08/10/2010
Pranab tells US: Protectionism will not help our ties
Washington: Finance Minister Pranab Mukherjee in his meeting with US Secretary of State Hillary Clinton discussed America's decision to hike H-1B visa fees, arguing that protectionism would not strengthen the relationship between the two countries. The US has increased professional visa fees significantly to fund a $600 million programme to secure its border with Mexico.
Mukherjee and Clinton, in their 30-minute meeting at the Foggy Bottom headquarters of the State Department, discussed Indian reservations about several US policy developments. "Protectionism would not help," Mukherjee said, arguing for the free flow of trade and money, which he said would benefit everyone.
As part of efforts to boost employment in the US, Obama is vigorously pushing to end tax break for companies who ship jobs overseas saying it should go to firms who create jobs in America. However, the Senate Republicans successfully blocked the passage of a recent anti-outsourcing bill that denied tax breaks to US companies which move jobs overseas, dealing a blow to President Barack Obama.
India, which already holds at least 50% of the global outsourcing market, has become the world's back office as Western firms set up call centres, number-crunching and software development outlets to cut costs. Mukherjee has also ruled out any plans to curb foreign capital flows, but clarified that its central bank reserves the right to intervene if foreign funds cause the economy to overheat.
"I do not consider that situation (need to curb foreign fund flows) has arisen," Finance Minister Pranab Mukherjee told reporters here. Foreign institutional investors have pumped in a record $21 billion so far this year and Reserve Bank of India Deputy Governor Subir Gokarn has said the central bank could intervene in forex markets if the capital surge leads to any disruptions.
"As far as the Foreign Institutional Investment and FDI to India are concerned, I do not consider that it is going to be too volatile in the present situation," Mukherjee said. "But definitely, it is the responsibility of the central bank of any country to watch the situation and as and when it is necessary to intervene appropriately." Gokarn had said that the Reserve Bank would look out for exchange rate fluctuations before intervening.
Delivering the inaugural Woodrow Wilson Centre and Federation of Indian Chamber of Commerce and Industry (FICCI) annual lecture series, Mukherjee said India is exploring new ideas in financial regulation that protect the vulnerable but allow markets to flourish. "There is a lot that can be learnt from the best practices in one part of the world to guide policy response in the other," he said.
"If we do not regulate economic activity at all, we can have poor people getting trapped in debt and a repeat of the crisis of 2007. On the other hand, if we over regulate, we will kill innovation and harm economic growth. The solution to this dilemma is not easy. The US has tried to address some of these concerns with its new Dodd-Frank legislation," he said.
Source: Agencies
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