India-US: Nearing yes ‘we’ can

Semi Column

Hank Paulson was Timothy Geithner's predecessor as the US Treasury Secretary. He has an amazing tale about the role China played when the global financial order cartwheeled after the collapse of Lehman Brothers in 2008. Before announcing the first round of quantitative easing, the $700 billion Troubled Assets Reconstruction Programme, Paulson worked the phones with Beijing to keep them abreast of the developments. Just as the announcement of the extra inflow of government papers began making yields haywire, the People's Bank of China stepped in to announce its comfort with the dollar and markets were soothed. Just a few months before, the USA had announced a Strategic Economic Dialogue with Beijing.

India seemed a world apart. But till a couple of years ago it was punching above its weight in the global economic order. In April 2010 when Paulson's successor Geithner signed the Indo-US Economic and Financial Partnership with Pranab Mukherjee the implicit ideas were on the same lines. Indian exports to USA had risen 180 per cent since 2000 and combined foreign investment between the two countries did even better at 165 per cent in just five years. But relations soured soon. The two economies fought their own economic battles but more important Washington felt the economic bridgehead it had established in New Delhi had become redundant as none of the promised changes in foreign investment or trade rules came through. Compared to the clear plan of action in the first joint communique the second one in 2011 just restated positions. "We" is how Chidambaram and Geithner have described themselves in the statement on Tuesday at the third meeting of the partnership. The number of areas where the two nations suddenly seem to find synergy has leapfrogged. The most telling is the commitment to deepen cooperation in G-20. India has never been on the same page with USA at this forum. Instead of the two countries talking on parallel tracks, US Fed chief Bernanke explained in detail to Chidambaram and Subbarao why he felt the third quantitative easing will not create a wall of cheap dollars to push up oil prices creating havoc for India's inflation management.

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