New Delhi: US treasury secretary Timothy Geithner will try to strengthen bilateral ties with India during talks in New Delhi this week, but his visit may be overshadowed by Washington’s tense relationship with China.
Both the US and India will be simultaneously pushing trade and foreign exchange agendas with China, as they discuss cooperation on infrastructure development and financial markets.
Geithner on Saturday delayed a 15 April report to Congress on whether China manipulates its currency, pledging to work instead with Group of 20 (G-20) members—India and China included—to persuade Beijing to de-peg its yuan from the dollar.
India’s foreign minister S.M. Krishna will be in Beijing for talks this week on a range of issues, smoothing out trade flows and reducing non-tariff trade barriers to shrink a $16 billion (around Rs71,500 crore) trade deficit with China.
“There is one potentially big issue of common interest between the US and India—the Chinese exchange rate,” said Arvind Subramanian, senior fellow at the Peterson Institute for International Economics, a Washington think tank. “China’s undervalued exchange rate affects emerging market economies like India even more than it does the US.” Subramanian added that India might be persuaded to support a broad-based effort aimed at currency rebalancing in a large, global forum such as the G-20 grouping of wealthy and big emerging economies.
China has intervened in currency markets to keep the yuan steady against the dollar since July 2008 at a rate that critics say effectively provides a lucrative subsidy to Chinese exports.
India maintains a floating exchange rate policy. But India remains reluctant to provoke China and won’t want to be seen as openly supporting US demands for a rise in the yuan.
“The Indians have been pissed-off in the past about being used by the US to try to counterbalance China. They don’t want to be in that position,” said Stephen Cohen, a senior fellow at the Brookings Institution in Washington.
US treasury officials have downplayed the China currency issue as a major topic for the talks, referring to it only as a discussion on rebalancing the global economy.
The talks will cover three main areas: economic stability, infrastructure development and the financial sector. Geithner and Indian finance minister Pranab Mukherjee will lead the discussions. The US treasury chief later will meet with Prime Minister Manmohan Singh.