growth requires capital and investment and ideas, and there is a lot of room for improvement. we are working carefully to build a strategic economic relationship. we do that in the budget areas. we have very productive technical working exchanges under way on things like that management or how to build a more effected -- regime, a whole range of issues. we work closely together and all the major international economic and financial furm, an indy g- 20 in particular, not just because of the credibility experience of indians economic leadership, but india is a model for with a more balanced system.

a good example for the rest of the world in that context. that is one reason india plays such a important role in the g- 20 process to bring the emerging-market economies it together on things that are good for growth. that is our agenda. it is a personal privilege for me to take part in these talks. i spent a large part of my youth in india growing up. i think i spent more consecutive years in india than any other country by the time i was 20. it had a huge impact on my view of the world and that makes it a particular privilege for me to have the chance to work to build a much stronger economic relations. i look forward to our conversations. >> thank you. i would like to express my deep appreciation to the brookings institution for organizing this

conference. in particular, secretary geithner. i will have the opportunity of discussing with him in detail not only how to respond between india and the u.s.a., and also there are issues on which we share common perceptions. one of the fundamental principles of our relatiohip is we share many common patterns. we have now engaged not only in strategic partnerships but also to expandhe relationship in

various international forums, particularly the g-20, as an important forum to address the problems [unintelligible] it has developed into a mar financial crisis. the weaknesses inherent in the system, and too much dependence on market results. effective regulations point out the weakness in the system. we have taken certain measures

in this forum and a full cup summit, the latest one, which has clearly outlined the measures to be taken by the various countries to ensure that there is a proper and orderly development on a sustainable basis. i would like to share with this audience the problems and prospects of the indian economy. many economies were badly hit, but not to the extent that many others suffered. one simple fact will point out

the depth of the problem. at the beginning of the year to designate, our economy was growing almost at the same pace withhe previous year, that was around 9%. but with the growth scenario, we noticed -- in the last quarter, and indications were it would be as low as 5.8%. therefore we had to step then, and like many other countries, we had to provide the fiscal based by injecting a stimulus package, almost 3% of our gdp, but it had its cost. the fiscal expansion literally

created a distortion that we prevented the [unintelligible] of the gdp growth and we had modest growth of 6.6%. the next. with 8%, and in 2010 it was 8.5%. of course in my budget, when i presentethe details are predicted the 2011 level would be around 8.5 to 8.75%. but that does not mean that we are comingack to the path of higher growth scenario without any problems.

one of the problems is inflation. inflationary pressure is putting a serious constraint. if we can have a moderate rate of inflation and a reasonable level of growth, the monetary and fiscal policy must move in tandem. in india, where growing slowly. therefore, theoint i would like to emphasize is that india, the growth potential is tre. the rate of savings and the rate of investment is reasonably high.

the various -- it will insure there is investments that can attract investment from different parts of the country. sometimes questions have been raised, looking in the short term, in the initial months of the current calendar year. the question was raised, almost every year in the past few months of the calendar year,

there is a slow down, but in the latter part of the year, it makes up. this is not in one year, but it has happened in the past. as i was mentioning, inflation is an important constraint that we will have to tackle. to be very frank, a tolerable level of inflation is difficult to define. but in our economy, we have seen that if we cannot give the inflationary pressure -- keep it

within 5% to 6%, it would have been ideal. this year i hope it will be a little more, not because of real supply constraints. we have substantially address that by taking appropriate measures. but the international cmodity price is causing serious concern. we are appreciative of the 60 billion barrels for the month of july, but when i look at the

$90 billion, the 2 billion barrels is not very significant. nonetheless, it has had its impact. the prices have started coming down. we have adjusted the price of oil and also by providing [unintelligible] appealing to the provincial governments. i hope it will have some impact. this is going to be a major problem and it will have its

impact on our world. we have taken certain steps, as i was talking of, we have recently finalized the guidelines. we have also decided that all investment of policy to be more friendly -- more user-friendly. it has been consolidated into one comprehensive document that will be reviewed every six months. we have gotten the specific

intent of our policy. it has been clearly defined in this regard. certain important legislation like reforms of the banking regulation act, the announcement on the insurance sector [unintelligible] these three important legislation as i have introduced in theast session of parliament, and i do hope it

will be possible for us to get these legislations past, but i will -- as i was mentioning to secretary geithner, in our system, we have to have the consensus from the other party because we do not have that simple majority to get the laws passed in our parliament. the talks about the consensus are going on and i hope it will be possible, with the help the parties concerned, we will be able to get these decisions past. in that area of taxation, we have allocated new reforms. i hope from the next financial year we will be able to it.ational lieize

the goods and services tax, we are trying to evolve a consistent as part of our constitutional practice. there are areas of taxation which the constitution has authorized the federal government and provincial governments to enforce taxes. unless the state agreed and a solution is introduced fast, this is not possible to make it effective. for that constitutional amendment, a special majority and 50% of the provincial

government. the consensus among the major political parties, we are working on that to get this legislation passed. we have decided to allow the internal cost to directly affect the investment from foreign investors who meet the guidelines with a view to facilitate investment opportunities in india. only to the foreign institutional investors. [unintelligible]

it has been enhanced considerably from the existing $15 billion. the original limit being available for the bond offerings. for this announcement also there will be a lockout. three years. introducing this subject, dung the next five years from 2012 to 2017, our infrastructure investment will be very substantial. is about $1 billion u.s. 50% of that is to come from the

private sector. we do expect that these immediate measures including the recent guidelines which we have issued, it will be possible for the present sectors to come and make invesents. in order to make it successful, we are providing a funding mechanism which is quite effective. the last point i would like to emphasize, as i mentioned at the beginning of my observations, that in order to prevent the

dissolution of growth, in 2008 we had to lessen the fiscal expansion. today with the problem of fiscal consolidation, while presenting the defense budt, with the mandate of the peoe, i declare that we shall come back to this sooner than later. i am happy to inform this this thing which gathering that we have been able to do so. for the year 2010-2011, i predicted that the fiscal deficit would be 5.5% of our gdp, but we have been able to manage it to four 0.7% of gdp --

4.5% gdp. for the next year we have predicted 4.6%. i hope in the next couple of years will be possible for us to come back to the fiscal deficit to the level which we had before the crisis. thank you, ladies and gentlemen. i have taken more time that i intended to. [applause] >> thank you, mr. minister. thank you, mr. secretary. we will now join our discussion session. >> thank you very much. it is a pleasure and an honor. perhaps the first question to secretary geithner, i know that you and the obama

administration or admire in india's growth rate. >> and fiscal deficit. [laughter] >> but there is some time of feeling in the advced countries in europe and the u.s. that this growth rate somehow subtracts from progress in other countries. how do you explain, how do you elaborate on the interdependence of economies on how, in fact, wrote in the emerging market economies, particularly in india, in some circumstances is actually quite beneficial to the u.s. economy and u.s. consumers and investors? it is sometimes a hard thing to rely explain andet the message out. maybe you can take this opportunity to say a few words on that.

>> it seems self-evident to us, but it is not necessarily accepted immediately by anybody. the way i think about it is this. if you look at the american economy today, the most rapidly growing and strongest parts of the american economy are those most able to benefit from the rapid growth we are seeing in india and other parts of the world. export growth has been good in the early stages of recovery. if you look acrossgriculture, high technology, manufacturing, the most resilient and dynamic parts of the american economy are those most exposed to the growth opportunities we see in india and the emerging economies. with that export growth, you see more jobs, more opportunity, you can demonsate to the average people why we have such a strong taken this

relationship. growth in india is good for the united states. it is no threat to the united states, and the more successful they are in putting in place reforms to help a lot future growth, the better it will be for the united states, just as is true that we benefit greatly from the sheer scale of indian talon we have operating in the u.s. economy, the ideas and innovations they bring is good for our economy. as president obama was so successful in doi in india, you can point to the tangible benefits that come from more investment opportunities and they understand it better. >> this morning there was discussion on the world economy on current account deficits and so on. one point that was made by several speakers is that india

contributes to world a man. >> as do week. >> in terms of absolute size, maybe you want to reduce your as a little bit. >> you are right. let me step back and make a general point. for the world economys a whole, to grow the kind of highest, most sustainable level possible, we need to see more balance across the economy as a whole. we need to see more modest deficits over time in countries like the united states but you need to see more modest surpluses over time in countries like china. if you are not able to achieve that, the risk is that future growth will be more volatile. you see more volatility in exchange markets they can put

pressure on governments trying to develop. for the united states, that means that we have to see the basic pattern of growth shift dramatically from what we saw in the last decade. it was an expansion built on a moreenuous foundation of consumption fueled by borrong and a substantial decline in savings rates. to be successful in the future we need to see a growth strategy were driven by investment and export growth, and we need to see a shift to more responsible saving pattern, not just by the average american, but by the government itself. we are seeing that pattern start to take shape in the united states. >> these are the questions much debated in the g-20. india is now a member of the g-

20. it is a wonderful development to be emerging economies like india. how do you see the role of india in the g-20 and cooperate -- cooperation with the u.s.? exchange-rate policy issues -- how would you about your weight the discussions and the progress made at the g-20? -- how would you evaluate the discussions? >> the establishment of the g- 20 has clearly demonstrated the -- 85% of the world economies are represented by the countries of the g-20.

it is because of the g-20, [unintelligible] to prevent money laundering and to counter terrorist activities, the positive contribution made is the contribution of the g-20 to ultimately [uninlligible] it compels the jurisdictions to cooperate to prevent money- laundering effectively. i am just giving you one example.

there is a sustainable framework as you look for sustainable development. without taking into account [unintelligible] but we are basing the current crisis by providing resources and there is an important ingredient in that some that is an important contribution. the most important piece, the free and frank discussions which take place. at least that is my experience.

the secretary will agree with me, in most of the issues, we arrive at consensus. this practice should be encouraged at all times. i think the g-20 is doing well and we should encourage it to play a more effective role in the coming years as we reach sustainable growth. >> there is sometimes a simplistic view that says in the g-20 you have the old d-7 and then there are the developing countries. there are quite a few issues.

on some issues, maybe it is closer to the emerging marks. would both of useppa few words on the dynamics of the g-20? are there two separate groups, where is it much more intact and flexible -- would both of you say a few words on the dynamics of the g-20? it goes across that line of emerging markets. >> it might be cultural, there will be convergence in india. one of the characteristics of in the yet, we say there is community in diversity. therefore, when we meet in the g-20, there are countries having

different perceptions, different culture, different values, but having a common approach of approaing the issues that affect all of us in a consensual way. there is a convergence of views in certain issues in all of the emerging economies, whether g-7 or g-10, all are converging into the g-20. the divergence will be narrowed down. >> i agree, there for coalitions depending on the issue. one of the things we have done together over the last few years

was to build consensus on reforms to make the governing structure of the international financial institutions more balanced and open and legitimate. in that context, many of the europeans he a somewhat different view. our position was closer to india than to them. there are lots of other issues. we all recognize that for there to be better economic outcomes for the world as a whole, we have to find a way for countries to work together more carefully to make sure they take into consideration the external effects of our policies. think about international financial reform. you cannot create a more financial -- more stable financial system by leaving the design of capital requirements assembly to national authorities. if you do that, you will just

raise them in one place but shift all the risk to somewhere else. we saw that happen in the years before the crisis. there is a compelling compared to f closer cooperation because we are more integrated now. the g-20 is doing a good job of building a foundation to take advantage of that natural interest we have together, mutual interest in negotiating better, and outcomes. >> the projections in india, very convincing projections for growth of to 10% in a couple of decades. china may go down a little bit, but growth is more likely to be rapid. we hope the u.s. will grow at 3% in theong run, it seems possible. all this when you add it up,

given the bigger weight of this rapidly growing economy, adds up to world growth that is unprecedented. are there any worries about natural resources, environment, climate? how to manage an economy that grows so rapidly and provide so many new benefits to billions of people, but do we have the natural resource base, are we investing enough in new technoloes to allow this to be sustainable from an internal point of view? >> i do feel there are areas of cooperation. many of the countries, including india, require technological support. the cooperation we are having with a usa, education and

development, in our concept of sustainable development, the climate is most important ingredient. we cannot allow all the internment to be disturbed further. it will have to be preserved but essentially there is no confrontation between environmental protection and development. we will have to synchronize it in such a manner that development takes place, maintaining the environment as required. sustnable development, the

most important ingredient is maintaining the environment. >> the world at the moment is such an interesting mix of huge promise in terms of the growth trajectory of the emerging economies, not just india, and much of the rest of the world still digging out of a crisis that could have been a second great depression. there is huge promise in the growth potential of emerging economies. that will help the world heal the damage caused by the crisis more quickly. it will bring tremendous pressure onesources, and demands for capital, and a lot of pressure on the system as a whole. that is why it is important that we build a better framework for cooperation so we have a better capacity to manage the inevable tensions that come with that growth. >> we will have to request is.

you'll have to tell me when we are out of time but want to take advantage of this wonderful opportunity. i have to give someone in the back the fst question. >> i have a question for each of you. what do you perceive to be the biggest obstacle to greater u.s.-india economic and financial partnership? >> clearly there is a different

in the perception, but for discussions and negotiations, we have been able to remove the obstacles which were there. for example, after the visit of esident obama, the restrictions on exports in the entities from the list of the u.s.a. is a major step forward. of course the cooperation agreement is an important landmark. therefore, i do not thinkhere is any big hurdle. sotimes there are concerns to be addressed and we will be

doing exactly the same. >> i cannot improve on that. i think if you look at this relationship, one of the things that is so eouraging is the relative absence of trauma -- of drama. there is a complementary interest that the private sector has amplroom to take advantage of but there are a lot of things that stand in the way of that. we will try to work through some of those things. >> i think we can do with aess drama in some parts of the world. we'll takeo questions as a group and then go back t the ministers. >> in the context of the u.s.- china relationships, secretary geithner laid out exactly what the u.s. wants from china and

what china wants from the u.s.. despite the notions of generic cooperation, do you have a similar specific list for india? i would be interested in mr. -- minister mukherjee's views. >> i am really happy to be here because i have a slightly different view on the economies. i have lived both in india and here and identify with both equally. what i am trying to do is add a little bit of drama, but it will depend on your answer. you talked about strategic bought -- partnerships and there

is definitely room for collaboration and mutual benefit. one industry i am curious how this applies to is the outsourcing industry. obviously, india faces inflation or if they are able to cope with inflation, it has an impact on the u.s. economy. i would love to your boat your views on that. >> i will talk about our side of the ledger, our objectives. from our perspective, the most important things we would like to see our progress on financial reforms that provide a deeper, more liquid market for corporate debt, infrastructure financing that allow more access to american companies. our interest are pretty complementary as a whole. we are working with the grain of

the reform imperative as well, which is the only way to make progress. i do not see any conflict between our interest or objectives there. that is where writer at a good motors -- most of the near-term emphasis. -- that is where we put most of the near term if this is. if you look at what is going to happen to wage costs, the cost of doing business, in india and in china, to, they will be increasing more rapidly over the next decade or so. what that means is the economics of the decision about where a u.s. firm may decide to produce or build something is going tohange. it is tilting back in the direction of investment in the united states. you can hear more people talking about reintegrating the supply

chain, bringing some this back. i think that is encouraging for the long-term competitiveness of the u.s. manufacturing industry, but it creates no risk for india. most of india's growth is going to come from the natural dynamics of an economy that has a huge amount of room. that will not be affected by this modest shift in the relative competitiveness of where some services locate going forward. it is good for us at the margin but i do not s any risk to india's growth and development agenda. >> i would like to clarify one point, that india's growth is essentially [unintelligible]

a 2014 we have a $500 billion. but still, the momentum coming from domestic demand, and our inflationary problem, apart from high oil prices and international commodity prices, it is the supply constraints. from the demd side we hit take appropriate measures by adjusting the crucial rate and controlling the demand side. appropriate steps have been taken.

from the supply-side constraints, i mentioned my observations that it was largely related to the bottle neck and supply constraints whi have been addressed. [unintelligible] it all contributed and this trend is going to contie in subsequent years. secondly, even the growth in highly developed countries is slow down as far as expanding

our cooperation. we did not have any defense cooperation with the u.s.. it has started within the last couple of years. it is expanding very fast. therefore that areas of cooperation whether it is in the area of technology, knowledge, education, agriculture, you can have cooperation. growth, inflation, these are temporary measures to be tackled, but let us not stand in the way of long-term cooperation and understanding. thank you.

>> is there anybody from the press? >> both of you toucd on the importance of the g-20 meeting. it is clear that for the past two years, one important point of the g-20 was to reform the international institutions to ensure [unintelligible] tomorrow there will be an executive board meeting to decide the next managing director. it has been reported that china has already expressed their support, and it is an important

opportunity for both countri to express your views for the future of the financial institutions. how are you going to cast your vote tomorrow? [laughter] and based on what kind of thinking. >> secretary geithner era, banks were too big to fail before your bailout, and now there are even bigger. when you talk about financial for -- reform, what do you think of that? it is widely regarded that you have not had the political will to push through reforms. the thing that is true, and if

so, are you going to change that action? >> we will go back to the ministers for their final remarks. who would like to start? >> i would like to answer the qution about the internal institutions, [unintelligible] i must say that the institutions when they are established in a particular context, and when that context no longer demand irrelevant, new institutions are to be formed.

the world has undergone a major change since 1925. this is in the process of these institutions. at the same time i am quite confident that these institutions will be in default. other institutions have attempted under similar pressures, but it did not materialize. after 30 or 40 years, we could establish [unintelligible] therefore, ititutions ought to

just -- ought to adjust. the point is a continuing one. [unintelligible] in india we are going to work continuously for those reforms. 20 years ago, it was to deregulate, and that process was complete. we had to make reforms in other ars as required. most of it has been done, but

most new reforms, it is a constant exercise. the structural differences, i have given some examples as my colleagues have stated. , rabatin the bond market's -- reforms in the insurance sectors, the banking sector, pensions, the necessary legislation have been introduced to ensure its passage. there has to be a consensus and

get support from the others. they will have to carry on the process of default. >> on the first question, i have no interest in announcing our position to you right now. [laughter] i do think we are on the verge of having what i felt is necessary, which is an ope contested process two excellent candidates and a quick resolution. i am sure we are on the verge of having someone emerge that will be able to command it is a time when you need strong leadership. on the question about the u.s. financial reform, let me sell you things quickly about this. if you look back at the top 20

financial institutions in the united states before the crisis, almost half of them no lumber exist today as independent entities. we had a huge restructuring of the american financial system, huge amount of failure of very large institutions. the ones that survived had to meet a market test. could they raise enough capital on their own so they could exist going forward? the surviving instituons today are on average, much better capitalized than their major international peers. but is better than that. if you look at our system in comparison to that of any other major economy, it is a much less concentrated banking system. look at the shares of the top five u.s. firms compared to the top two banks in most of the other major economies today. our banking system is smaller as a share of gdp.

banks at the root in the united states together are only about one times r annual gdp. a comparable number is about five times gp in the u.k., eight times in switzerland. despite the fact that we had such a lot of restructuring or because of it, we are less concentrated and there is a much better capacity to withstand the risk of failure of a major institution because there's more capital in the system. one of the great strengths of financial reform in the united states was that we took away the ability of the executive authorities, regulatory authorities, to intervene, to sustain nonviable institutions and give them a chance of living

again. women did that discretion because of the moral hazard risk -we limited that discretion. we are at the early stages of preparing reforms, but we have a lot of work to do. i am confident we will have a much more stable system and better capacity to withstand shocks in the future and to insulate well-managed institutions from the barriers and mistakes of the less prudent. >> thank you very much. the way aressed in a very substantial way and an open way the questions that asked and engaged with the audience conversation was wonderful. i would like to add my hope that these two demracies will cooperate together and both will contribute to the rest of the worl economy for the many

countries that will benefit from the good performance of both the american and indian economy. i will turn over to our chairman. >> it has been an expanding -- outstanding seioby the two leaders today. thank you for your time and giving us this honor and this interaction. it has been one of the most outstanding sessions in the recent past that we have had between the united states and india. we saw several opportunities as we discussed the challenges throughout the day. the outstanding team from india, including the chairman, the chief economic adviser, and the deputy governor of the world bank. also a very strong team from the

indian industrial. it has been anutstanding day and thanks to both of you we get so much on the table. the support we have received from the indian embassy and the u.s. treasury has been exemplary in making this conference a success. thank you so very much. [applause] >> thank you so much. host: caller: [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> the senators will consider

the nomination of marine corps lieutenant general john allen to replace general david petraeus as commander of u.s. forces in afghanistan. that is on c-span 3 at 9:30 eastern. in a few moments, today's headlines and your calls, live on "washington journal." at 10:00, john kerry tears a hearing of the foreign relations committee looking into whether or not the war powers act applies to military action in libya. we will return to live coverage of the foreign relations committee at 2:30 eastern when members consider a resolution authorizing the limited use of u.s. forces in support of the nato mission in libya. it is a measure introduced last week by senator kerry, john mccain, and others. in about 45 minutes, transportation secretary ray ho