US against curbs on capital flows

Mulford reacts to FM's statement at Davos.

US Ambassador to India David Mulford today said the US favoured an open capital market without any curbs on capital flows.

Briefing reporters, Mulford said the US economy was stronger than it was credited to be "" this was obvious from the speed with which the subprime loan market had recovered.

Conceding that there would be some slowdown in growth, as it was a transparent market, Mulford, however, said, "We favour an open capital market."

His statement is significant given Finance Minister P Chidambaram's observations in Davos during the World Economic Forum meeting that India would have to act to curb inflow of capital, which could cause the dollar to depreciate further, causing more pain to exporters.

While conceding that the damage done by the subprime crisis would take some years to correct, he said not only was the US going to see a decline in its economy, but other countries would not be immune.

However, one reason why the trade deficit between the US and India had been cut into half, he said, was because of currency changes.

Mulford also said he expected the bipartisan statesmanship shown in the US on the Indo-US Civil Nuclear Agreement to have some resonance in India.

While promising patience until India had gone through its internal political process, Mulford pointed out that the US president had taken some "very radical steps in the non-proliferation history" in backing the agreement.

He added that the US had no intention of "pushing" India but the "statesmanship shown by the US is not getting enough attention here". He also said he had said earlier that time was of essence.

"If negotiations are not completed during the term of this administration, then it might not be possible to begin renegotiations till a new government is in place in India," he warned.

Mulford said the US was willing to help India in fighting the recent bird flu outbreak.

He said the US had offered the Centre and West Bengal a range of things to help the state out of its current crisis, including the Tamiflu vaccine and technologies to control the flu, but added that the US was yet to hear from West Bengal.