Books on India
Irdian Rupee (INR)
Update No: 016 - (27/05/05)
India and Pakistan held the 9th round of diplomatic talks to reduce
differences over the demilitarisation of the Siachen Glacier which was the
world's highest and toughest battlefield. Indian Defense Secretary Ajai Vikram
Singh led an eight member team and met his Pakistani counterpart Tariq Waseem
Ghazi over two days. Pakistan says it is willing to withdraw troops from Siachen
if India too pulls out her troops. However, before committing to pulling out its
own troops, India wants Pakistan to recognize and acknowledge the ground
position which requires authenticating as the Actual Ground Position Line or
AGPL to avoid any conflicts in future. The two countries are "hopeful"
that a resolution is in sight. According to a press report statement quoting
Tariq WAsim Ghazi, "we are proceeding into these talks very hopefully. We
see positive signs. And I think there is optimism. We would like to work towards
this resolution and we will discuss all these issues with this positive
In a separate issue, India declared that Kashmiri separatist leaders who were
scheduled to travel to Pakistan, would not be allowed to travel beyond Pakistani
occupied Kashmir. The Indian Foreign Ministry released its official statement a
day after leaders of the All Parties Hurriyat Conference (APHC- the main
political separatist alliance of disputed Kashmir) accepted an invitation from
Islamabad to travel to the Kashmir border on June 2 with the view of engaging in
diplomatic talks to resolve the territorial issue. Indian Foreign Ministry
Spokesman Navtej Sarna told the press that "as per the understanding
between the two countries, any person travelling on the bus service can travel
within the erstwhile state of Jammu and Kashmir and any violation would affect
such understanding". (PTI Report)
One year in office
The Congress-led UPA government completed one year in office on May 22,
2005. The government's record in the last year has been promising with high
growth rates and positive steps taken towards facilitating the peace process
with Pakistan. On the down side, the Congress party faced opposition not just
from its rival party, the BJP but also from its own coalition members such as
the CPI and CPI(M). The BJP has raised several issues with regard to the
Congress government's failures. The messy handling of the electoral verdict in
Jharkhand and political upheaval in Goa has to an extent tainted the image of
But the Congress and its coalition partners have handled the opposition's
charges well. According to Prime Minister Manmohan Singh, the mere fact that
ministers have been charge-sheeted in certain political scandals does not in
itself disqualify them from being ministers. The government's relationship with
the Leftist parties has come under greater strain on economic issues. The Left
has voiced its disapproval with come of the Congress government's policies but
the criticisms have been systematically tackled by Manmohan Singh who remains
focused in advancing economic reforms.
Next generation Gandhi
Separately, it seems clear now that Congress President Sonia Gandhi will
appoint Rahul Gandhi as General Secretary of the party. She believes that Rahul
Gandhi's one-year stint in the political limelight and in Parliament has
prepared him adequately for this role. The next round of organizational changes
will include Rahul Gandhi's induction as new General Secretary. The revamp of
the Congress set-up might be accompanied by a reshuffle of the Union Cabinet. A
couple of relatively young Congress members of Parliament are likely to be given
junior ministerial berths. While Rahul Gandhi will become a key functionary in
the party, Sachin Pilot, Milind Deora and Ajay Maken, Congress members of the
Lok Sabha, may be made ministers.
ECONOMY AND BUSINESS
Hailed as a big step towards regional integration, India is planning to
build a trading block for Asia on the lines of the European Union. Deputy
Chairman of the Planning Commission, Montek Singh Ahluwalia stated that
"the concept of Asian economic integration is a logical development as a
means of promoting the common prosperity and well-being of the people of
Asia." As Asian countries have opened up their economies to foreign trade
and investment, they have become active participants in the global economy.
This month, the Indian government also came up with a strategy to resolve the
current oil crisis it faces. While international crude oil prices have risen
dramatically, the government has been working to reduce the pressure on
government oil companies who are facing rising losses. The new plan aims to
reduce the extent of the retail price hike that the oil companies have been
asking for. The government may also withdraw the import duty concessions on
crude oil that are offered to companies that export refined petro products like
petrol and diesel. The new strategy will also get the support of the Left who
wanted private oil refiners to share the burden.
In separate news, US conglomerate General Electric is looking at acquisitions
the in financial and industrial sides and is considering India as a
manufacturing hub. Jeffrey Immelt, CEO and chairman of GE Worldwide stated that
"this is the right time to invest in India and we will be bold on the
market here." "GE is now planning to make investments in the country
and is ready to work with the government and other Indian players." The
company is targeting eight per cent organic growth and expects India to be a
major contributor to this.
Air India orders 50 Boeing jets for up to US$6.9bn
As Airbus prepared to launch the headline-grabbing A380 recently, Boeing won an
order from air India for 50 passenger jets valued at as much as US$6.9bn, the
International Herald Tribune reported on April 27th.
Airbus played down the back-to-back announcements, although it called the timing
"unusual," so close to the maiden flight of the A380.
"It's curious, but it's kind of hard to take away from the lustre of the
greatest event in aviation in the last three decades," said Mary Anne
Gretchen, an airbus spokeswoman in Toulouse, France.
While Airbus has high hopes for the A380, Boeing is counting on the
fuel-efficient 787 Dreamliner, its fist new plane in 15 years, to recover the
lead of the industry within two years from Airbus.
The order from Air India, the nation's biggest overseas carrier, includes 27 of
the 787s and 23 Boeing 777s. Approval of the purchase from the Indian government
is required, the state-owned airline said.
Air Canada ordered 32 planes valued as much as US$6.1bn recently, including 14
of the 787s.
"We have never seen interest like we have with the 787," said Michael
Bair, the head of Boeing's 787 program, during a conference call with reporters.
"It's really gratifying to see airlines from all over the world, with
different business models, endorsing the plane."
Airbus has yet to win board approval to begin production on a competing model
known as the A350.
Chairman V Thulasidas said Air India was buying new planes because of mounting
competition form Indian and overseas airlines such as Singapore Airlines and
Winning Air India's bid helps Boeing catch up with Airbus in India, where local
carriers have chosen twice as many aircraft made by Airbus.
Indian carriers are buying and leasing planes as economic expansion in Asia's
fourth-biggest and leisure travel.
Air India needs more planes to expand its network to cities such as Melbourne
and Toronto and to increase flights to New York and London. It also faces
increasing competition from India's private airlines such as Jet Airways and
Sahara Airlines, which will start flying to the United States and Britain this
Airbus expects Indian carriers to buy 570 planes through 2023 and Boeing expects
India to buy US$35bn of planes in the next 20 years.
The twin-engine 787 was designed to replace older 757 and 767 models. It can
carry as many as 289 passengers and is 20 per cent more fuel-efficient than
Carbon fibre composites will account for about 50 per cent of the weight of the
new plane and this will make it lighter.
Meeting India's demand for natural gas
The aim of creating Petronet LNG Limited was to meet India's emerging demand for
natural gas and provide consumers with a secure supply of it. "It is
extremely satisfying to create a worldclass organisation for import,
regasification and distribution of regasified LNG (liquefied natural gas) in the
shortest time at a benchmark cost," said Suresh Mathur, the chief executive
officer and managing director of Petronet LNG Ltd. The government of India
approved Petronet in July 1997, enabling it to import LNG at various coastal
locations in the country with 50% equity participation of four public sector
undertakings: GAIL ONGC, IOC and BPCL.
Natural gas is going to be a major fuel, due to its environment-friendly,
cost-effective and efficient burning character, Mathur said. There is also a
perceptible shift toward natural gas in India. Petronet LNG has kick-started
that process by augmenting domestic production with imports. Imports through
transnational pipelines are also envisaged. Throughout the world, developed
nations are taking steps to provide secure gas supplies. India has historically
depended largely on imported crude oil. Imports have initiated a shift from
petroleum products to regasified LNG as a fuel and feedstock in many industries.
Seeking new energy sources to fuel new growth
India's economy, which has been on an upward surge for most of the past two
decades, is constantly seeking new energy supplies to help sustain its dynamic
growth. To that end, the Indian government is actively encouraging companies
that are prepared to invest in the search for new sources of oil and gas in
other parts of the world.
The need is pressing, as there is little likelihood that India's economic
juggernaut will slow down. In India, as in its next-door neighbour, China, rapid
growth has led to unquenchable energy demands from its new factories and
increasingly affluent population.
While India does not have the energy resources to achieve self-sufficiency, it
does have unexplored areas with promising prospects for tapping into oil and gas
reserves. The New Exploration Licensing Policy offers incentives to companies
prepared to invest the extensive time, effort and expense necessary.
The government has offered new licenses in blocks, most recently making another
20 sites available, inland as well as inshore and offshore. "Because of the
fast-growing economy, it is important for us to access hydrocarbon
resources," says Shri SC Tripathi, secretary to the government of India's
ministry of petroleum and natural gas.
"Tremendous economic growth is taking place," he added. "During
the 1980s, growth was around 5.6% a year on average; from 1991 onward it was 6
to 7%. That has continued into this century. In 2003-2004, growth was 8.3% and
preliminary estimates for 2004-2005 show that the pattern is continuing."
A conference in January this year in the capital, New Delhi, addressed the
present and future energy needs of the nation of one billion people, as well as
global issues. Speakers at Petrotech 2005 included experts from around the world
and senior government officials from India. In a bid to coordinate Asian efforts
to maximize energy resources, India also staged a round-table meeting of energy
ministers from the region this year. Shri Mani Shanker Aiyar, minister of
petroleum and natural gas, pointed out the challenges that lie ahead - and how
cooperation on major projects would be mutually beneficial for Asian nations.
"The oil and gas sector in India welcomes the world with open arms and
reserves a particular welcome for Asian investors," he told delegates.
"Equally, we stand ready to do our share for the promotion of the global
oil economy in general and the Asian oil economy in particular. We believe we
should continue and intensify this dialogue in the interests of facilitating
mutual investments to ensure mutual security."
India to open retail sector but try to guard jobs
India plans to open its booming but protected retail sector to foreign
investment - initially with access for grocery companies - as the government
tries to answer growing pressure for bolder economic changes, the Wall Street
Journal Europe reported on May 3rd.
Commerce and Industry Minister Kamal Nath said in an interview that the
US$190bn, or roughly 150bn Euro, retail industry, which has been growing as much
as 5% a year recently, would be opened in a way that encourages investment while
protecting the jobs of millions of small shopkeepers who dominate the trade.
He said the priority is facilitating the entrance of refrigerated distribution
networks to ensure fruit and vegetables are well preserved in transit to shops.
About 40% of perishables grown in India rot during transport and distibution. Mr
Nath said as much as three-quarters of the initial opening to foreign investment
could be in food and related investments.
The Indian government is mulling many different proposals to open the country's
retail sector. Among those being considered are ceilings of either26% or 49% on
foreign investment in a retail outlet. Analysts say allowing majority control at
this time isn't likely, given the political realities of India's coalition
government, which includes leftist parties.
Currently, direct foreign investment isn't permitted in India's retail sector.
Companies such as McDonald's Corp of the US and Italy's Benetton Group SpA have
opened in the subcontinent, but usually through franchising agreements in which
Indian partners dominate and make most key decisions, analysts say.
Allowing direct investment from abroad would give foreign companies more control
over the location and size of which they currently lack, says Anand Dutta, a
retail analyst at property consultant Hones Lang LaSalle's office in Bombay,
which is also know as Mumbai.
The government faces a delicate balancing act in trying to answer growing global
expectations for faster deregulation of its heavily protected economy, while
making sure its largely impoverished population doesn't suffer as a consequence.
It is under growing pressure to boost foreign direct investment. Its economy is
being opened at a much slower pace than China's analysts say. China attracted
more than US$60bn in foreign investment last year, about 10 times what India
attracted during the financial year that ended March 31st.
What policy New Delhi follows with its retail sector is seen as a test of its
willingness to catch up with China in making economic changes. China started
opening its retail sector in 1992, and recently threw open the doors to 100%
ownership by foreign investors in retail outlets.
"Retailing can be a catalyst for the Indian economy," says Ireena
Vittal, partner at McKinsey & Co in Bombay. "It has a multiplier effect
which is quite large."
But India faces political hurdles to liberalisation that China didn't have to
confront. Its congress Party-led government rules in a coalition with more than
a dozen partners, including two communist parties that staunchly oppose foreign
investment in the retail sector.
Those parties believe an opening would put millions of small shopkeepers out of
business. The Indian retail industry, which McKinsey says is the world's eighth
largest by sales, is highly fragmented and dominated by an estimated 12 million
tiny mom-and-pop stores where most Indians buy their necessities. These shops
make up 93%of the retail industry.
Mr Nath said India can allow foreign investments while preserving these jobs. He
said foreign investment will be phased in over a period of years. One slice of
the retail sector will be opened "and if it doesn't replace any jobs then
you look at opening something else," the minister said.
Global retailers such as Wal-Mart Stores Inc of the US and Carrefour SA of
France have wanted to enter the giant Indian market for years. Analysts say big
chains have been waiting until they ca have significant control of nay
operations in India through direct ownership.