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Key Economic Data 
  2003 2002 2001 Ranking(2003)
Millions of US $ 598,966 515,000  481,400 12
GNI per capita
 US $ 530 480 470 160
Ranking is given out of 208 nations - (data from the World Bank)

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Update No: 019 - (30/08/05)


The frequent spate of criticisms from the Left opposition parties had begun to affect India's economic progress. In an interview to the global management consultancy firm McKinseys, Prime Minister Manmohan Singh said that coalition politics and a rigid labour policy are affecting the country's economic growth potential. In his words, "extreme rigidities in the labour market and inflexibility of the labour market is not consistent in achieving our goals in a world where demand conditions are changing so fast and technological conditions are changing so fast." Singh also stated that until some form of consensus is achieved, progress on the economic front will be impeded. Referring to the government's Left allies, Singh said that if the Left responded more positively or if there was a shift in their approach, then the situation could well improve. Therefore, while being cognizant of the criticisms, Singh expressed his faith in the Left's support for the central government's policy on economic reforms. However from the perspective of the Left, things look a bit different. CPI(M) Politburo member Sitaram Yechury reacted to the government's economic program strongly by saying the Left will continue to oppose anti-people reforms. The Left parties believe that the reforms are not really going to benefit of the populace at large. If reforms help the lot of the people, then they would favour the government's policies. The Left seems to have a set of conditions that must be met before they favour the economic program. For instance, they are in favour of foreign direct investment if it increases productivity, upgrades technology and generates further employment. 
On the eve of India's Independence Day celebrations, Prime Minister Manmohan Singh delivered a powerful speech drawing on India's cultural history and the recounting the country's achievements in the last 58 years. Much of his speech was directed towards advancing a vision for minorities in India. Referring to Mahatma Gandhi, the Prime Minister said his dream was "an India where the poorest of the poor feel that this country and this nation belong to them." The Prime Minister also focused on the issue of economic reforms. Singh stated that "the economy is growing at a rate of 7 per cent. If we keep doing that for the next 5-10 years, we will be able to eradicate poverty." Among other issues addressed by the Prime Minister was the extending of opportunities for scheduled castes and scheduled tribes outside of government employment which include establishing agricultural science centres, tribal rights to forest land, development of border lands and launching a national campaign for water and cleanliness. Last year in his speech, the Prime Minister made no promises, but called for codes and ethics for those in public life, appealing to the conscience of the nation. This year's speech was different from last year's in that the Prime Minister refrained from making any lofty promises. Instead, he provided a critique of the government's policies and advanced a more realistic time frame and vision for achieving the goals outlined. Addressing the relations between India and Pakistan, Prime Minister Manmohan Singh said that Pakistan needs to do much more to curb terrorism in the Kashmir valley. Singh said that Pakistan needs to take concrete steps to eradicate the recurring threat of terrorism. 

According to a latest news report, Indians working abroad remit huge sums of money back home every year but they often complain that the Indian government does little when they face difficulties. A per new regulations which still need to be approved by the Ministry for Overseas Affairs, Indians travelling abroad for work will soon carry a smart card in addition to their passport. This smartcard will carry more information on individuals in addition to the information contained in their passport. "This card will carry all the information carried in a usual passport but it will also be a tool that will enable their relatives to claim their bodies or their money if something happens to them", according to Jagdish Tytler, Minister for Overseas affairs. Many Indian workers especially those working in the Gulf countries have their passports taken away by their employers and are then forced to serve in inhuman conditions. People in the travel trade feel that this will be a good step for helping Indians abroad if implemented. Indians working abroad remit approximately US$22 billion home every year. In states like Punjab and Kerala this amount forms a significant chunk of the local economy. But many Indians working abroad often complain that the Indian government does not look after their needs as well as it should. The government hopes to change all that with this new smart card (Times of India Report). 
This month, Infosys Technologies board member Srinath Batni flew to China to kick start the company's most important initiatives this year which included signing letters of intent with Shanghai Zhangjiang Co Ltd and the administrative commission of the Hangzhou Hi-Tech Development Industry Zone to set up two development centres. The two new facilities expected to cost US$65 million over the next five years will boost the number of software engineers employed by Infosys's Chinese subsidiary from the current 250 to 6,000. From a mere US$2 billion in offshore revenues this year (compared to India's US$17 billion), China is expected to pull in US$27 billion from IT services (including call centres and back-office work) by 2007, according to Gartner, which predicts Indian companies will carve out 40 per cent of that figure (PTI Report). China is being seen not just as an offshore hub. Its domestic market is growing, too. Chinese companies will spend over US$25 billion on information technology this year, and the market is growing at a rapid 30 per cent annually. According to research house IDC, US$9.4 billion will be spent on technology services alone in 2006, up from US$3.74 billion in 2002. Little wonder Indian companies are hoping to use their Chinese operations to gain a domestic foothold. Hyderabad based Satyam Computer Services has similar projects outlined with the Chinese. Satyam has around 300 engineers, mostly Chinese, at its facilities in Shanghai and Dalian. With plans to set up a third development centre in one the Chinese metropolitan cities, the company hopes to multiply its workforce to 3,000 by 2007 and 5,000 by 2010. NIIT, another company which promotes software education also has had a presence in China for almost a decade and is adopting a different model by collaborating with local universities and setting up education centres on their campuses. 
Another issue that came up this month is the process of divestment which according to the Tata Group should be aimed at taking public sector undertakings to the stock market instead of finding a strategic partner as the government would like. While stating that the process must be allowed to find its own level, Tata, however, said that some constraints must be put so that no single block or no single group can acquire more than a certain percentage to ensure that control is not taken away. Taking a shot at unions and political parties opposing divestment he also said that "those public sector units don't belong to any one specific political group but belong to all of us in the country." 

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India's Exports Surge 

India's exports surged by 27 per cent year-on-year in July as a resurgent economy pushed up industrial output, the commerce ministry said recently, AFP reported.
Exports during July rose to US$7.23 billion from US$5.70 billion a year earlier. Exports rose 21.33 per cent year-on-year between April-June, the first quarter of the fiscal year, to US$28.13 billion. Imports in July grew by 33.21 per cent to US$9.9 billion from US$7.4 billion in July 2004. Imports grew by 36.36 per cent during April-June to US$42.10 billion.
The trade deficit swelled to US$13.97 billion during the quarter from US$7.69 billion in the same period a year earlier.
"With this trend in exports and our concerted efforts to sustain it, I am confident that we will reach and even surpass the export target of US$92 billion which has been set for this fiscal year," Commerce Minister, Kamal Nath, said. He played down worries over the rising trade deficit, saying the country's foreign exchange reserves of over US$140 billion were enough to cover it.
The minister said much of the imports were industrial machinery which would boost national income.
Nearly 2.4 million new jobs would be added over the next two years because of buoyant exports, he added.
Government data shows that industrial production and foreign and domestic investments are all experiencing strong growth. Industrial production grew by 11.7 per cent in June, nearing a 10-year record as India's increasingly affluent consumers bought new cars, refrigerators and other manufactured goods.
Foreign investment between April to June grew 50 per cent to US$1.2 billion.
Nath said the government had set a target of more than US$5 billion in foreign investment for the fiscal year, compared with 3.75 billion last year.
The government, he said, hoped to complete a trade agreement with Persian Gulf countries in the next six months along the lines of a pact with Singapore comprising accords on trade in goods and services and investment protection.

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Indian pioneer of outsourcing to expand in Hungary

Tata Consultancy Services, a pioneer of India's fast-growing outsourcing industry, is expanding its own international outsourcing operations, The Financial Times reported.
TCS, India's largest software developer, is investing in Hungary in a sign of the increasing complexity of the global outsourcing business and of the growing sophistication of India's software industry.
Other big Indian software groups may follow suit in investing in eastern Europe, notable Wipro, which says it is considering sites in Hungary, Romania, Russia and Ukraine.
TCS first opened a software centre in Hungary in 2001 and is planning to transform the site by hiring about 700 new workers over the next three years to take the total staff to more than 1,000.
SV Mani, head of TCS's Hungarian operations, says the group was already serving clients all over the world, with 52 per cent of its turnover in the US and 25 per cent in Europe. But it is now building a global delivery network so that projects can be completed closer to the customer where necessary, he said.
In Europe, British companies have no companies have no difficulties in the outsourcing of business processes to India. But for continental European companies, India seemed remote, says Mr Mani.
TCS chose Hungary because, as well as English, many Hungarians can speak other European languages, including German, French and Italian. "We want to provide a European from end (point of contact) for our European customers," he said.
TCS preferred eastern Europe over western Europe because it was much cheaper. Hungary had been chosen over Poland, the Czech Republic and Romania because it offered a good infrastructure, a firm currency, a stable political environment and highly skilled workers.
The group, which employs 6,500 of its 40,000 staff in Europe, is now looking to establish at least one more development centre in eastern Europe - in Poland, Russia or Romania - probably employing more than 500 people. "We have identified eastern Europe as a thrust area for 2005," says Mr Mani.
TCS's move highlights the growing importance of eastern Europe in the global business process outsourcing industry, especially for centres serving continental western Europe.
Outsourcing specialists with east European business service operations include Accentrue, IBM and Cap Gemini. Companies that have established service centres for in-house requirements include Citigroup, the US bank, Lufthansa, the German airline, Ahold, the Dutch retailer, and General Electric, the American industrial group.
Everest Partners, a US based consultancy, said in a recent report that while India remained the global leader in the outsourcing of business processes, the "real competition" was just beginning. The key drivers of expansion included lower costs, language skills, and geographical and cultural affinities, said the report.
"Ten years ago, India didn't register a blink on the radar of western companies. Eastern Europe today is where India was a decade ago."
PwC, the consultancy, says Indian costs are much lower than eastern Europe's. It estimates that if the cost of running a financial services centre is about 200 in the UK or Ireland, it is 100 in Poland and jus 37 in India.
However, Rafal Krasnodebski, from the central and east European operations of PwC, says that as well as language and technical skills, the region has an advantage in the minimal time difference between western and eastern Europe. Offshore financial centres generally operate 24 hours a day, but their managers usually work only local office hours.


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