience by surprise, with several questioners asking him what should be done next in order to revive growth. He responded is “not my place” to recommend a next move – and immediately adding “our politics are a bit of a challenge,” clearly implying that Indian politics is, too. He made that explicit a bit later, saying it is hard to “build coalitions of support on policy that may not be too popular.” And in contrast to his last trip to New Delhi, the “sense of possibility” is much greater now than earlier.
When asked for details of his discussions with Finance Minister P Chidambaram, Mr Geithner said that they talked mainly about “the strategy behind the reform process, and what it meant for the Indian economy.” He said the government was showing an awareness not just of the mechanics of good economic policy, but of how to create the confidence needed to “generate investment, including by Indians.”
He warned against a focus on numbers, saying that not just the “strength of growth, but also its quality” was important. He also repeated, to a noticeably sceptical audience, the near-obligatory reference of “the world’s respect” for the architects of the 1991 reforms, adding that “nobody understands the challenges” like the current economic team.
On Indo-US ties, he said that the “lack of drama” is a sign of the relationship’s strength, and that it is stronger than it was three to four years ago. The US economy, he insisted was the best-placed developed-world economy, while Europe would face challenges for a “very long time”.
America had the most formidable fiscal challenges in the developed world to face, greater than most emerging-market economies, but he expected it would rise to the challenge. He was empowered, he repeated several times, by the scale of the problems the US faced immediately after the financial crisis hit, and how it emerged from them. He spoke several times for the need for “conservatism” in financial structures, forcing a reduction in leverage, and broadening the tax net. The shadow of 2008 means that, to Mr Geithner, 2012 doesn’t look so bad.
