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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: 024 - (30/01/06)

POLITICS
The Congress party recently held its plenary session in Hyderabad. Prior to the meeting, the Congress Working Committee (CWC) convened a meeting which was attended by Prime Minister Manmohan Singh and party President Sonia Gandhi. The plenary session began amidst a brewing political crisis in the state of Karnataka. The Prime Minister opened the proceedings and the session's agenda included a discussion over politics, economics, external security and international affairs. Interestingly, on the second day of the Congress session, the entire focus of discussion and debate was Rahul Gandhi, son of Sonia Gandhi. The top leadership believes that there is no position for the young Gandhi in the party just yet. But hundreds of party workers began chanting slogans insisting that Rahul address them. In what seemed to be an apparent disapproval of the speeches extolling her son, Congress President Sonia Gandhi urged delegates to concentrate on "issues" and not spend time discussing personalities. In her opening remarks at the 82nd Plenary of the Congress, Gandhi told delegates to talk directly about issues. "I want maximum time devoted to discussing important matters, there is no need to repeat what one individual has said". The debate over Rahul Gandhi's accession to politics may be critical in the future months and years especially if there is a change in the Congress leadership. Rahul Gandhi, owing to his lineage and political upbringing, seems to hold a strong appeal with the masses which has led to rumours of his leading the Congress party in future years. 

In another political development, Buta Singh resigned as Governor of Bihar after taking the Republic Day salute in Patna. His exit was on the cards after the strong indictment issued by the Supreme Court in the case relating to dissolution of the Bihar Assembly last year. The Supreme Court said that Singh's report to the Centre was "misleading" and was done to prevent the Janata Dal [JD(U)] from forming a government. Referring to the Supreme Courts indictment, Singh said he had sent two reports to President APJ Abdul Kalam on April 27 and May 21; reports based on clear evidence of horse trading. Singh had occupied the chair during one of the most crucial years in the history of the politically volatile state, which saw two assembly elections within a span of eight months in 2005. The February 2005 elections led to a divided mandate, after which Singh brought the state under President's rule. 

INDIA-PAKISTAN RELATIONS
India has proposed a freeze on new defence posts and defence works along the Line of Control (LoC) in talks with Pakistan. New Delhi has also announced its intention to extend the Munnabao-Khokrapar rail link to Ajmer. On the first day of talks between Indian Foreign Secretary Shyam Saran and his Pakistani counterpart Riaz Mohammad Khan, India proposed holding brigadier-level flag meetings. The Pakistani side proposed that there should be no permanent relocation of strike formations in forward locations and pre-notification of missile tests should be extended to cruise missiles. 

The two sides also noted the "positive developments" in the overall improvement in relations and a reduction in the deficit of trust. He added that Pakistan appreciated the proposal to extend the rail link between Munnabao and Khokrapar up to Ajmer. The draft MoU handed over by India to Pakistan last year on measures to reduce the risk of accidental or unauthorised use of nuclear weapons was also discussed. He said developments on the nuclear CBMs were noted as one of the successes of the Composite Dialogue as was the implementation of the hotline between the Foreign Secretaries. the talks also focused on the issues of Siachen and Sir Creek. Islamabad has also proposed an agreement on accidents at sea, speedy return of inadvertent border crossers, prompt exchange of prisoners and discussions on threat perceptions. 

INDIA'S RELATIONS WITH SAUDI ARABIA
India and Saudi Arabia have joined hands to combat global terrorism and signed four agreements in New Delhi after Prime Minister Manmohan Singh and Saudi King Abdullah Bin Abdul Aziz Al-Saud held one-on-one talks that lasted close to 45 minutes, promising a renewed relationship. This was the first visit by a Saudi King in 50 years. Saudi Arabia controls a quarter of the world's oil reserves and it seems the visit is an attempt by Riyadh to look east. King Abdullah arrived in Delhi after a visit to China to begin a series of fresh talks with the Indian Prime Minister and also forge agreements in various political, economic and social arenas. Abdullah declared that "The relation between India and Saudi Arabia is an historic one and we have been old friends and God willing, this visit will renew historic ties". 

The two countries signed four agreements or MoUs (memoranda of understanding) on combating terrorism, avoiding double taxation, investment promotion and cooperation in the field of youth and sport. Separately, public and private companies signed six MoUs in the area of energy cooperation. The King was also the Chief Guest at India's Republic Day celebrations on January 26. King Abdullah also said that India should be an observer at the Organization of Islamic Countries (OIC) and Pakistan should move a resolution to this effect. He further clarified that his country's relationship with India was not hinged on its relationship with Pakistan. 

INDIA-US RELATIONS
India and the US closed another critical round of talks on the nuclear deal. The deal, if approved, will allow lifting of restrictions on import of technology for atomic power plants.
The US has reportedly asked for a more detailed plan of separation of civilian and military nuclear facilities. 
Nicholas Burns, US Under Secretary of State, stated that both governments have had a thorough discussion about the arrangement of the deal. Even though there may be obstacles, Burns was hopeful that both countries would overcome their problems through goodwill. The US also reiterated its acknowledgment of India's unique nuclear position in the international community. In addition, US Senator John Kerry has expressed strong support for the nuclear deal between India and US, signed on July 18, 2005. Kerry has said that the agreement unreservedly grants India the status of a nuclear power. This statement by Senator Kerry, who is a member of the Senate's foreign relations committee, is a major step forward in the relationship. Kerry further noted that "in discussions with the Prime Minister, it is a great signal and a positive one for the global community to bring a better three fourths of the program under safeguards to meet the strategic goals of the non proliferation debate; and all that is now subject to discussion. Kerry also said that he had received an assurance from the Indian Prime Minister Manmohan Singh that India will sign the Fissile Material Cut-off treaty; a treaty that requires countries to stop nuclear weapons production. According to Kerry "the agreement is a good one as it increases visibility on these issues and brings India on board as a key player to tackle issues as serious as these."

US Secretary of State Condoleezza Rice also stated recently that the prospect of India having civilian nuclear energy could be an "enormously important step" forward. In her words, "We've been very clear that while we want India very much to have access to civil nuclear technology, we also want to do this in a way that strengthens non-proliferation." 

ECONOMY AND BUSINESS
King Abdullah's recent visit to India also opened up Indian markets to trade ventures with the Saudis. AK Saeed, a Saudi businessman who heads an industrial empire that produces everything from carpets and perfumes to bottling carbonated drinks accompanied King Abdullah on his visit to India. Saeed is also the president of the Saudi-Indian business group and sees India as the largest growing economic power. The avenues for business include hotels, food, electricity and hospitals. The main centres for business are the metropolitan cities, Mumbai, Bangalore and Delhi. 

India and China have also signed a historic agreement to allow their public sector oil giants to work together to maximize existing energy potential in their domestic oil and gas market. A big Chinese oil and gas giant like Sinopec (worth $80bn) will work with an Indian PSU oil company in exploration, production and distribution in India as well as China. As per the Memorandum of Understanding between Sinopec and Gail, Sinopec will be able to invest in India in a joint venture with Gail for gas exploration, production and marketing. In return, Gail will also be welcomed by the premier Chinese oil and gas companies to work in Beijing and lend its expertise in setting up CNG stations at the retail level in the run up to Beijing Olympics. 

Opposing the government's decision to allow Foreign Direct Investment (FDI) in the retail sector, the Left parties called for a nationwide protest against the decision. The Left believes that the move is just a step before the entire retail sector opens up. Even the UPA is clearly divided on the issue, which is why yesterday's FDI decision was restricted to the high-end retail sector. 

In other business news, three Indian partners at management consulting major AT Kearney, including India country head Vivek Gupta will become major shareholders in the global firm in a management buyout. This follows the global management buyout of the consulting firm from computer services company EDS. EDS had bought AT Kearney about 10 years back and was operating it as a part of its outsourcing services. AT Kearney India Managing Director Vivek Gupta said "we have aggressive plans chalked out for India for the next five years. India is part of the 15 global profit centres of AT Kearney. Our mandate has also been expanded recently and now we are also handling the operations in the Middle East." 

General Motors Corporation has stated that it lost $4.8 billion in the fourth quarter and $8.6 billion in all of 2005, dragged down by losses in its North American division. GM's stock price, which had already fallen about 36 percent since July, dropped another $1.26 to $22.59 after the news. GM Chairman and CEO Rick Wagoner said: "2005 was one of the most difficult years in GM's history. It was a year in which two significant fundamental weaknesses in our North American operations were fully exposed- our huge legacy cost burden and our inability to adjust structural costs in line with falling revenue." The falling sales may affect those Indian share markets and automobile sectors which share a major collaboration with GM. 

In stock market news, Indian shares rose more than 1 percent to a new peak this week engineered by firm Asian markets and hopes for robust economic growth while Colombo climbed ahead of peace talks between the government and Tamil Tiger rebels. The finance minister, Chidambaram stated that India could grow by 10 percent in the 2006/07 fiscal year if investment levels were ramped up. The 30-share BSE index was up 1.2 percent at 9,798.04 points by 0510 GMT as gainers beat losers more than two to one in trade of 51 million shares. The 50-issue NSE index gained 0.7 percent to 2,961.30.

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ENERGY

India, China to jointly explore hydrocarbons in Kazakstan 

China and India are turning to Kazakstan's vast oil fields to fulfil their increased demand for energy. The interests of Chinese and Indian oil companies collided in the course of purchasing shares of PetroKazakstan of Canada with China National Petroleum Corporation (CN PC) emerging as the winner. However, the interests of two of the world's most quickly developing economies appear to concur in gas rather than in oil, experts from the New Delhi-based Observer Research Foundation said recently. Nandan Unikrishnan and Lydia Powell talked to Kulpash Konyrova, New Europe, in an exclusive interview in Astana during their visit to consider possibilities of transporting Kazak gas to India under the order of Ministry of Energy of India. 

Why has India pinned interest in Kazakstan hydrocarbons though you've got positive agreements with Arab countries?

India within the last five-seven years is worried about its energy security. The country is encountering the problem of searching new energy sources. Even under the most optimistic scenario the country's own reserves could cover some 20 per cent of our resource requirements. Imports are vital to us. Though at the moment India does not encounter gas problems - due to guaranteed shipments basically from Arab countries, - we should be secured of lack of problems with hydrocarbons' deliveries in future. 
Experts believe that it is the growth of economies in India and China as well as their demands in hydrocarbons that geared steep oil prices. Factors influencing the increase in prices are as follows: the situation in Iraq, tense relationships with Iran and even the Katrina hurricane. Undoubtedly, one of the reasons is that both China and India take oil in large quantities. To date they consider each other as competitors but in a year or two the situation will change to the better and they will be partners in the petroleum business. It will be mutually beneficial in gas production for all parties involved, including Kazakstan.

Then why is it gas? 

We are interested in oil too. However, gas is cheaper and is environmentally greener. It could become an energy resource of future, at least within the next 200 years. Not only cars will convert to gas. Gas-fired combined heat and power stations are planned to be constructed. Under our estimates within the coming 15 years India will annually lack of gas approximately 60 million cubic metres. Iranian gas covers just 50 per cent of this quantity deficiency. We need new sources of blue-sky fuel and we are hoping that gas from Central Asia, Kazakstan, inclusive, will cover 20 per cent of the current deficit.
Kazakstan disposes of sufficient volumes of gas but its delivery to India is questionable. How do you intend to receive Kazak gas?
Three options are available for us: 1) in tankers from Kazakstan to Iran by sea, there from as a liquefied gas to be transported to India, 2) from Kazakstan to Iran there from by gas pipeline via Pakistan, 3) southward through gas pipeline Kazakstan-Turkmenistan-Afghanistan- Pakistan-India. One more option is available, via China, which is being thoroughly considered. It is common knowledge that China has agreed with the Kazak government to construct gas pipeline from Kazakstan to China. We could receive gas through China extending the gas pipeline laying. However, actually it's hardly a viable project. Mountains are on the way from North China to North India. So the issue is to lay gas pipeline via mountains, which are difficult to cross mostly because of snows. No technologies of gas injection in highlands are available so far.

Which of three options is the most acceptable and lucrative?

The best option will be the most expensive one. The first route from Kazakstan to Iran by sea is politically the safest one, but it fails to give much volumes. The Kazakstan-Iran option by sea and from Iran through the pipeline via Pakistan is the cheapest but politically insecure. The option through the Kazakstan-Turkmenistan-Afghanistan-Pakistan-India pipeline is the most expensive averaging USD three billion but it's the most acceptable. Asian Development Bank has already endorsed this project.

When do you think gas will be transported from Kazakstan to India should the last option be finally okayed?

Construction of the Kazakstan-Turkmenistan-Afghanistan-Pakistan-India gas pipeline involves several countries. The process of agreeing and executing inter-government arrangements could take some three-four years. Construction of the gas pipeline could take the same timing, i.e., ten years as minimum. 

To what extent is India interested in construction of the Kazakstan-China gas pipeline? 

It will be beneficial for China as well because gas for India will increase volumes of injection and will contribute to decrease of transportation royalty and the gas cost will be lower for China. We see here the potential for cooperation. 
Turning to the issue of cooperation two petroleum companies of China and India have been laying claims to PetroKazakstan shares. However, you've given up in price. China, bidding against you, has won.
Economy-wise, it's not the best time for acquiring the oil company with high oil prices world-wide. However, when prices drop such companies could not be available. Yes, India showed interest in buying PetroKazakstan shares and will appreciate the opportunity to acquire this company at this stage. However, let us leave the decision with the government of the Republic of Kazakstan and it would be undiplomatic to comment on the above. India is a large developed country. So, if it decided to enter any sphere, namely your country's petroleum sector, then at first instance it must be cost effective with all things considered. It is not an issue of price. India could have paid this price as well. The thing is whether it would be profitable in future. If CNPC buys these shares then they find this purchase as economically advantageous for lots of reasons. With Atasu-Alashankou oil pipeline commissioned this year they are finalizing the entire technological chain, from upstream to midstream and downstream. It is worth paying double. As far as India is concerned, we lack such secured technology cycle. Even if we could have bought fields and we could produce oil the issue of oil transportation and sale will come out. Thus, political issues are vital, but the above is requisite if this project is profitable economy-wise. 

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TELECOMMUNICATIONS

Maxis moves into India's mobile market

Taking a bet on India's rapidly growing mobile phone market, Malaysia's Maxis Communications has acquired Aircel, one of India's smaller cellular operators, for US$1.08bn, the Financial Times reported on January 1st.
The Malaysian group and the Chennai-based Reddy family, an Indian joint venture partner, have purchased 100 per cent of the equity in Aircel, whose 2.2m subscribers are located in the southern state of Tamil Nadu. Maxis will hold a 65 per cent direct equity stake in Aircel, while the Indian joint venture company will own 35 per cent.
Tan Sri Dato Megat Zaharuddin, Maxis chairman said: "This exciting acquisition, which is also the largest Malaysian investment ever in India, marks another milestone in our aspiration to be a regional communications player of choice."
He added that wile the penetration rate in the Indian mobile market was low at 6.2 per cent, it was also among the fastest growing, and the number of subscribers was expected to grow between two to three times from its current 67m.
Maxis becomes the latest player to enter India's mobile telecoms arena following the government's decision in October to allow foreign investors to own up to 74 per cent of local companies, up from the previous 49 per cent. Shortly after the move, Vodafone bought a 10 per cent stake in Bharti Tele-ventures, India's leading mobile operator, for US$1.5bn.
While Aircel is one of India's smaller operators, it has been setting the stage to expand beyond Tamil Nadu, where it is the biggest operator. By the end of 2006, the operator will have operations in 12 of India's 26 telecoms circles, giving it access to about 58 per cent of the country's population.
Bharti Tele-ventures and Reliance Infocomm are India's largest wireless carriers, each with about 15.5m subscribers. Government-owned BSNL is third with 13.3m customers.

 

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