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Tillerson's India visit: China top of agenda

By Archis Mohan
October 21, 2017 08:50 IST
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'We appreciate his positive evaluation of the relationship and share his optimism about its future directions.'
'We look forward to welcoming him in India next week for detailed discussions on further strengthening of our partnership,' the MEA said on Friday.
Archis Mohan reports.

US Secretary of State Rex Tillerson speaks about the US relationship with India for the Next Century at the Centre for Strategic and International Studies, a Washington, DC think-tank, October 18, 2017. Photograph: Yuri Gripas/Reuters

India has described Wednesday's speech by US Secretary of State Rex Tillerson as a 'significant policy statement on India-US relations and its future'.

Tillerson is scheduled to visit India next week.

A statement from the ministry of external affairs on Friday hailed the speech and also sought to underline the congruence of views between India and the US on China's assertiveness in the South China Sea, as well as New Delhi and Washington DC's misgivings over Beijing's 'One Belt, One Road' infrastructure project.

South Block sources said that the OBOR, the South China Sea, and even the Doklam military standoff between India and China could come up during Tllerson's discussions with the Indian leadership.

In his speech on October 18 to a think-tank, Tillerson said the US is India's 'reliable partner.' He criticised China for 'provocations' in the South China Sea and also its 'predatory economics' through its OBOR initiative.

Advocating stronger India-US relations for the next 100 years, Tillerson said China, while rising alongside India, has done so less responsibly. He said that 'in this period of uncertainty and somewhat angst, India needs a reliable partner on the world stage'. He said the US is that partner.

While Beijing criticised Tillerson for his 'biased views', the MEA said in New Delhi on Friday: 'Secretary Tillerson has made a significant policy statement on India-US relations and its future. He brought out its various strengths and highlighted our shared commitment to a rule-based international order.'

'We appreciate his positive evaluation of the relationship and share his optimism about its future directions. We look forward to welcoming him in India next week for detailed discussions on further strengthening of our partnership,' the MEA said on Friday.

In his five-nation, week-long, tour next week, Tillerson is scheduled to visit India, Pakistan, Saudi Arabia, Qatar and Switzerland.

His first stop will be Saudi Arabia where he will meet leaders to discuss Yemen, the ongoing Gulf crisis, Iran and a number of other important regional and bilateral issues, state department spokesperson Heather Nauert said in Washington on Friday.

Tillerson, Nauert said, will then make his inaugural visit to South Asia as secretary of Sstate, reaffirming the Trump administration's comprehensive strategy towards the region.

In Islamabad, he will meet with senior Pakistani leaders to discuss America's continued strong bilateral cooperation, Pakistan's critical role in the success of US President Donald J Trump's South Asia strategy and the expanding economic ties between the two countries, she said.

The exact dates of his visits to Islamabad and New Delhi are yet to be announced.

In New Delhi, Tillerson will meet with senior Indian leaders to 'discuss further strengthening of our strategic partnership and collaboration on security and prosperity' in the Indo-Pacific region, Nauert said.

In his speech on Wednesday, Tillerson said Beijing has, at times, undermined the international, rules-based order even as countries like India operate within a framework that protects other nations' sovereignty.

'China's provocative actions in the South China Sea directly challenge the international law and norms that the United States and India both stand for,' he said.

While the US seeks constructive relations with China, Tillerson said it will not shrink from Beijing's challenges to the rules-based order and where China subverts the sovereignty of neighbouring countries and disadvantages the US and its friends.

Tillerson said his visit to New Delhi next week 'could not come at a more promising time for US-Indian relations and the US-India partnership'.


US Treasury monitoring India's policies

India ran a trade surplus of $23 billion with the US, reports Anup Roy.

India's rising foreign exchange reserves and trade surplus with the United States have attracted the attention of the US treasury department, which will now take an interest in India's macroeconomic policies.

'Treasury will be closely monitoring India's foreign exchange and macroeconomic policies,' said the October issue of the US treasury publication Foreign Exchange Policies of Major Trading Partners of the United States.

India is one of the 13 largest trading partners of the United States, and as of June 2017, ran a trade surplus of $23 billion with the US, which the department termed 'significant'.

Traditionally, emerging markets have maintained foreign exchange reserves at more than their required levels, but India has been more aggressive in this regard.

The US treasury publication said while India's foreign exchange reserves were 16 per cent of its gross domestic product, lower than many of the US's trading partners, India's reserves as a percentage of short-term external debt are at 412 per cent, the second-highest among all major trading partners of the US.

Short-term debts are those obligations that mature in a year.

In the April issue of the same publication, India came on top of the list in short-term external debt coverage, with 427 per cent of the liabilities covered.

'Over the first half of 2017, there has been a notable increase in the scale and persistence of India's net foreign exchange purchases, which have risen to around $42 billion (1.8 percent of GDP) over the four quarters through June 2017,' the report said.

India has a significant bilateral goods trade surplus with the United States, totalling $23 billion over the four quarters through June this year.

The criteria for coming into the focus of the US rreasury are 'net purchases of foreign currency, conducted repeatedly, totaling in excess of 2 per cent of an economy's GDP over a period of 12 months'.

'India is very close to meeting this criterion for the four quarters ending June 2017, with net purchases of foreign currency slightly below 2 percent of GDP,' the report said.

Since then, the Reserve Bank of India has stepped up its reserves accumulation and India's reserves now stand at $400.3 billion.

At the end of June, when the Treasury study was conducted, reserves stood at around $362 billion.

Reserves in Korea, India and Taiwan are currently at or near all-time high levels.

Clearly India's foreign exchange reserves are in excess of what can be considered adequate.

Although there is no one rule to measure reserves adequacy, emerging markets have been aggressively building up reserves in excess of their current needs, observed the report.

India's reserves are now at more than 13 months' imports, against its below seven-month import in 2013.

The reserve adequacy, going by the metrics of the International Monetary Fund, differs from one country to another. Generally, for India, reserves of seven months are considered adequate.

However, economists say the accumulation of India's reserves is the result of a huge fund inflow and if the funds flow out for any reason, the central bank will have to actively intervene to protect the rupee and in such times reserves will eventually may get drained out.

IMAGE: US Secretary of State Rex Tillerson speaks about the US relationship with India for the Next Century at the Centre for Strategic and International Studies, a Washington, DC think-tank, October 18, 2017. Photograph: Yuri Gripas/Reuters

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