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Key Economic Data 
  2002 2001 2000 Ranking(2002)
Millions of US $ 515,000 481,400  460,616 11
GNI per capita
 US $ 480 470 450 159
Ranking is given out of 208 nations - (data from the World Bank)

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India has emerged as one of the dominant players in the international system and a regional power in the South Asian subcontinent. Located in the heart of South Asia, India is unique for its cultural heritage, geographical diversity, and democratic ethos. India's ancient history was marked by series of invasions and foreign rule beginning with the entry of the Aryans in 1500 B.C., the advent of the Mughals in A.D 1000, culminating in British imperial rule around 1858. During this period, India was one of the richest countries in the world. It was renowned for its international trade in spices and textiles. Along with its rich resources, India's geographical location made it an attractive colony. The British wanted to exploit India as a market for the sale of its manufactured goods. They set up a centralized form of administration, built an extensive network of highways, railroads and post and telegraph systems. They also imparted western education to the Indians which led to the emergence of a middle class conscious of their own rights.
To overthrow British tutelage, a section of erudite Indians led by Surendra Nath Banerjee established the Indian National Congress in 1885. The Indian nationalist movement evolved through different phases and the INC emerged as the single largest representative of the Hindus in India. It became an umbrella organization and leaders like Bal Gangadhar Tilak and Lala Lajpat Rai were at the forefront in India's struggle for independence. Of the most famous of India's "freedom fighters", was a man called Mohandas Karamchand Gandhi. In the struggle for liberation against British rule, Gandhi developed concepts like ahimsa (non violence), satyagraha (search for truth) and civil disobedience. As the national movement picked up momentum, British rule began to weaken. From the 1940s, the Muslim League, a party representing the Muslims of India, demanded the creation of a Muslim majority state. The Indian National Congress was ill-prepared for these demands and tensions brewed amongst members of both camps leading to large scale Hindu-Muslim rioting. Finally in 1947, the Congress leaders acceded to the division of the country along religious lines which led to the creation of the separate nation of Pakistan. Partition left a deep impact on the secular fabric of the country. Close to half a million Hindus, Muslims and Sikhs were killed. On August 1947, India gained independence from the British. Yet, the memories of partition remained etched in the minds of Hindus and Muslims and were soon to become the root of an intractable conflict over Kashmir. 
From the time of independence, India has fought four major wars with Pakistan (1947, 1965, 1971 and 1999) and one with China (1962). While India suffered a severe debacle at the hands of the Chinese in the 1962 war, the dispute over Kashmir with Pakistan remains unresolved and has led to incessant crises on both sides. The roots of the Kashmir dispute date back to partition and the events of 1947. The end of British rule had compounded the problem of achieving a unified India. In the months after partition, the prince of Kashmir, Maharaja Hari Singh faced tremendous pressure from both India and Pakistan but refused to accede to either country. During the first week of October 1947, a tribal rebellion broke out in Poonch, a region in southwestern Kashmir. Sections of the Pakistani army aided the rebels with arms and men. Within two weeks, the insurgents were close to Srinagar, the capital of Jammu and Kashmir. At this point, Hari Singh appealed to India for protection against the intruders. India's Prime Minister Jawaharlal Nehru agreed to provide assistance to Hari Singh only if the Maharaja acceded to India and the accession was endorsed by Sheikh Abdullah, the political leader of Kashmir. Once the Maharaja signed the Instrument of Accession, Indian troops were airlifted into Kashmir. On 1 January 1948, India referred the Kashmir dispute to the UN Security Council by invoking articles 34 and 35 of the UN Charter. On 24 April, 1948, the UN Security Council passed a resolution stating that India and Pakistan should bring about a cessation of all hostilities and move towards the early restoration of peace in the region. It also urged both countries to conduct a free and fair plebiscite to determine the wishes of the Kashmir people. This resolution was held as the principal term of reference for future negotiations between the two countries. However, the UN achieved little and the dispute continued to rock the relations between the two countries. The problem of Kashmir took on a different dimension from the late 1980s when there was a rise in insurgency within the state of Kashmir. This was the first time that India was witnessing the start of cross-border terrorism. Moreover, while Pakistan has repeatedly sought third party mediation and looked towards the United States to play such a role, India has reiterated its position of resolving the dispute bilaterally. 
India's relations with China took a downslide after the 1962 war and also when the Chinese tested their first nuclear device in 1964. However, India has not been engaged in any major conflict with China since 1962 but continues to be wary of the Chinese presence north of the Himalayas. Another one of India's concerns with regard to China has been the technical and material support that China provided to Pakistan in developing the latter's nuclear weapons arsenal. 
With regard to the United States, India has predominantly enjoyed a cordial relationship. During the height of the Cold war between the US and the erstwhile Soviet Union, India advocated a policy of non-alignment and sought to distance itself from the power struggle between the two super powers. The United States was not very interested in South Asia during the Cold War but was careful not to allow the spread of communism to the region. Most of America's strategic interests in the region during the Cold War were guided by its fear of communist expansion. America maintained stronger relations with Pakistan and established a military alliance with Pakistan in 1954. While the US provided military assistance to both India and Pakistan, by 1964, Washington was unhappy with both countries and began to withdraw itself from the region. It was only after 1979 and the early 1980s that Washington began again to take an interest in India. In the period after the Cold war, Washington was particularly concerned with the development of India's nuclear capabilities and pushed for non-proliferation efforts in the region. The conduct of India's nuclear tests in the summer of 1998, followed by the Kargil war of 1999 between India and Pakistan raised fears in the international community about the possibility of a nuclear war between the two adjacent neighbors. Since then, the United States has repeatedly urged both countries to exercise restraint.

Political Structure and Elections

India's political structure is modeled along the British parliamentary system. Under the Indian Constitution, executive power resides in the President who represents the symbolic head of the nation. The President is also the Supreme Commander of the Indian Armed Forces. The Prime Minister is the executive head supported by a cabinet of ministers and is responsible for the actual execution of policy. The Indian Parliament consists of two houses: the Lok Sabha which is the lower house and is popularly called the House of the People and Rajya Sabha, the upper house. The members of the Lok Sabha are elected on the basis of universal adult suffrage directly from India's 25 states. The members to the Rajya Sabha are nominated by the President on the basis of their expertise in the fields of literature, science and social service. 

Since 1951, elections in India have witnessed the gradual decline of the Congress party and from the early 1990s the rise of the Bharatiya Janata Party (BJP). From 1989 to 1998, India has had four national elections and except for the period between 1996 and 1998, these elections produced unstable short term coalition governments. In the 1996 and 1998 elections, four distinct political groups emerged, namely the Congress and its allies; the BJP and its allies; the United Front and a large number of caste based and regional parties. In the 1998 elections, the BJP came to power and won 25.47 percent of the vote and 179 seats. The Bharatiya Janata Party still continues to be the dominant party at the Center and is heading a multi party coalition called the National Democratic Alliance (NDA). 

In post independence India, there were major debates about the future of the Indian economy and the type of model India should adopt for economic reconstruction. India's Prime Minister Jawaharlal Nehru was interested in building a strong decentralized state along socialist lines. In 1948, the Industrial Policy Resolution was passed which called for a mixed economy in which some industries like railroads and atomic energy would remain under the public sector while industries like coal, iron and steel and manufacturing would be open to private enterprise. As part of this model, India embarked on a set of Five Year plans which continued well into the mid 1960s. In the 1960s, India was faced with the challenge of liberalization and the Fourth Five Year Plan encompassed the need for allowing a more free hand for the market. From 1963 to 1973, a series of constitutional amendments were initiated to restructure the Indian economy. This was a period of structural reform in which Prime Minister Indira Gandhi nationalized a number of private sector banks and the government took over a large part of the private sector. From 1973 onwards, a second phase of liberalization began. However, even though the liberalization produced some changes, the Indian economy took a downslide and by the early 1990s India was practically bankrupt, forcing it to borrow loans from the International Monetary Fund (IMF). This in turn unleashed a new spate of economic reforms and led to the complete liberalization of the Indian economy. Ever since then, different governments at the Center have dealt with the process of liberalization in various ways and it remains a fundamental bedrock of the Indian economy. Over the years, India has opened up its markets to numerous multi national corporations and has become a thriving market for the import and export of international products. 

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Update No: 005 - (30/06/04)

Political Events 
The month of May was a rather dramatic one with regard to the end of India's elections. In a spectacular turn of events, the BJP which seemed certain of forming the government at the Center was routed by the Congress party; a phenomenon that reflects the true democratic ethos of India. Not only did the BJP get defeated at the polls, in yet another stunning development, Sonia Gandhi, President of the Congress Party refused to accept the position of Prime Minister in leading the Congress. One month later, the Manmohan Singh government is dealing with various sets of issues including the Indian budget and the recent Indo-Pakistani talks. The Bharatiya Janata Party is trying its best to salvage its reputation. However, following some personal attacks against him, India's former PM, Atal Behari Vajpayee has announced his intention to retire from politics. Following the BJP's deafeat in the parliamentary elections, many of the BJP's allies criticized Vajpayee for his miscalculations during the campaign phase. If Vajpayee, does retire from politics, then the BJP will lose an astute politician and balanced statesman. L.K.Advani may indeed take center stage in Vajpayee's absence. Advani is firm on retaining the Hindutva ideology and has argued that the Rashtriya Swayamsevak Sangh (RSS) will continue to remain the umbrella organization of the BJP. The RSS commonly known as the Sangh Parivar is a hard line right wing Hindutva organization made up of three parties: the BJP, VHP and Bajrang Dal of which the BJP is still the most moderate. The BJP has also recently attacked the newly formed Congress government on grounds that there are two centers of power revolving around Sonia Gandhi and Manmohan Singh. Such criticisms seem baseless given the fact that the same reasons could have applied to LK Advani during PM Vajpayee's tenure. 

India-Pakistan Relations
With regard to the relations between India and Pakistan, the month of June was a rather eventful one. With the change in government at the Center, there was speculation that a new dimension would be added to relations between India and Pakistan. The Indian Prime Minister Manmohan Singh also made a positive speech marking a constructive endeavor in relations between both countries. On June 28, 2004, diplomatic talks at the Foreign Secretary levels ended positively. While the Indian side was led by Foreign Secretary Shashank, the Pakistani side was led by Riaz Khokar. Talks on Kashmir were declared as being "intensive and substantive". The two countries have proposed to release a joint statement keeping in mind the final resolution of the Kashmir dispute. As a result of these talks, a number of key decisions have been reached. For instance, besides dealing with the Kashmir issue, the two governments have agreed to enhance communication, coordination and interaction. Further, the consulates in Karachi and Mumbai will be reopened and civilian prisoners on both sides including some fishermen will be released. Even though these talks mark a departure from previous failed attempts to reconcile the Kashmir issue, it remains to be seen how exactly the two governments plan to settle the Kashmir issue. Experience from past years suggests that whenever the two governments have sought to arrive at a settlement on this issue, Kashmiri militants have made efforts to destabilize the situation by engaging in acts of terror on the Indian side. Meanwhile Pakistani President Pervez Musharraf has invited India's President APJ Abdul Kalam and PM Manmohan Singh to Pakistan. 
Terrorist activities continue to tear the Kashmir region. In a recent encounter on June 26 near the city of Srinagar, militants took shelter in a mosque and took 60 civilians hostage. Security forces were finally able to outdo the militants and rescue all 60 civilians although in the process two militants and one soldier were killed. 

This month, the US state of Indiana has paid one million US dollars to Tata America International Corporation, a subsidiary of TATA India for an outsourcing contract. This venture had been scrapped last year and primarily focused on paying and training 45 state programmers in development and engineering of up to date software systems, designing software plans. Infosys, a computer software company has plans to set up a 2400 professional center at the Chandigarh Technology Park. 
The Indian economy has also been rocked by increasing inflation. Inflation has risen to 5. 89 percent due to rise in prices of fruits, vegetables, tea, eggs, minerals and manufactured products. However, the Indian Stock Market has reacted favorably to the change in government at the Center. With Manmohan Singh becoming Prime Minister, there is hope that the Indian economy will receive a further boost. While increasing levels of economic growth is a high priority on the Congress government's agenda, sustaining such levels of growth will pose a serious challenge. India's Gross Domestic Product (GDP) has risen by 8.9% due to tremendous growth in agricultural, industrial and service sectors. 
Last month, Max New York Life India (MNYLI) announced an agreement with Warburg Pincus to sell 29% of its equity for Rupees 200 crore. MYNLI is a joint venture between Max India and New York Life. It expects the Indian insurance market to grow at 22% annually between 2003 and 2007. 

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EIL, Bharti to develop airports 

State-run Engineers India Ltd will partner Sunil Mittal-promoted Bharti Enterprises and Changi Airport of Singapore in bidding for development of Delhi and Mumbai airports, the India Times reported. 
"While Bharti and Changi will be equity investors in the project, two other partners will be involved - one for construction and the other as project management consultant. Larsen & Toubro will be the construction partner and we will be the PMC contractor," EIL chairman and managing director, M K Dalal, said. 
EIL, in consortium with CPG Singapore, has already won the contract for designing of international terminal at Ahmedabad Airport. The company has also tied-up with Airports Authority of India and is likely to secure an assignment relating to feasibility study for Pune-Chakan airport of Maharashtra Industrial Development Corp (MIDC). 
EIL is bidding with state refiner Indian Oil Corp for revamp of two refineries in Iran and one each in Sudan, Libya and Nigeria. It is also considering setting up a joint venture company in Algeria for providing engineering consultancy services as well as taking up projects on turnkey basis.

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Reliance strikes gas off Orissa coast 

Reliance Industries Ltd., India's largest private sector business conglomerate, said Thursday it had struck four to five trillion cubic feet of gas off the Orissa coast in the Bay of Bengal, reported. 
"We have made an initial estimate of the potential from seismic and other studies, which indicate an in-place volume of about four to five trillion cubic feet," Mukesh Ambani, chairman of Reliance Industries, told a shareholders' meeting. 
Last year, Reliance had struck oil in an onshore block in Yemen, where it has a twenty-five per cent interest. The share of recoverable oil reserves for Reliance from this block is estimated to be about 50-60 million barrels. 
"The next two years will see Reliance making very intensive efforts in oil and gas exploration and production," said Ambani.
"This will be achieved through acquisition of small and medium sized oil companies and participation in exploration and development projects. Geographically, the regions of focus are Africa, the Middle East, Australia and Latin America."
Reliance struck as much as 14 trillion cubic feet of gas in the Krishna-Godavari basin in 2002, India's largest discovery in three decades.
The company, which has interests in a wide spectrum of industrial sectors such as petrochemicals, refinery, communications and power, holds the largest exploration acreage amongst private sector companies in India.

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World Bank may double aid to India

World Bank is likely to double loan sanctions to India to about US$3bn annually for the next four years, as part of its Country Assistance Strategy to be announced in New Delhi, reported recenlty.
The World Bank assistance to India was about US$1.5bn last year, which is expected to be stepped up to support reforms in more states requiring US$500-900m a year, bank sources told PTI.
World Bank is also likely to stress on poverty reduction, education and health schemes, they said.
The bank was also considering several loans for the country's infrastructure projects including power, railways, roads and urban development, the sources added.
According to the draft CAS, World Bank can lend a maximum US$3bn through IBRD and IDA.
The concessional IDA loans could be in the range of US$850m and the rest could be in IBRD loans.
World Bank's CAS would focus on poorer states that are implementing wide-ranging reform process.
Sources said the World Bank's CAS would stress on strengthening the enabling environment for development and growth by improving effectiveness of government sponsored programmes, fostering private sector led growth and promoting health and education. 

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Ranbaxy gets US$4m from German drug maker 

Ranbaxy Laboratories, India's largest pharmaceutical company by sales, said recently that the company had received US$4m milestone payment from Germany's Schwarz Pharma for further development of a molecule, reported.
In June 2002, Ranbaxy and Schwarz Pharma signed a licensing deal for the treatment of benign prostate hyperplasia, said a company statement issued here. 
As per the agreement, Schwarz Pharma obtained exclusive rights to develop, market and distribute the product in the US, Japan and Europe while Ranbaxy retained rights to all other markets.
The agreement also provides for Ranbaxy to manufacture and supply finished formulations of the product to Schwarz Pharma. 
Schwarz Pharma completed phase-I clinical trials of the molecule RBx 2258 in Europe and the molecule is now moving into phase-II trials in Europe and South Africa.
In India, the compound RBx-2258 is currently progressing well in clinical phase-II trials, said the statement.
Schwarz Pharma has a strong international presence with affiliates in Europe, the US and Asia.

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Award for Bharti Tele-Ventures 

India's leading cellular company Bharti Tele-Ventures has bagged the "Asian MobileNews operator of the year" award in India and the subcontinent, the India Times reported. 
The award is part of the annual Asian MobileNews Awards 2004, a company release said recently. 
Commenting on the award, group Chairman, Sunil Mittal, said "It is heartening to know that Bharti's efforts in enabling faster and more affordable communications is being recognised not just in this country but across the world." 
The award comes close on the heels of Frost & Sullivan CEO of the year award to Mittalin May, the release added. 


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