As India plans to achieve 9 percent economic growth during 2011-2012 and cross the double digit threshold during twelfth plan (2012-2017), with US running the global economy, an India-US economic and financial partnership was naturally very much on the cards.
Mainly anchored on massive investments in infrastructure projects, mostly roads and ports, it was but natural to take a call to develop a domestic corporate debit market to meet the long-term requirements of big infrastructure companies for finance, since banks are not designed for this purpose.Thus speaking on the platinum Jubilee celebration of the RBI Prime Minister Manmohan Singh clearly said “Massive investment in infrastructure will have to be funded through long-term debit which underscores the need of a corporate debit market”.
A beginning in evolving a private sector infrastructure bond market had indeed already been made in the current budget itself, when substantial income tax relief was provided to the Middle income group and simultaneously private sector firms were authorized to issue long-term tax free infrastructure bonds. As part of budget proposals ,individuals become entitled to tax benefits for investments upto Rs 20,000 in infrastructure bonds over and above the benefits that were already allowed for Rs one Lac worth of saving across other instruments. Thus the government stands committed to bring in much needed buoyancy in this market. Naturally a number of companies may even venture into global enterprises there being no dearth of business acumen in the country’s business world.
Now India eyes US investment to the tune of $600 billion over 5 years in the US-India partnership in PPP (public private partnership) mode i.e. mainly outside the banking system. This collaboration through various financial systems may see designing of innovative mechanisms by leveraging on private investment .A common approach to strengthen global financial institutions like IMF and World Bank and make them more representative could also be an outcome in the long-run. India’s success in weathering the global recession and resilience of Indian economy has been due to policies based on an inclusive and domestic demand . US Treasury Secretary Timothy Geithner thus rightly noted “India is not vulnerable to the ups and down of the global economic vagaries to a great extent because of its policies”.New Delhi is also hopeful of this partnership ultimately taking the model of highly successful economic dialogue platform that China has with US .The partnership envisages a fast track setting up of an Infrastructure Development Fund that will serve as a vehicle for US investment into Indian infrastructure.
The deepening of financial relations in this manner could also give impetus in bilateral trade. Likewise India’s discomfort with proposed higher taxes for US companies that outsource their business could also be sorted out.There is also a resolve to look afresh about ‘terrorism financing’ that happens to pass through various financial systems and salutary action in this regard could further cement the partnership efforts. Thus the relationship becomes even more important both “economically as well as strategically” .According to Deputy Chairman of Indian Planning Commission Montek Singh Ahluwalia “revitalization and stability of the American economy is an essential element of India’s return to 10% growth and a financial partnership with the US is an economic imperative”.
Soon there will be a significant deepening of capital markets, including more liquid debt markets and increasing the scope of infrastructure finance that will add to gains in both the countries.
Published
13/04/2010 in
http://samaylive.com/english/nation/articles/676461358.html
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