Joint Press Conference by Treasury Secretary Snow and Finance Minister P. Chidambaram

FINANCE MINISTER CHIDAMBARAM: Good evening all of you. This is the third cabinet-level meeting of the Indo-US Financial and Economic Forum. We had a rich and varied agenda before us. We have exchanged views on the global economic outlook and macroeconomic policies that are being pursued by the two countries, as well as other countries of the world. We have discussed the subject of promoting sustainable growths. Earlier today, the officials of both sides had extensive discussions on setting goals for engagement among the ministries and the regulators, with special reference to capital market, banking, money laundering, insurance, pensions and infrastructure.

Both Secretary Snow and I have taken note of the discussions here this morning and we have endorsed the conclusions reached by the officials. From India's point of view, this Forum has been a very rewarding mechanism. Economic cooperation between the two countries is growing. It is stronger every year and I believe it will get stronger in the future, too. We are very happy that Secretary Snow and his delegation have traveled a long distance to be with us for a few days. Secretary Snow has had very useful meetings in Mumbai and Delhi. He has met with industry. He has met with the central bank, the Reserve Bank of India. He has met with our regulators. He has met with some NGOs. I have found this discussion very useful and I think the purpose behind this Forum is clearly proving itself with every meeting. Over to you Mr. Secretary…

SECRETARY SNOW: Thank you very much, Mr. Minister. Let me again say how much we appreciated the warm hospitality and the good engagement we had at this, our third meeting of this kind. It serves to deepen and strengthen the relationships between our two ministries, and our two countries. India and the United States share much in common, as you are the largest democracy in the world, and we are the oldest. The cooperation between our two countries, the engagement between our two countries, is growing and growing. I think the relations between our two countries have probably never been better. I hope my visit here underscores the importance that the United States assigns to our relationship with your country. Just as the President's impending visit early next year signifies how important we view our relationship with India.

We commend you for the commitment you are making to growth and to good economic policy in the area of finance, to further liberalizing financial market operations, deepening and strengthening capital markets. We commend you for that and urge you on with those initiatives because they have huge potential for lifting growth rates and helping address the issue that I know is much on your mind, and the mind of the Prime Minister: reducing poverty levels, creating employment, stronger job numbers, and so on. I found our discussion today extremely productive, and I think we made a lot of progress on a number of issues, and I look forward to the fourth annual meeting where we can host you in the United States. Thank you very much.

MODERATOR: The floor is now open for questions. We have about 15 minutes. I would request you all to introduce yourselves and the organization you represent, and also to speak clearly the question that is being broached.

QUESTION: I am Nivedita Mukherjee from The Week magazine. I wanted to know what specifically has been discussed with regard to strengthening the capital markets?

SECRETARY SNOW: Well, we talked about a lot of subjects that are related to that. One important one is the so-called "road map," and Minister Chidambaram gave us a good review of the "road map," which broadened our understanding of that. In addition, he reviewed with us the anti-money laundering legislation that is moving forward, which of course is important to have strong capital markets. He talked to us about the pension reforms and the insurance rules which will lift, raise the caps on foreign engagement. And we talked about the role of the national stock exchange, which has been in existence just over a decade but is clearly having a powerful effect in your equity markets and in Asia's equity markets. We talked some about the role of the commodity exchange. We had a chance to visit the commodity futures exchange yesterday when we were in Mumbai and, again, that is only two years old, but is beginning to have far reaching effects in its markets, in these commodity markets, and narrowing spreads, in creating better price and choice offerings in those marketplaces. Across the board we reviewed the developments as well as prospects for deepening the bond market, the longer end of the financing markets. I commended the Minister for the very good review and for the progress that's being made across so many fronts.

QUESTION: This question is for Minister Chidambaram and for you also, Mr. Snow. Did you talk about curbing terror-funding?

MINISTER CHIDAMBARAM: Yes, we did. We did. Money-laundering act is in place. We are members of FFATF. We have complied with all the requirements. There has to be a report inspection and a report, which I believe, will take place shortly. I have told Secretary Snow that we are fully committed to curbing money laundering as well as to stamp out financing of terrorist activities.

SECRETARY SNOW: Yes, we discussed the anti-money laundering. We expressed our support for the legislation, commended the Minister and the Government for their commitment to strengthening the anti-money laundering regime, and for their role as being part of the global community that is waging the war against misuse of the financial system for wrongful purposes.

QUESTION: This is Seetha from DNA. The question is for both Mr. Snow and Mr. Chidambaram. I believe in Bombay you had spoken about the need for some fast track mechanism for dispute redressal. Could you elaborate on what exactly you meant? And, Mr. Chidambaram, would you respond to, you know, whether that is acceptable?

SECRETARY SNOW: Yes, in my discussions with business leaders, and I had a number of discussions with business leaders during my two days in Mumbai. The question that came up repeatedly was infrastructure, infrastructure investment, and I got the sense in talking with Indian as well as American business leaders that one of the things that may be holding back further investment activity is concern about the justice systems providing a ready and expedited outcome. In talking with some of these business leaders, the suggestion was made that maybe we should talk, the Minister and I, talk about the applicability of some expedited process to resolve these disputes because one of the things that is on the mind of business people is uncertainty about the length of time that it takes to resolve problems. So, some sort of an expedited dispute mechanism and arbitration process, and I think in our communiqué we reflected the view that having such a mechanism in place would be helpful and we are both, I think, members of the (Minister Chidambaram interjects to say UNCITRAL) UN agreement that calls for arbitration of disputes.

MINISTER CHIDAMBARAM: Both the U.S. and India are members of UNCITRAL, and the Indian Arbitration and Conciliation Act of 1996 reflects the UNCITRAL rules. I have assured Secretary Snow that we have in India a law, which is in conformity with the internationally accepted norms for arbitration. Now these are the UNCITRAL rules, and I have shared with him my own experience of arbitration, where U.S. companies, Indian companies, have arbitrated in locations such as London or Hong Kong or Singapore. But if the U.S. side has any further suggestions to quicken the process of arbitration -- I think the substantive law is adequate -- if they have any suggestions for procedural improvements to quicken the process of arbitration, I said, I would certainly welcome it and see what we can do to quicken the process of arbitration.

QUESTION: Rajesh Mahapatra from the Associated Press. This is a question for both of you. Is the Forum, both of you, aiming for tangible outcomes on some areas before President George Bush visits India?

MINISTER CHIDAMBARAM: Well, actually, Secretary Snow and I meet at least three or four times a year. There are two meetings of the Fund Bank, and then there is a meeting of the G-20. There are meetings of G-7 to which we are invited. So, we have exchanged views on a number of occasions. This is, of course, a formal structured meeting where officials of both sides can meet. We believe that some areas of cooperation have been identified and, in fact, agencies on both sides have been identified to take the discussion further. It is possible that some MOUs could be agreed upon ahead of President Bush's visit. If such MOUs are agreed upon, then perhaps the time when President Bush visits us would be the time to sign those MOUs.

QUESTION: (inaudible)

MINISTER CHIDAMBARAM: We are looking at a dialogue between our commodities market regulator and the commodities futures trading commission. That is an example.

QUESTION: Mr. Snow, this is Subhomoy Bhattacharjee, Economic Times, was there any discussion on the shift capital account convertibility and the steps India is taking to move in that direction?

SECRETARY SNOW: Yes, there was. This is a discussion that Minister Chidambaram and I have had over the course of several years, and we went into this in some detail today. We recognize that the United States has a responsibility to reduce our deficit, and I reaffirmed our commitment to do so and reviewed some of the progress we have made. The U.S. deficit, as a percent of GDP, came in at 2.6% for 2005, the year that just ended, our fiscal year that just ended. That's a little higher than our average over the last 40 years, which is 2.4%, but it's not good enough. We know we've got to bring that down significantly, and we are determined to do so. The President has said we are going to cut our deficit in half, which would bring it well below 2%, by the time he leaves office in 2009. We're scheduled to do that, we're on path to do that. The key to it is keeping the revenue stream strong, the receipts, government receipts strong, and the only way to do that is to have a growing, expanding economy with job creation, more taxpayers, and with profitable businesses. I think we are on track to do that.

We reviewed the outlooks for each of our economies, and I assured the Minister that I thought we were on a pretty good path to sustain good growth rates in the United States. The other part of that, though, in addition to good revenue growth, is spending controls, and there, we're pressing hard. The President is pressing hard, we are pressing hard in the administration, with the Congress, to look at slowing the rate of spending and to go back and reduce spending in a variety of areas. We have been hit with Katrina, as you know, and it's required some additional spending, but we are looking to offset all of that additional spending, or as much of it as we can, through recisions -- that is reducing prior commitments on spending -- and by finding offsets in the budget. We are committed there.

There are two other parts, though, to this resolution of the global account imbalances. One is greater growth rates in other parts of the world that are growing too slowly. Greater growth rates in places that are growing too slowly will create investment opportunities there that will absorb savings. The other part is to make sure that currencies are flexible so that they send the right signals to the global economy so the appropriate adjustment processes are occurring. We are confident that as we approach this as a shared problem with everybody who is a major player in the global economy having a role to play -- India is contributing here by growing -- that we will make progress on this problem.

QUESTION: Miranda Kennedy from National Public Radio. Secretary Snow, could you just give a couple of words on how you see the pace of India's reforms. I know you've spoken in Mumbai about a couple of sectors that you would like to see opened up faster - could you just elaborate on that for a couple of minutes?

SECRETARY SNOW: Yes, India's been on a nearly 15-year, decade and a half, reform process. It started really, I think, when the Prime Minister was the Finance Minister back in 1990-91, at that time, where India looked at tariffs, reduced tariffs, looked at some regulations, and reduced some regulations, and began to engage the global economy on a larger scale. It has continued to do that in that interim decade and a half and in many areas has really made striking progress. We see that in telecommunications, for instance. We see it in a number -- civil aviation -- in a number of industries. And we see it in finance as well. The finance sector is moving to increased openings. We think that is very good for India because the financial system is at the center of any country's economic success because it creates the conditions for success; it mobilizes capital and moves it to the places that it has the highest and best uses. India is making strides and the discussion was the pace of future changes. That was the nature of our discussion and, of course, we are encouraged by the progress and we encouraged the process that will lead to further openings.

MINISTER CHIDAMBARAM: Thank you.