Books on India
Irdian Rupee (INR)
Update No: 018 - (29/07/05)
In the last month the Indian political scenario has been marked by strong
opposition to the Congress government's policies. Prime Minister Manmohan Singh
has received considerable flak especially from members of the Bharatiya Janata
Party and the Communist parties. Even a few members from the Congress bloc have
begun to openly criticize his policies. Those critical of Singh's policies have
argued that the Prime Minister seems to be compromising national interest. The
criticisms began soon after Singh visited Oxford and praised the British Raj for
their good governance and for establishing a strong judiciary, civil service and
police force. The opposition believes that by praising the British Raj, the
Prime Minister compromised the contribution of India's freedom fighters in the
country's struggle for independence. Advocates of Singh's policies argue that
Singh's remarks should be viewed in the context of Britain's relations with
India in the present. A second issue that has caused much concern amongst
opposition members is the recent Indo-US agreement on nuclear energy. The
Communists have called it a "sell out" by India but those who are
defenders of the Singh camp, stated that "the truth is we were desperate.
We have nuclear fuel to last only until the end of 2006. If this agreement had
not come through we might have as well closed down our nuclear reactors and by
extension our nuclear program." A third issue that appears to have brought
about some resentment among opposition members is the building of a gas pipeline
through Iran and Pakistan. Singh does not seem too pleased with the obvious
security implications of building the pipeline which he conveyed to President
George Bush during his recent visit to the United States. This was once again
seen as a compromise on India's part because the Americans are not too keen on
the idea either. The Left wants to know why Singh expressed doubts about the
feasibility of the Iran gas pipeline during his meeting with George Bush.
Prakash Karat, General Secretary of the CPI(M) stated, " The Prime Minister
must explain why he made such a remark in a country which is opposed to the
pipeline. We will ask for an explanation in the Parliament too." Moreover,
he said, "our party considers the Indo-Iran Gas pipeline very important.
The UPA government should be committed to start this. We want an assurance from
the government on this." There has also been recent speculation that
members within the Congress party have also expressed dissatisfaction with
Singh's policies. A rift between the Congress party members could prove
detrimental to Singh's tenure as Prime Minister. A final issue that has been
quite contentious is the discussion over the Women's Reservation Bill. The
parties on the Left want the original version of the bill tabled but the
Congress party is getting ready to propose an amended version of it.
This month marked a major breakthrough in talks between India and United States.
The leaders of both countries reached an agreement on civilian nuclear
cooperation. The Bush administration's effort to reach such an agreement with
India is a signal to other countries about the growing prominence of India in
global politics. President Bush and Prime Minister Manmohan Singh also discussed
issues vital to each state's security including nuclear proliferation, the
rising threat of terrorism and democracy promotion. Under the provisions of the
agreement, India would receive nuclear fuel for its Tarapur reactor. When India
refused to sign the Nuclear Non-Proliferation Treaty in the mid-1990s, the
United States had backed down from its commitment of supplying fuel towards
building the reactor. The change in policy is being hailed as a critical step in
cementing Indo-US ties. In the words of Nicholas Burns, "What we have done
is to develop with the Indian government a broad global partnership of the likes
we have not seen with India since India's founding in 1947. This has
consequences for American interests in South Asia but also has larger
consequences for what we are trying to do globally, in terms of promoting
democracy, fighting terrorism, HIV-AIDS and all of those issues discussed by the
two leaders." Besides the main agreement, a series of 10 new initiatives
have been launched which include expanding education in rural India and
improving agriculture through joint collaboration between Indian and American
organizations. In exchange for civilian cooperation, India will have to ensure
that it keeps its military and civilian programs separate and places its
civilian reactors under the international safeguards established by the
International Atomic Energy. It will also maintain strict controls over the use
of nuclear technology and observe the canons of the Missile Technology Control
Regime (MTCR). India's step forward in relations with the United States comes at
a critical time particularly since its demand to be given a permanent seat in
the Security Council.
The World Bank has praised many of the steps taken by India to reform its
economy but remains critical of the bureaucratic red-tapism which tends to
discourage investors from working in India. The World Bank has identified
corruption as the biggest obstacle to the growth of investment strategies in
India. In India there appears to be a link between corruption and the time
necessary for registering with a company. However, on the bright side, Indian
stock markets have recorded a boost ever since foreign investors have put money
into the Bombay Stock Exchange. Oil, gas and steel companies are heading the
list with foreign investment impacting the market.
Separately, a five member team from Pakistan visited India to inspect the
building of a hydro-electric dam project in Indian occupied Kashmir. India is
building this dam to provide power to its part of Kashmir. Pakistan wants India
to stop work on the dam on the grounds that it contravenes a shared water treaty
promoted by the World Bank. Pakistan believes that the building of the Balighar
dam will cut off irrigation facilities to its major agricultural regions. Yet
another bone of contention!
Toyota to manufacture small car in India: report
Japan's Toyota Motor will manufacture a small car in India together with its
subsidiary, Daihatsu Motor, as early as 2007, a leading Japanese financial daily
According to the Nihon Keizai Shimbun, the two companies will spend about 10bn
yen (US$90m) to build a plant near Toyota's factory in southern Indian city of
Spokesman for Daihatsu declined to comment on the report by saying nothing has
been decided, while a Toyota official said he was checking the validity of the
The current dominant player in India is a Japan-India joint venture involving
Suzuki Motor, which has a 50 percent share of the local market. Suzuki is
Japan's largest minicar manufacturer.
The new factory will assemble 100,000 cars. The car Toyota and Daihatsu are
planning to make in India will be most likely a 1-litre-class vehicle based on
the Passo model they co-developed, according to the report. The Passo is the
smallest and least-expensive model in Toyota's vast line-up. The car's price for
the Indian market will be further reduced to make it affordable for local
consumers, the report said.
Toyota has been building the Corolla subcompact in India with a local firm,
selling 48,000 vehicles last year, the company's record for the country. But
Toyota's share of India's auto market currently stands at a mere five percent,
according to the report. Small cars are very popular in India and they account
for more than 70 percent of overall auto sales in the country. This will be the
first foray for Daihatsu, which is Japan's second largest mini-vehicle maker,
GE sheds its stake in India power plant
The curtains are finally down on the controversy surrounding the onetime
showpiece of India's foreign investment drive, with General Electric announcing
a settlement in the sale of its stake in the now-closed US$2.9bn Dabhol Power
project in the western state of Maharashtra.
A company release recently quoted the GE India president and chief executive,
Scott Bayman, as saying, "GE has reached a comprehensive settlement of its
Dabhol-related disputes with the government of India, the government Maharashtra
and its entities and the Indian lenders to Dabhol."
Though GE did not reveal the price at which it settled for its stake, newspaper
reports speculated that the payments totalled US$145m.
The settlement over Dabhol, which was shut four years ago after a payment
dispute with its sole customer, marks the exit of all the foreign investors in
the project except Bechtel Group.
For a long time, Dabhol was the single largest foreign investment in a country
that started an ambitious economic liberalisation drive in the 1990s. But in the
end, it turned out to be one of the deepest financial quagmires.
Bechtel, a San Francisco-based multinational construction company, is expected
to reach a financial settlement soon. Bechtel and GE held a combined 85% of
Dabhol after they bought the 65% stake owned by Enron after that energy trader
failed. The Maharashtra State Electricity Board, the state utility that was
Dabhol's sole customer, owns the other 15%.
The settlement frees the government to revive the project, possibly next year,
and it is expected to use government-owned companies like National Thermal Power
and Bharat Heavy Electricals. The Independent Power Producers association of
India estimates that the country has peak power shortages of 25%. Even this is
an artificial, conservative number, the trade group says, because the government
"It was about time that the government stepped to resolve the major and
complicated wrangle," Harry Dhaul, director general of the association,
said by telephone form Delhi. "This bodes well for foreign investments into
the power sector."
The Dabhol project, 250 kilometres, or 150 miles, south of Mumbai on the Arabian
Sea, will be able to generate 2,184 megawatts of power after its second phase in
complete, enough to power tow million average US homes.
Indian lenders supplied most of the money to build it and are owed some
US$1.5bn. foreign creditors included institutions like Citigroup, Bank of
America and ABN AMRO. The project ran into repeated conflicts with politicians
Announcing the settlement, Bayman of GE said it had been a long and complex
process. He said GE would work with state-owned companies to restart the first
phase of the project and to complete construction of the second phase.
"We are pleased with the progress thus far," he said.
Infrastructure problems like power shortages and crowed roads and airports are
starting to impede India's economic growth. Severe power shortages in
Maharashtra are causing shutdowns even in Mumbai, the financial capital.
India eyes increased cooperation with France
India is targeting bulk French investment in the country following its proven
success and competency achievement in the technological sectors, N Srinivasan,
director general of Confederation of Indian Industry (CII), said, New Europe
He stressed that France now recognises India's competence in technology and
engineering and that a number of French companies "are already exploring
business opportunities in India."
However, Srinivasan, who recently made a visit to France, admitted points of
French concerns regarding India's weakness in infrastructure and delays in
governmental approvals. "We have explained to the French business community
on how the delays in decision making process can be overcome. The French
companies, who are setting up business in India in collaboration with an Indian
company, should do so after careful analysis and research. This would definitely
help shorten the timeframe," he said.
The director general of CII continued that there will be several French
delegations visiting India in the next six months including those on defence and
aerospace, automotive sector and technology. "Several French auto and auto
component makers have already promised to be present at the Auto Expo, to be
organised by CII in January 2006," Srinivasan explained. "Hospitality
is another sector in India which the French are keen on."
There has been some hectic activity towards deals between India and France
The French business houses sat up when orders worth a total of 13bn Euro orders
were placed at the recently organised Le Bourget France Air Show by three Indian
airlines - Jet, Kingfisher and Indigo - out of the total order placed at the
show of 42bn Euro. Further, Air France is starting direct flights from Paris to
Bangalore five times a week from October.
Meanwhile, the Indian aeronautical equipment manufacturer HAL has won orders
from Airbus for producing doors. Economists interpreted the move as the
recognition of the Indian expertise in engineering by the French side. Recent
reports revealed that Safran, jet engine and aerospace equipment maker, was also
in talks with HAL for project related works.
Among other French giant firms exploring the Indian market, Alcatel stands as a
foregoer with its engagement in captive outsourcing at its Chennai, Bangalore
and Gurgaon facilities. Renault recently tied up with Mahindra and Mahindra for
a new car "Logan" to be manufactured at M&M's Nashik plant. Valeco,
car parts manufacturer, was also reportedly planning to set up shop in India.
India, Sweden sign MoU on ICT
Indian Minister fro Communications and information Technology, Thiru Dayanidhi
Maran, on June 30th ended a two-day visit to Sweden where he had a wide-ranging
discussion with his Swedish counterpart, Ulrika Messing, on how to further
strengthen bilateral cooperation in the strategic area of Information and
Communication Technology (ICT). "While appreciating the more than a century
old presence of Swedish companies like Ericsson in India, Thiru Maran invited
the Swedish SMRs to collaborate with Indian companies to enhance their
competitiveness," diplomatic sources at the Indian embassy in Stockholm
said, New Europe reported.
Maran visited the rural communication network in the northern remotest part of
Sweden. He invited the ICT companies to participate in IndiaSoft 2006. The
minister inaugurated a round table on ICT collaboration at which a 16-member
business delegation under the aegis of FICCI also participated. The Indian and
the Swedish ministers witnessed the signing of a MoU between FCCI and the Sweden
India Business Council (SIBC) for promoting bilateral trade and investment.