Irdian Rupee (INR)
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.
Update No: 001 - (01/03/04)
With the Lok Sabha elections coming up, there is widespread speculation amongst Indian analysts and political gurus about which party will come to power and form the government at the Center. As the current situation reveals itself, it seems that the National Democratic Alliance (NDA) led by the Bharatiya Janata Party will continue to remain in its seat of power. In an interview with the Times of India, India's Union Rural Development Minister Shanta Kumar is reported to have said that the NDA government under the leadership of Prime Minister Atal Behari Vajpayee has been successful in maintaining stability and security and had displayed tremendous foresight and vision in formulating policy. As part of the party's agenda, Prime Minister Atal Behari Vajpayee has reiterated that employment opportunities will be provided to the poor and towards this end, employment has been provided to nearly 8 million people.
The BJP led government has released two reports as of February 22, 2004. The first report outlines the achievements of the NDA government, the second report is related to funds granted to each state on centrally sponsored schemes. With regard to the political struggles between different factions within the NDA, there have been concerns that some of the smaller parties within the NDA like the Dravida Munetra Khazagam (DMK) might drop out. However, this should not affect the party's position in the upcoming elections. (Source: Times of India Report, February 2, 2004).
The Congress Party has decided to share its seats with the DMK and with three new seats being assigned to the Congress Party, it is going to contest ten seats in all (seven which were allotted earlier). As of Feb 21, 2004, the ruling PDP-Congress alliance in Srinagar, the capital of Jammu and Kashmir have begun their election campaign from the town of Sopore, 50 kilometers away from Kashmir. One of the primary issues on the Congress agenda is the need to curb the spread of communalism and also generate more employment.
Given the excitement that is being generated by these elections, the BJP's state units have begun framing their polling strategies and outlining their election agendas. While there is a high probability that the BJP will win the forthcoming elections, it still has to overcome some of the petty squabbles between BJP stalwarts like Shanta Kumar and Prem Kumar Dhumal in states like Himachal Pradesh. In the southern Indian state of Karnataka, the state assembly has been dissolved by the state's Governor since he favors state elections. By March 15, the BJP plans to announce its list of candidates for the Assembly and Lok Sabha elections. For this purpose, the state election committees have been asked to submit their recommendations before March 5. The BJP Party Preseident, Mr.Venkaiah Naidu has declared that party members are working on the "Vision Document" which will contain the policies and the programs of the BJP. All contentious issues like the building of a Ram Temple in Ayodhya, will be avoided.
Pakistan has expressed its willingness to undertake a nuclear restraint regime with India. Pakistan's Foreign Office spokesman expressed concerns regarding the accidental or unauthorized use of nuclear weapons. This is part of a series of confidence building measures that both countries have decided to embark upon. As part of its diplomatic efforts, Pakistan has also pressed one of the most virulent militant organizations, the Hizbul Mujahideen to abandon its cause of "jihad" (holy war) and declare ceasefire in order to prevent the escalation of tensions between both countries.
On January 6, India's Prime Minister Atal Behari Vajpayee and the Pakistani President Pervez Musharraf issued a joint statement in which the Pakistani President pledged that Pakistani territory would not be used for terrorist activities against India. With regard to the nuclear question, Pakistan is firm in its belief that it will not roll back its nuclear weapons program. The Pakistani President has placed in the hands of the army's arsenal a short range missile called the Hatf-3 Ghaznavi missile which has a range of 290 kilometers and is capable of striking targets within Indian territory.
India's Gross Domestic Product (GDP) has risen by 8.9% due to tremendous growth in agricultural, industrial and service sectors. India's Finance Minister Jaswant Singh believes that this comes close to the expected calculations of the government's projected figures. India's exports in particular products like tea has also marked a major increase in non-traditional sectors. Over the years Indian tea has become extremely popular among Americans, Australians and the Japanese. In the area of commerce, India's Minister of Commerce Arun Jaitley has drawn up a plan called Vision 2004 which envisages spending up to half a billion rupees on infrastructure. The BJP government is also interested in allocating sums of money for power projects and water transportation. In addition, towards achieving higher growth rates, the government is developing "economic growth clusters" in both urban and rural sectors.
With regard to current WTO trade negotiations, India has objected to the framework advanced by the US representatives of trade. "New Delhi suspects that the model mooted by the EU and the US will play a subversive role for it by distancing the significant opening up of global agricultural trade from the crucial question of cutting down the high levels of farm subsidies in the US and EU" (Source: Economic Times, February 24, 2004). India wants the framework to provide some indicators on tariff reduction, export subsidies in different aspects of the negotiations whether it pertains to agriculture, industrial products or services. The terms of the framework were discussed during US Trade Representative Robert Zoellick's recent visit to India.
In the banking sector, the government is trying to come up with guidelines for allowing foreign banks to set up their subsidiaries in the country. Foreign Direct Investment (FDI) regulations have been eased giving foreign banks like HSBC, ABN AMRO and Standard Chartered the incentives to set up subsidiaries in India.
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