The eighth meeting of the Indo-US Economic and Financial Partnership has focussed inter alia on important issues like money laundering, illicit finance and terror funding – extremely important in the present context.

In the meeting, both sides also noted the devastation caused by the Covid-19 pandemic and sought to bolster bilateral cooperation. In a separate meeting with the Board of Governors of the International Monetary Fund, the commitment was made towards the vaccination of the entire world.

Indian finance minister Sitharaman expressed concern over the stark differences in vaccination coverage of low-income and advanced countries and called for addressing vaccine inequity swiftly. She also stressed that to win the war against the Covid, sharing of medical research and developing adaptive, responsive, affordable and accessible health care systems were imperative.

The significance of this Indo-US meet is to be seen on several aspects. First, the joint US-India Economic and Financial Partnership statement reflected that there was satisfaction with the economic reforms adopted by India. There had been no mention on the need for economic reforms. In the past, in 2016 and 2019, the statements had focussed on the need for reforms. This is a testimony that economic reforms introduced in the past one year have made positive impact. Important among them are India’s acceptance of the plans for a minimum global tax for corporations and removal of retrospective tax levied on several companies. Crucially, both sides hailed the OECD/G20 Inclusive Framework political agreement on October 8 as representing a significant accomplishment for updating the international tax architecture to reflect the modern economy and establish an international tax system that is more stable, fairer, and fit for the 21st century requirements.

Second, the meet reflected upswing in the economic relations. The exchange-related issues and import duties were not raised like earlier times. The statement noted that India had made significant progress in recent years to resolve bilateral tax disputes between the two countries, and that it had moved to provide certainty to taxpayers through the existing Mutual Agreement Procedure and bilateral Advance Pricing Agreement relationship. Significantly, the US has replaced China as India’s trade partner in the first nine months of this year.

Third, both sides agreed on further engagements on financial-sector issues, including cross-border payments, payment systems and the development of the International Financial Services Centre. There was also commitment for greater engagement, both bilaterally and multilaterally, to address global economic issues. Both sides noted the progress in sharing financial account information between the two countries under the Inter-governmental Agreement under the Foreign Account Tax Compliance Act (FATCA).

Fourth, the meeting emphasised on climate finance, reflecting their respective commitments to driving urgent progress in combating climate change and the critical role of climate finance in achieving this shared global goal.

Fifth, the most important aspect was the pledge to boost cooperation in stemming illicit finance, money laundering and terror-funding, and highlighted the need for effective implementation of the standards stipulated by the Financial Action Task Force (FATF). This is extremely important as the terror funding money laundering and illicit fiancé are providing sustenance to terrorism and other economic crimes. The Financial Action Task Force, the Paris-based global body against money laundering and terror-funding, has retained Pakistan on its ‘grey list’ for its persistent failure to crack down hard on terror-financing. It is essential to keep a close watch on Pakistan as it continues as an important hub of terrorism. With the Taliban controlling Afghanistan, the fear of the region re-emerging as the epicentre of international terrorism is haunting the world. If the financing aspect, which is providing sustenance to terrorism, is taken care of, the counter-terrorism efforts would succeed.

The joint statement mentioned: “We continue to strengthen our cooperation in tackling money laundering and combating the financing of terrorism through increased information sharing and coordination.” There was also stress on the importance of fighting financial crimes and on the effective implementation of the FATF standards to protect the financial systems. One hopes that Pakistan’s duplicity and its continued support to terrorist groups would be taken care of.

On the whole, the meeting indicted convergence on important issues, including the need for combating financing of terrorism, illicit fiancé and money laundering. All these are providing sustenance to various types of crimes. The need for strengthening FATF can hardly be underestimated in the current period. India’s wide-ranging reforms, including in agriculture, labour and financial sectors are yielding positive results. The International Monetary Fund has assessed that India’s economy would grow at 9.5 per cent in 2021 and at 8.5 per cent in 2022, which had contracted in 2020 due to the Covid-19 pandemic. While this is good news, the efforts for further improvement should continue as there could be serious repercussion of the global economic problems. There is an urgent need to operationalise an alternative supply chain. While the Quad partners are working in this direction, others should also be encouraged to strengthen this effort.

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Views expressed above are the author's own.

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