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India-United States Economic and Financial Forum - Third Sub-Cabinet Level Meeting

Washington, DC
April 27, 2004       

As part of the Enhanced U.S. – India Economic Dialogue, senior U.S. and Indian policymakers discussed economic and financial development and global efforts to combat terrorist financing.   India’s Finance Secretary D.C. Gupta led the Indian delegation, which included officials from the Ministry of Finance, The Reserve Bank of India, and the Securities Exchange Board of India.   The U.S. was led by Treasury’s Assistant Secretary for International Affairs Randal Quarles; the U.S. delegation included officials from the Treasury Department, the Federal Reserve Board, the Office of the Comptroller of Currency and the Securities and Exchange Commission, the Commodities Futures and the State Department.

The discussions focused on:

Macroeconomic policy: The two delegations discussed the importance of appropriate tax policies and expenditure management for macroeconomic stability and sustained  economic growth.  Emphasis was also placed on monetary policies that maintain price stability, and inter-governmental fiscal relations that are structured to give both central and state governments incentives to maintain fiscal discipline.  The two sides had fruitful discussions about appropriate exchange rate policies.

Financial sector issues: Both sides agreed that a strong financial sector is essential for sustained growth and macroeconomic stability.  They discussed the role of the public sector as a regulator and supervisor, and noted the growing presence of private investment in the banking sector.  They discussed ways to deepen trade in financial services for mutual benefit.  They underlined the importance of transparency in financial regulation.   They discussed the U.S. experience in encouraging bank lending to underserved regions without weakening asset quality.   Both sides stressed the need to adequately provision for and restructure non-performing loans.

Terrorist Financing Issues:  The two sides pledged to continue close cooperation in the fight against terrorist finance and to protect charitable non-profit organizations from terrorist abuse.   They noted that alternative remittance systems were particularly vulnerable to abuse by terrorists and agreed to enhance information exchange on such systems, their weaknesses, and ways to deal with such transactions.   To prevent abuse of the formal financial sector, both sides acknowledged the importance of financial intelligence units (FIU) to monitor suspicious financial activity and to record and share financial information in accordance with international standards promoted by the Financial Action Task Force (FATF) and the Egmont Group.  Towards this end, the Indian government’s ongoing efforts to implement appropriate policies were applauded. 

Next Steps:  Both sides agreed that the discussions laid a solid foundation for continued engagement.   The delegations agreed to continue discussions on the following areas:

  • Strengthening tax administration.

  • Examining experiences in Asset Reconstruction Companies.

  • Continuing cooperative information exchange, especially on financing of terrorist groups and establishing Financial Intelligence Units.

  • Sharing experiences on pension reform and promoting efficiency through increased competition.

  • Sharing experience on capital market and commodity market regulations and on convergence issues.

·        Strengthening the legal framework for investor protection, investigation and enforcement procedures and codes for corporate governance.

  • Considering the views of the U.S. and Indian private sectors.