Union Finance Minister Nirmala Sitharaman and United States Treasury Secretary Janet Yellen on Friday said the biggest challenge facing their respective countries was inflation, caused by high prices of energy and food on account of the war in Europe.
Both said there was a need for increased cooperation between India and the US amid global headwinds caused by geopolitical uncertainties.
“I will have to say the global economic outlook at present is extremely challenging. In part because high inflation is a challenge that many advanced and developing countries face in common and central banks are first and foremost trying to deal with these problems. In part this inflation reflects the spillover of Russia’s war in Ukraine,” said Yellen.
“As far as the US is concerned, the economy suffers from high inflation,” she said.
Yellen was in New Delhi for the ninth meeting of the Indo-US Economic and Financial Partnership forum. She and Sitharaman also interacted with Indian industry leaders.
“There are comparable challenges as mentioned by the secretary (Yellen). I think in India the inflation challenges are prompted more by external factor,” Sitharaman said.
“So while the number today is in a manageable range, the challenges are largely due to the import of crude oil; 85 per cent of all petro needs that we consume are imported.
Volatility in the emerging markets is going to affect India and that is one thing we are keenly watching,” she added.
The spectre of the war in Europe and its impact on commodity and food prices featured in a joint statement released by the two countries.
“In the context of the conflict in Ukraine, we discussed the current headwinds to the global macroeconomic outlook including increased commodity and energy prices as well as supply side disruptions, and we reemphasised our commitment to the central role of multilateral cooperation in addressing these global macroeconomic challenges,” said the joint statement.
It said both sides had affirmed their commitment to debt sustainability, transparency in bilateral lending, coordinating closely on extending fair and equal debt treatment to countries facing debt distress, and reiterated their commitment to step up efforts to implement the G-20 Common Framework for Debt Treatment in a predictable, timely, orderly, and coordinated manner.
“(The war) generated an unwelcome shock to fuel and food prices and greatly exacerbated inflation pressures. But challenges like this help strengthen partnerships like the one that exists between the US and India by demonstrating the necessity of cooperation and clear and open communication,” Yellen said.
Finance Minister Nirmala Sitharaman and US Treasury Secretary Janet Yellen termed inflation as their biggest challenge. Photo: PTI
When asked on cryptocurrency regulations during the industry interaction, Yellen said this was an area where international collaboration was important — collaboration among public authorities, the private sector, and other stakeholders and where there was need for a high regulatory standard globally.
Yellen said ties between India and the US could be instrumental in supporting economic prosperity across the Indo-Pacific region, and the US was looking forward to discussing shared priorities with India as the latter assumed presidency of the G-20.
“Our strong ties are reinforced through significant and frequent interactions between our Prime Minister and the President of the United States and the commitment of both the leaders towards consolidating a strategic partnership. The Quad and Indo-Pacific Economic Framework have further expanded our cooperation,” Sitharaman said.
She said India still offered an environment with a competitive cost of labour for American companies, and that the latter should transfer technology to their Indian partners.
The finance minister added these platforms served as important fora for stronger collaboration in developing sustainable economies and ensuring global health security, resilient supply chains, clean energy technologies, green infrastructure, and climate finance.
Also present in the discussion were Reserve Bank of India Governor Shaktikanta Das, Economic Affairs Secretary Ajay Seth, and Chief Economic Advisor V Anantha Nageswaran.
Earlier in the day, Yellen visited a Microsoft centre in Noida and said the US was pursuing an approach called “friend-shoring” to move away from countries that presented geopolitical and security risks to “our” supply chains, and the approach included deepening partnership with India.