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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: 018 - (29/07/05)

POLITICS
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. 

INDIA-US RELATIONS
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. 

ECONOMY/BUSINESS
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!

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AUTOMOBILES

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 reported recently.
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 Bangalore. 
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 report. 
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, into India. 

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ENERGY

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 rations power.
"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 and environmentalists.
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.

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FOREIGN COOPERATION

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 reported.
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 recently.
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.

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INFORMATION TECHNOLOGY

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.

 

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