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INDIA


 

 

In-depth Business Intelligence

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
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)

Books on India

REPUBLICAN REFERENCE

Area (sq.km)
3,287,590

Population

1,049,700,118

Capital
New Delhi

Currency
Irdian Rupee (INR)

President
Abdul Kalam


Update No: 029 - (29/06/06)

INDIA'S FOREIGN RELATIONS WITH CENTRAL ASIA
The Shanghai Cooperation Organization (SCO) has quickly emerged as a force to be reckoned with in Central Asia. At the fifth annual SCO summit, held in mid June in Shanghai, participants castigated the United States in a not-so-subtle fashion. An SCO declaration insisted that determining Central Asia's future was up to the states in the region, and not outside powers. "Models of social development should not be 'exported,'" the declaration stressed. According to Stephen Blank, Professor at the US Army war College, one of the SCO's chief weaknesses is connected with the expansion dilemma that the organization is currently facing. The SCO's rapid emergence has made it attractive to other states in the region: both Iran and Pakistan, for instance, are openly eager to join. But many existing members are reluctant to accept these two controversial states, both currently observer members, believing that they could be a source of future geopolitical headaches. Thus the fact that India doesn't seem interested in full membership at this time constitutes a substantial obstacle for Pakistan. India's stance toward the SCO was underscored by Prime Minister's Manmohan Singh absence from the Shanghai summit. New Dehli has been improving its relationship with Washington, and believes Russia and China want to use the SCO mainly as a platform from which to launch diplomatic attacks against the United States. At the same time, India wants to maintain touch with the organization out of a desire to cooperate with Beijing and Moscow on energy issues and direct security threats affecting the three states.
During Indian Prime Minister's visit to Uzbekistan last month, the two countries signed a pact to cooperate in gas and oil exploration and production. GAIL and Uzbekistan's Uzbekneftegaz are working together in Uzbekistan to produce liquefied petroleum gas. Energy experts in India want the country to step up its energy diplomacy further saying the country is still not as pragmatic as other countries. But political analysts argue that look at long term solutions for their energy needs but it should not violate the rights of other people under the name of energy development. Senior diplomat from the Indian side, Rajiv Sikri has stated that India is not averse to striking deals with pariah states. There is an underlying assumption in Indian policy that India should be allowed to maintains its independent position on dealing with such states as it deems fit even if engaging in economic partnerships with them might elicit some opposition from other pro-democracy parties.

POLITICS
India has made a new move in the chess of world politics with the announcement of Shashi Tharoor as New Delhi's candidate for the post of UN secretary general. In the recent edition of India's Outlook Magazine, journalist Seema Sirohi argues that the absence of a realistic prospect of India becoming a permanent member of an expanded UN Security Council lies behind this move. Tharoor formally approached Prime Minister Manmohan Singh in Washington just after Manmohan Singh announced a path-breaking nuclear agreement with the United States. By advancing a candidate, India is making a statement to the rest of the world that the UN must be an equally representative organization instead of just reflecting the aspirations of its five permanent members. This initiative by the Indian government has consoled the left parties and certain sections within the Indian establishment who have routinely expressed their scepticism of the prosperous India-US relationship. Veteran Congress leader N.D. Tiwari is in demand once again.
Chief Minister of Uttaranchal, N.D. Tiwari has been asked to lead the party's campaign in both Uttaranchal and neighbouring Uttar Pradesh. His support is essential in resurrecting the party in Uttar Pradesh. A senior leader said that Tiwari's background of having been the chief minister of undivided Uttar Pradesh for four terms makes him a crucial man for the job. Tiwari has emerged a key aide of Congress president Sonia Gandhi and has been meeting her frequently. Tiwari's years of experience in running the administration of the state makes him an asset to Sonia Gandhi and Rahul Gandhi's bid to lead the Congress party in Uttaranchal. Tiwari enjoys widespread appeal among the generation of older leaders in UP, most of whom belong to upper castes. Tiwari, being an upper caste Brahmin himself will be in a better position to garner more votes from this section of the community. 

INDIA AND PAKISTAN
India and Pakistan entered into a two day dialogue with Pakistan on the Wullar Barrage project which came to a complete standstill. The Pakistani delegation was led by Mr. Ashfaq Mahmood, Secretary, Ministry of Water and Power, Government of Pakistan and the Indian delegation was led by Mr. J Hari Narayan, Secretary, Ministry of Water Resources, Government of India. Both sides have expressed their desire to continue talks by maintaining their commitment to the Indus Waters Treaty of 1960. They are keen to settle all outstanding issues on this matter under the provisions of the treaty. It appears that while both sides are interested in arriving at some agreement, there is a lack of understanding on both sides. 
On the positive side of the relationship between both countries, a bus service linking the Pakistan-controlled Kashmir's Rawalakot and the India-controlled Kashmir's Poonch has started. Buses from two sides carrying 99 passengers will cross the line of ceasefire in Kashmir from the Tetrinote and Chakan-da-Bagh crossing point, The bus carrying 55 passengers would leave Rawalakot for Poonch, while the bus from Poonch will leave after 15 minutes for Rawalakot with 44 passengers onboard, GEO said. Pakistan and India had decided to start the bus service linking Rawalakot and Poonch after talks held in the Indian capital New Delhi on May 3rd. According to earlier reports, India had suggested the inaugural run a day later than the initial plan of June 19th, and Pakistan had accepted it. Lauding the Indo-Pak peace process, Prime Minister of Azad Kashmir Sikander Hayat Khan said the gun has become "irrelevant" but India and Pakistan should be more serious about resolving the Kashmir issue. "Talks between Pakistan and India and with the people of Kashmir are very important for a peaceful resolution of the Kashmir issue. It should be carried forward with speed," he told PTI here. Khan said the "role of the gun has become irrelevant and peace talks are the only way to a solution of the issue". He, however, said the governments of the two countries needed to take more concerted steps in this direction as they appeared "non-serious" about the issue. The people of Jammu and Kashmir and AJK should also be involved in peace talks, he said. "This step would be more result-oriented." Khan earlier flagged off the "Karavan-e-Aman" bus from Rawalakote in AJK. The bus carrying 30 passengers headed for Poonch in J&K while UPA Chairperson Sonia Gandhi and Defence Minister Pranab Mukherjee flagged off the one from this side of the LoC. 
India and Pakistan also reached an agreement on the exchange of prisoners' lists during the interior or home secretary-level talks between Pakistan and India on terrorism and drug-trafficking held in Islamabad on May 30-31. Following the agreement, the Pakistani Foreign Ministry indicated this month that Pakistan has handed over to India a list of Pakistani civilian prisoners held in Indian jails. A statement issued declared that "we have conveyed to the Indian side a list of 493 Pakistani civilian prisoners held in Indian jails. Out of these, the national status of 213 has been confirmed by Pakistan. These prisoners are awaiting release from the Indian jails while 169 have not yet been allowed consular access by the Indian Government." The statement said that the national status verification of the remaining 111 is under process by authorities in Pakistan. "We have been informed that 30 Pakistani fishermen are in the Indian custody and Islamabad is seeking consular access for these fishermen. 

INDIA-US RELATIONS
Addressing the 31st Annual Leadership Summit of the US-India Business Council (USIBC), American Vice President, Dick Cheney expressed his confidence in the Indo-US nuclear deal being approved by Congress. Cheney strongly supported the nuclear deal arguing that the deal strengthened the non-proliferation regime rather than undermining it. There is a huge India-America caucus at Capitol Hill which consists of both Democrat and Republicans. Cheney spoke highly of India's growing economy and its critical role for American industry. Indian markets are valuable because of the large pockets of skilled manpower and a rapidly growing middle class. India's democratic tradition and respect for democratic values is an added advantage for the Americans. Cheney was also presented with the USIBC's Distinguished Service Award for Exemplary Leadership in uniting India and the United States. 

ECONOMY
India's economy remains strong, and continues to be a favoured destination for foreign investors, Minister of State for Finance Pawan Kumar Bansal said on Friday. "We are confident of more than 8 per cent growth this fiscal year," he told reporters, adding he expected higher farm output if monsoon rains were normal. Analysts have said higher oil prices could push inflation and dent growth as interest rates rise. Every US$10 a barrel rise in crude prices shaves about 1 per cent off India's growth, the Asian Development Bank has said, as the country imports most of its oil. The minister said the government would press on with reforms to the banking and pension sectors, and boost farm credit to ensure higher growth in the countryside and overall economy. Farm credit amounting to 2 trillion rupees could be made available in the year to March 2007, a ministry official said. India had set a target for state-run banks to push up farm credit to 1.75 trillion rupees in 2006/07, from a little over 1.2 trillion rupees in 2005/06. Bansal said that the manufacturing sector was also doing well. The government wants to push manufacturing growth above 12 per cent in the coming years in order to reach much sought after double-digit GDP growth rates.
Despite the volatility in global and domestic share markets, Bansal said: "India still continues to be a favoured destination for foreign investors." According to government estimates, India's gross domestic product expanded by 8.4 per cent in 2005/06 on the back of robust growth in industry and services sectors. The central bank HAS projected a GDP growth of 7.5-8 per cent for 2006/07 in April. An economic advisory panel reporting to the prime minister on Thursday said GDP growth could be around 8 per cent if farm output grew by 2 per cent in the year to March 2007. The rate could exceed 8 per cent if agriculture grew by 4 per cent. 
The Confederation of Indian Industry (CII) is launching its Indian Business Forum in New York City on June 23rd which will be inaugurated by Commerce Minister Kamal Nath. The forum seeks to share information on the activities of Indian companies in the United States and to gather information on issues and concerns of members of Indian industry there. The official launch will be followed by a nine day program organized by the CII that the launch will cap off a nine-day programme organised by the industry body (CII) in the US that aims to highlight the increasing impact of India on the world and double bilateral trade with the US to US$80 billion in the next three years. The official Indian team for the initiative will include Science and Technology Minister Kapil Sibal, Deputy Chairman of the Planning Commission Montek Singh Ahluwalia and Chairman of the Knowledge Commission Sam Pitroda. India Inc will be represented by the likes of Tata Sons` Chairman Ratan Tata, Godrej & Boyce CMD Jamshyd Godrej, Sona Group CMD Surinder Kapur, Fortis Healthcare Chairman Harpal Singh and Biocon CMD Kiran Mazumdar Shaw. The eight-point multiple agenda of 'Nine Days of India in the US' includes, discussion and dialogues on innovation, strategy, trilateral talks on Indo-US-China and Indo-US-Japan, healthcare and the launch of the Indian Business Forum, apart from a session by the Indian American Council (IAC) to help Indian Americans connect to opportunities in India.
Mittal Steel and Arcelor SA, the world's largest steel companies are about to merge together. But the 27.5 billion Euro merger is unlikely to impact Lakshmi Mittal's plans to invest 9 billion dollars in its first Greenfield project in Jharkhand. Mittal Steel signed an agreement with the Jharkhand government last year in October to pump 9 billion into a 12 million tonne project-the second largest Foreign Direct Investment in the steel industry following South Korean firm, Posco's 12 billion plan investment plan for Orissa.

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ENERGY

India to participate in Central Asian gas pipeline 

The Indian cabinet has approved a proposal for a US$3.5-billion gas pipeline from Turkmenistan to India, New Europe reported.
The meeting of the council of ministers, chaired by Prime Minister Manmohan Singh, cleared the Petroleum Ministry's plan to secure gas from Turkmenistan through Afghanistan and Pakistan. Information and Broadcasting Minister Priya Ranjan Dasmunsi said the pipeline would be extended to India and would be called the Turkmenistan-Afghanistan-Pakistan-India pipeline, the Asian Age reported. He did not give further details about the project approved last Thursday. The pipeline would provide India an alternative to a US$ seven-billion gas-pipeline project from Iran. There is a question mark over India's participation in the Iran project amid uneasy ties between New Delhi and Tehran and pressure from the United States for India not to import gas from Iran. India's energy deals with Iran are in limbo after New Delhi sided with Washington and voted to report Tehran's nuclear programme to the UN Security Council. Meanwhile, the United States has been urging India to join the Turkmenistan pipeline. It would be "politically easier" to implement because it has Washington's backing by way of the Asian Development Bank's participation, the Times of India reported, cited by Deutsche-Presse-Agentur (dpa). The project is free from funding fears, which is the bane of the Iranian pipeline, the paper said, and would help India cater to its growing energy needs. The South Asian country recording economic growth of 7.5 to eight per cent annually, has been making extensive efforts to secure energy sources worldwide for fuelling its booming economy.

OVL-Mittal sets sight on Kazakstan 

Kazakstan has expressed interest to work jointly with India in the energy and hydrocarbon sector. The governments of both countries are considering cooperation in these sectors. India's ONGC Videsh and steel baron L N Mittal plans to tap oil and gas assets in Kazakstan, New Europe reported. Mittal Steel is planning to source natural gas from the country for its own 5.5 million tonne per annum steel plant at Temirtau as feedstock. It is one of the largest single-site integrated steel plant in the world, covers about 5,000 hectares. The OVL-Mittal is eyeing for 40-60 percent share in the unexplored asset of Caspian offshore controlled by Kazakhstan, reported Interfax. "Even though talks are at the primary stage, both the governments are hopeful for a joint venture," sources close to the development said. OVL is lining up a billion-dollar infrastructure development projects for Kazakhstan to secure oilfields. 

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FOREIGN COOPERATION

India-China trade link to reopen 

Trading through the Nathu La Pass will resume after 44 years. China and India have signed an agreement to re-open an ancient trade route which was closed 44 years ago, The BBC news website reported. 
Border trade will now resume through the Himalayan pass of Nathu La, 4,000 metres (14,000 feet) above sea level. 
The Nathu La pass provided a crucial link in the ancient Silk Road through which Indo-Tibetan trade has been conducted for centuries. 
India and China reached an initial agreement about the pass in 2003. 
But the formal deal was signed only on Sunday by officials from the two sides who met in the Tibetan capital, Lhasa. 
The Nathu-La pass was to be opened just a few days after the first train service started between eastern China and Tibet. 
"The reopening of border trade will help end economic isolation in this area," Tibet government vice-chairman, Hao Peng, said, according to the Xinhua News Agency. 
Officials say iron ore, livestock products, wool and electric appliances are among the products that will be traded through the route. 
The Nathu La pass was closed in 1962 after war broke out between China and India. 
Both sides still have territorial disputes. India accuses China of occupying 32,000 sq.km. (14,670 square miles) of territory in Kashmir, while Beijing lays claim to the north-eastern Indian state of Arunachal Pradesh. 
But last year, China accepted that the tiny state of Sikkim, where Nathu La is located, belongs to India. 
Indian officials say the opening of the trade route will go a long way to resolving differences between the two countries. 
"The resumption of border trade is a great historic event, not only for enlarging trade, but also for greater relations between the two countries," Indian commerce ministry official, Christy Fernandez, was quoted as saying by the Press Trust of India. 
The famed Silk Road was an ancient trading route that once connected China with India, West Asia and Europe. 

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MEDIA

Indian media boom moves to market

One of the most striking aspects of India's resurgence is the dizzying array of cable-television channels and newspapers that have sprouted with the expanding economy. Now they are making an impact on the stock market, too, through a spate of initial public offerings that analysts say could be long-term buys, the Wall Street Journal reported.
So far, many of the new shares have been slow to take off, reflecting investor disquiet about tight regulation in the cable industry and an increasingly crowded newspaper market. Analysts contend that these worries are likely to fade faster in the electronic-media segment, which despite having high valuations seems a better long-term play than print.
The boom in electronic and print media is driven by a new generation of young consumers whose spending has driven advertising revenue growth of between 12 % and 14% annually for print media and cable TV.
Sixty-one million families in India have cable television, out of 108 million households that own TV sets. Ten years ago, a couple of cable news channels had almost no competition. There are now 22 news channels across the country, according to PricewaterhouseCoopers.
In a March report, the consultant predicted that electronic media revenues would climb to 427bn rupees or nearly US$9.5bn, in 2010 from 148bn rupees in 2005. Print revenue is expected to increase to 195bn rupees from 109bn rupees during the same period, it added.
Cable-television stocks should benefit from this growth, say analysts, especially when an end is called to a freeze on cable subscription charges imposed by the government-appointed industry regulator nearly three years ago. Analysts expect the price freeze to ease gradually in coming years.
Moreover, the cable industry awaits the introduction of a conditional-access system, expected in several months. The system would allow viewers to pay for only the channels they want to watch. Analysts say such a system would help boost advertising revenues for companies running popular channels.
"Television stocks are in for huge growth" when conditional access comes in, says Phani Sekhar, an analyst at Angel Broking in Mumbai. He expects cable networks to command premium-advertising rates compared with print by using their ability to instantaneously reach markets across the country in a way newspapers can't.
News channel New Delhi Television, a leading cable-TV network, is expensive compared with peers, as it trades at a multiple of 30 times forecast earnings for the fiscal year ending March 31st 2007, according to KR Choksey Securities of Mumbai.
Jigar Shah, a director at the brokerage firm, believes the premium is justified given NDTV's growth prospects. NDTV listed in 2004, and so far in 2006 its shares have climbed 28% to close at 258.20 rupees on May 17th. The Bombay Stock Market's Sensitive Index, meanwhile, has climbed 30% during the same period.
Mr Shaft expects NDTV's share price to reach 320 rupees by the end of the 2007 fiscal year, driven by the success of its marquee English- and Hindi-language news channels, which rate first and second, respectively, in their markets.
TV Today Network, which broadcasters one English and two Hindi news channels, is also poised for growth, Mr Shah said. Though its stock has been comparatively weak this calendar year, rising only 6%, he expects a revenue lift from new channels overseas and from direct-to-home satellite television.
Though still in its infancy in India, direct-to-home service could transform the industry by doing away with local cable operators that control the so-called last mile of cable into viewers' homes. Currently these operators under declare subscriber numbers to broadcasters, thus keeping as much as 85% of subscription revenue for themselves.
"In the long term, when under-declarations are reversed, it will have a huge gain," Mr Shah said in reference to TV Today's stock, which his brokerage firm predicts will hit 125 rupees by March 31st 2007.
The performance of print-media stocks has been less spectacular. Shares of Jagran Prakashan, which publishes India's biggest Hindi newspaper, have fallen 7.5% since its IPO in February, and finished on May 17th at 296 rupees. HT Media, which publishes the Hindustan Times, has relied this year after listing last September, but has only just managed to surpass its issue price of 530 rupees.
Nonetheless, some analysts believe print offers better value compared to pricier TV stocks.
Sanjeev Prasad, who covers the sector for Kotak Securities in Mumbai, favours print-media stocks over their splashier electronic rivals. He believes that print is being overlooked because investors are looking at the travails of the global print industry, where many newspapers and magazines are struggling to maintain profitability.
Mr Prasad believes India is a special case and there is room for further growth, as its citizens are still underserved by newspapers. He favours HT Media, which he expects to outperform the Sensex over the next 10 months. By that time, he contends, the share price will have consolidated at around 550 rupee. HT Media's stock has risen 21% this year, and closed up 2.4% at 530.65 rupees on May 17th.

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