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U.S. sees vast untapped trade potential with India

By David Lawder

WASHINGTON (Reuters) - Finance officials from the United States and India will work to find ways to access the vast untapped trade potential between the two countries in economic talks next week, a senior Treasury official said on Wednesday.

The official told a news briefing that closer economic cooperation and greater market access would help make India one of the top 10 U.S. trading partners.

The talks, led by Treasury Secretary Timothy Geithner and Indian Finance Minister Pranab Mukherjee, will focus on infrastructure development, capital markets reforms, cooperation on the Group of 20 efforts to reduce trade imbalances, and efforts to combat money laundering, the official said.

One area for discussion will be ways to open India's "relatively closed" capital markets and banking sector to foreign investment, the Treasury official said.

"It's an issue for India as it seeks to maximize its growth potential. It's clearly important for India to develop long-term capital markets to provide adequate financing for infrastructure, which is a major constraint to India's growth," the official said.

The talks follow on an initial set of discussions between U.S. and Indian officials in April 2010 in New Delhi.

In 2010, India ranked 12th among U.S. trading partner, with bilateral trade of $48.8 billion, according to the U.S. Census Bureau. That pales in comparison to the $456 billion in U.S. bilateral trade with China, its No. 2 partner after Canada.

Through April this year, India ranked 13th on the U.S. trade partner list, just behind oil exporter Venezuela.

INVESTMENT UNCERTAINTY

The Treasury official noted that U.S. firms' direct investment in India has fallen off slightly in the past couple of years, which he attributed to uncertainty in the regulatory and operating environment. Greater transparency and exchange of information so that businesses can better anticipate their returns on their investment would help, he said.

He acknowledged that long-standing corruption problems in India were "an impediment to investors looking to commit substantial sums of money."

The biggest opportunity for U.S. companies is India's massive need for infrastructure development, where firms can provide expertise in engineering, financing and the capital equipment needed for the ports, expressways, airports, railways and power grid that India needs to improve the efficiency of its economy, the official said.

The official's remarks came as U.S. Trade Representative Ron Kirk met with Indian Minister of Commerce and Industry Anand Sharma in Washington to discuss market access for U.S. firms and other bilateral issues on Wednesday.

"The booming bilateral trade and investment flows between the United States and India support tens of thousands of critical jobs in both countries, and we know that will only grow significantly in the coming years." Kirk said in a statement. "However, to continue and grow our successes both India and the United States must take concrete steps to resolve long-standing market access and investment concerns."

Next week's economic talks are not expected to cover a long-delayed U.S.-India civil nuclear technology agreement nor India's difficulties in financing its oil trade with Iran without violating international sanctions on Tehran, the official said.

(Reporting by David Lawder, Editing by Leslie Adler)

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