US Treasury Secretary Yellen looks to India for ‘friend-shoring’

Supply chains, Russia’s war in Ukraine and the impact of COVID-19 were top issues for US Treasury Secretary Janet Yellen as she met with Indian government and business leaders in New Delhi.

Both Yellen and Indian Finance Minister Nirmala Sitharaman called for the strengthening of supply chains with trusted trading partners in the Indo-Pacific region to diversify away from countries that present geopolitical and security risks. “India’s membership in Indo-Pacific Economic Framework [IPEF], in efforts to make our supply chains more resilient through what I call friend-shoring, are tightening those ties,” Yellen said.

The United States is pursuing an approach called “friend-shoring” to diversify away from countries that present geopolitical and security risks to supply chains. “To do so, we are proactively deepening economic integration with trusted trading partners like India,” Yellen said.

For instance, the US is providing America’s largest solar manufacturer with up to $500m in debt financing to build a facility in southern Tamil Nadu state in India. The facility will boost India’s solar manufacturing capacity and help diversify supply chains away from China, Yellen said.

“Technology companies like Amazon and Google are investing in India and Vietnam. Apple recently announced that it was shifting some iPhone manufacturing from China to India,” she said.

While India is part of the Biden administration’s signature Asian engagement project, IPEF, it has opted against joining the IPEF trade pillar negotiations.

Yellen visited Microsoft’s research facility on the outskirts of New Delhi before addressing a joint news conference with Sitharaman. Sitharaman said the meeting between the two will facilitate a coordinated policy stance on global economic challenges facing the world.

“Meeting today, we lend greater rigour to economic relationships, strengthen businesses-to-business links, and facilitate coordinated policy stance to address the pressing global economic challenges,” Sitharaman said.

Sitharaman and Yellen will participate in a US-India Economic and Financial Partnership dialogue in New Delhi and will discuss India’s leadership agenda for the G20 group of major economies next year.

In a statement issued later in the day, the two sides said they would continue a discussion on climate aligned-finance under the G20 sustainable finance working group. “We agreed that India and the US should work together with partners to pursue a broad mix of public and private financing to facilitate India’s energy transition in line with its nationally determined climate goals and capabilities,” the statement added.

Natural allies
Yellen, in remarks at the Microsoft facility, highlighted the Biden administration’s desire to deepen economic ties with India, saying that both the global economy and the democratic idea were at inflection points.

“The US and India are ‘natural allies’, in the words of a former Indian prime minister,” Yellen said, adding that both had waged similar fights for independence to attain freedom and dignity. “People around the world are looking to us and asking: Can democracies meet the economic needs of their citizens? Can they stand up to bullies and cooperate on the most intractable global problems?” she said. “I am confident that we will succeed,” she said.

Sitharaman said India considered the US a “trusted friend”, and the four-nation Quad and the Indo-Pacific Economic Framework to be key cornerstones of bilateral engagement “in developing sustainable economies, ensuring global health security, resilient supply chains, clean energy technologies, green infrastructure and climate finance.”

The Quad, comprised of the United States, India, Australia and Japan, is meant to deepen economic, diplomatic and military ties.

Among the actions for the two sides to work on are goals for India’s leadership of the G20, which should focus on the shared priorities for boosting investment to fight climate change, breaking a logjam in restructuring debts for poorer countries and improving access to the digital economy. “India’s G20 year is a chance to accelerate global coordination on debt restructuring,” Yellen said.

She also said that ending the war in Ukraine was a “moral imperative” but that economic challenges from the conflict and from supply chain strains were drawing India and the United States closer together.