Books on India
Irdian Rupee (INR)
Update No: 029 - (29/06/06)
INDIA'S FOREIGN RELATIONS WITH CENTRAL ASIA
The Shanghai Cooperation Organization (SCO) has quickly emerged as a force
to be reckoned with in Central Asia. At the fifth annual SCO summit, held in mid
June in Shanghai, participants castigated the United States in a not-so-subtle
fashion. An SCO declaration insisted that determining Central Asia's future was
up to the states in the region, and not outside powers. "Models of social
development should not be 'exported,'" the declaration stressed. According
to Stephen Blank, Professor at the US Army war College, one of the SCO's chief
weaknesses is connected with the expansion dilemma that the organization is
currently facing. The SCO's rapid emergence has made it attractive to other
states in the region: both Iran and Pakistan, for instance, are openly eager to
join. But many existing members are reluctant to accept these two controversial
states, both currently observer members, believing that they could be a source
of future geopolitical headaches. Thus the fact that India doesn't seem
interested in full membership at this time constitutes a substantial obstacle
for Pakistan. India's stance toward the SCO was underscored by Prime Minister's
Manmohan Singh absence from the Shanghai summit. New Dehli has been improving
its relationship with Washington, and believes Russia and China want to use the
SCO mainly as a platform from which to launch diplomatic attacks against the
United States. At the same time, India wants to maintain touch with the
organization out of a desire to cooperate with Beijing and Moscow on energy
issues and direct security threats affecting the three states.
During Indian Prime Minister's visit to Uzbekistan last month, the two countries
signed a pact to cooperate in gas and oil exploration and production. GAIL and
Uzbekistan's Uzbekneftegaz are working together in Uzbekistan to produce
liquefied petroleum gas. Energy experts in India want the country to step up its
energy diplomacy further saying the country is still not as pragmatic as other
countries. But political analysts argue that look at long term solutions for
their energy needs but it should not violate the rights of other people under
the name of energy development. Senior diplomat from the Indian side, Rajiv
Sikri has stated that India is not averse to striking deals with pariah states.
There is an underlying assumption in Indian policy that India should be allowed
to maintains its independent position on dealing with such states as it deems
fit even if engaging in economic partnerships with them might elicit some
opposition from other pro-democracy parties.
India has made a new move in the chess of world politics with the
announcement of Shashi Tharoor as New Delhi's candidate for the post of UN
secretary general. In the recent edition of India's Outlook Magazine, journalist
Seema Sirohi argues that the absence of a realistic prospect of India becoming a
permanent member of an expanded UN Security Council lies behind this move.
Tharoor formally approached Prime Minister Manmohan Singh in Washington just
after Manmohan Singh announced a path-breaking nuclear agreement with the United
States. By advancing a candidate, India is making a statement to the rest of the
world that the UN must be an equally representative organization instead of just
reflecting the aspirations of its five permanent members. This initiative by the
Indian government has consoled the left parties and certain sections within the
Indian establishment who have routinely expressed their scepticism of the
prosperous India-US relationship. Veteran Congress leader N.D. Tiwari is in
demand once again.
Chief Minister of Uttaranchal, N.D. Tiwari has been asked to lead the party's
campaign in both Uttaranchal and neighbouring Uttar Pradesh. His support is
essential in resurrecting the party in Uttar Pradesh. A senior leader said that
Tiwari's background of having been the chief minister of undivided Uttar Pradesh
for four terms makes him a crucial man for the job. Tiwari has emerged a key
aide of Congress president Sonia Gandhi and has been meeting her frequently.
Tiwari's years of experience in running the administration of the state makes
him an asset to Sonia Gandhi and Rahul Gandhi's bid to lead the Congress party
in Uttaranchal. Tiwari enjoys widespread appeal among the generation of older
leaders in UP, most of whom belong to upper castes. Tiwari, being an upper caste
Brahmin himself will be in a better position to garner more votes from this
section of the community.
INDIA AND PAKISTAN
India and Pakistan entered into a two day dialogue with Pakistan on the
Wullar Barrage project which came to a complete standstill. The Pakistani
delegation was led by Mr. Ashfaq Mahmood, Secretary, Ministry of Water and
Power, Government of Pakistan and the Indian delegation was led by Mr. J Hari
Narayan, Secretary, Ministry of Water Resources, Government of India. Both sides
have expressed their desire to continue talks by maintaining their commitment to
the Indus Waters Treaty of 1960. They are keen to settle all outstanding issues
on this matter under the provisions of the treaty. It appears that while both
sides are interested in arriving at some agreement, there is a lack of
understanding on both sides.
On the positive side of the relationship between both countries, a bus service
linking the Pakistan-controlled Kashmir's Rawalakot and the India-controlled
Kashmir's Poonch has started. Buses from two sides carrying 99 passengers will
cross the line of ceasefire in Kashmir from the Tetrinote and Chakan-da-Bagh
crossing point, The bus carrying 55 passengers would leave Rawalakot for Poonch,
while the bus from Poonch will leave after 15 minutes for Rawalakot with 44
passengers onboard, GEO said. Pakistan and India had decided to start the bus
service linking Rawalakot and Poonch after talks held in the Indian capital New
Delhi on May 3rd. According to earlier reports, India had suggested the
inaugural run a day later than the initial plan of June 19th, and Pakistan had
accepted it. Lauding the Indo-Pak peace process, Prime Minister of Azad Kashmir
Sikander Hayat Khan said the gun has become "irrelevant" but India and
Pakistan should be more serious about resolving the Kashmir issue. "Talks
between Pakistan and India and with the people of Kashmir are very important for
a peaceful resolution of the Kashmir issue. It should be carried forward with
speed," he told PTI here. Khan said the "role of the gun has become
irrelevant and peace talks are the only way to a solution of the issue".
He, however, said the governments of the two countries needed to take more
concerted steps in this direction as they appeared "non-serious" about
the issue. The people of Jammu and Kashmir and AJK should also be involved in
peace talks, he said. "This step would be more result-oriented." Khan
earlier flagged off the "Karavan-e-Aman" bus from Rawalakote in AJK.
The bus carrying 30 passengers headed for Poonch in J&K while UPA
Chairperson Sonia Gandhi and Defence Minister Pranab Mukherjee flagged off the
one from this side of the LoC.
India and Pakistan also reached an agreement on the exchange of prisoners' lists
during the interior or home secretary-level talks between Pakistan and India on
terrorism and drug-trafficking held in Islamabad on May 30-31. Following the
agreement, the Pakistani Foreign Ministry indicated this month that Pakistan has
handed over to India a list of Pakistani civilian prisoners held in Indian
jails. A statement issued declared that "we have conveyed to the Indian
side a list of 493 Pakistani civilian prisoners held in Indian jails. Out of
these, the national status of 213 has been confirmed by Pakistan. These
prisoners are awaiting release from the Indian jails while 169 have not yet been
allowed consular access by the Indian Government." The statement said that
the national status verification of the remaining 111 is under process by
authorities in Pakistan. "We have been informed that 30 Pakistani fishermen
are in the Indian custody and Islamabad is seeking consular access for these
Addressing the 31st Annual Leadership Summit of the US-India Business
Council (USIBC), American Vice President, Dick Cheney expressed his confidence
in the Indo-US nuclear deal being approved by Congress. Cheney strongly
supported the nuclear deal arguing that the deal strengthened the
non-proliferation regime rather than undermining it. There is a huge
India-America caucus at Capitol Hill which consists of both Democrat and
Republicans. Cheney spoke highly of India's growing economy and its critical
role for American industry. Indian markets are valuable because of the large
pockets of skilled manpower and a rapidly growing middle class. India's
democratic tradition and respect for democratic values is an added advantage for
the Americans. Cheney was also presented with the USIBC's Distinguished Service
Award for Exemplary Leadership in uniting India and the United States.
India's economy remains strong, and continues to be a favoured destination
for foreign investors, Minister of State for Finance Pawan Kumar Bansal said on
Friday. "We are confident of more than 8 per cent growth this fiscal
year," he told reporters, adding he expected higher farm output if monsoon
rains were normal. Analysts have said higher oil prices could push inflation and
dent growth as interest rates rise. Every US$10 a barrel rise in crude prices
shaves about 1 per cent off India's growth, the Asian Development Bank has said,
as the country imports most of its oil. The minister said the government would
press on with reforms to the banking and pension sectors, and boost farm credit
to ensure higher growth in the countryside and overall economy. Farm credit
amounting to 2 trillion rupees could be made available in the year to March
2007, a ministry official said. India had set a target for state-run banks to
push up farm credit to 1.75 trillion rupees in 2006/07, from a little over 1.2
trillion rupees in 2005/06. Bansal said that the manufacturing sector was also
doing well. The government wants to push manufacturing growth above 12 per cent
in the coming years in order to reach much sought after double-digit GDP growth
Despite the volatility in global and domestic share markets, Bansal said:
"India still continues to be a favoured destination for foreign
investors." According to government estimates, India's gross domestic
product expanded by 8.4 per cent in 2005/06 on the back of robust growth in
industry and services sectors. The central bank HAS projected a GDP growth of
7.5-8 per cent for 2006/07 in April. An economic advisory panel reporting to the
prime minister on Thursday said GDP growth could be around 8 per cent if farm
output grew by 2 per cent in the year to March 2007. The rate could exceed 8 per
cent if agriculture grew by 4 per cent.
The Confederation of Indian Industry (CII) is launching its Indian Business
Forum in New York City on June 23rd which will be inaugurated by Commerce
Minister Kamal Nath. The forum seeks to share information on the activities of
Indian companies in the United States and to gather information on issues and
concerns of members of Indian industry there. The official launch will be
followed by a nine day program organized by the CII that the launch will cap off
a nine-day programme organised by the industry body (CII) in the US that aims to
highlight the increasing impact of India on the world and double bilateral trade
with the US to US$80 billion in the next three years. The official Indian team
for the initiative will include Science and Technology Minister Kapil Sibal,
Deputy Chairman of the Planning Commission Montek Singh Ahluwalia and Chairman
of the Knowledge Commission Sam Pitroda. India Inc will be represented by the
likes of Tata Sons` Chairman Ratan Tata, Godrej & Boyce CMD Jamshyd Godrej,
Sona Group CMD Surinder Kapur, Fortis Healthcare Chairman Harpal Singh and
Biocon CMD Kiran Mazumdar Shaw. The eight-point multiple agenda of 'Nine Days of
India in the US' includes, discussion and dialogues on innovation, strategy,
trilateral talks on Indo-US-China and Indo-US-Japan, healthcare and the launch
of the Indian Business Forum, apart from a session by the Indian American
Council (IAC) to help Indian Americans connect to opportunities in India.
Mittal Steel and Arcelor SA, the world's largest steel companies are about to
merge together. But the 27.5 billion Euro merger is unlikely to impact Lakshmi
Mittal's plans to invest 9 billion dollars in its first Greenfield project in
Jharkhand. Mittal Steel signed an agreement with the Jharkhand government last
year in October to pump 9 billion into a 12 million tonne project-the second
largest Foreign Direct Investment in the steel industry following South Korean
firm, Posco's 12 billion plan investment plan for Orissa.
India to participate in Central Asian gas pipeline
The Indian cabinet has approved a proposal for a US$3.5-billion gas pipeline
from Turkmenistan to India, New Europe reported.
The meeting of the council of ministers, chaired by Prime Minister Manmohan
Singh, cleared the Petroleum Ministry's plan to secure gas from Turkmenistan
through Afghanistan and Pakistan. Information and Broadcasting Minister Priya
Ranjan Dasmunsi said the pipeline would be extended to India and would be called
the Turkmenistan-Afghanistan-Pakistan-India pipeline, the Asian Age reported. He
did not give further details about the project approved last Thursday. The
pipeline would provide India an alternative to a US$ seven-billion gas-pipeline
project from Iran. There is a question mark over India's participation in the
Iran project amid uneasy ties between New Delhi and Tehran and pressure from the
United States for India not to import gas from Iran. India's energy deals with
Iran are in limbo after New Delhi sided with Washington and voted to report
Tehran's nuclear programme to the UN Security Council. Meanwhile, the United
States has been urging India to join the Turkmenistan pipeline. It would be
"politically easier" to implement because it has Washington's backing
by way of the Asian Development Bank's participation, the Times of India
reported, cited by Deutsche-Presse-Agentur (dpa). The project is free from
funding fears, which is the bane of the Iranian pipeline, the paper said, and
would help India cater to its growing energy needs. The South Asian country
recording economic growth of 7.5 to eight per cent annually, has been making
extensive efforts to secure energy sources worldwide for fuelling its booming
OVL-Mittal sets sight on Kazakstan
Kazakstan has expressed interest to work jointly with India in the energy and
hydrocarbon sector. The governments of both countries are considering
cooperation in these sectors. India's ONGC Videsh and steel baron L N Mittal
plans to tap oil and gas assets in Kazakstan, New Europe reported. Mittal Steel
is planning to source natural gas from the country for its own 5.5 million tonne
per annum steel plant at Temirtau as feedstock. It is one of the largest
single-site integrated steel plant in the world, covers about 5,000 hectares.
The OVL-Mittal is eyeing for 40-60 percent share in the unexplored asset of
Caspian offshore controlled by Kazakhstan, reported Interfax. "Even though
talks are at the primary stage, both the governments are hopeful for a joint
venture," sources close to the development said. OVL is lining up a
billion-dollar infrastructure development projects for Kazakhstan to secure
India-China trade link to reopen
Trading through the Nathu La Pass will resume after 44 years. China and India
have signed an agreement to re-open an ancient trade route which was closed 44
years ago, The BBC news website reported.
Border trade will now resume through the Himalayan pass of Nathu La, 4,000
metres (14,000 feet) above sea level.
The Nathu La pass provided a crucial link in the ancient Silk Road through which
Indo-Tibetan trade has been conducted for centuries.
India and China reached an initial agreement about the pass in 2003.
But the formal deal was signed only on Sunday by officials from the two sides
who met in the Tibetan capital, Lhasa.
The Nathu-La pass was to be opened just a few days after the first train service
started between eastern China and Tibet.
"The reopening of border trade will help end economic isolation in this
area," Tibet government vice-chairman, Hao Peng, said, according to the
Xinhua News Agency.
Officials say iron ore, livestock products, wool and electric appliances are
among the products that will be traded through the route.
The Nathu La pass was closed in 1962 after war broke out between China and
Both sides still have territorial disputes. India accuses China of occupying
32,000 sq.km. (14,670 square miles) of territory in Kashmir, while Beijing lays
claim to the north-eastern Indian state of Arunachal Pradesh.
But last year, China accepted that the tiny state of Sikkim, where Nathu La is
located, belongs to India.
Indian officials say the opening of the trade route will go a long way to
resolving differences between the two countries.
"The resumption of border trade is a great historic event, not only for
enlarging trade, but also for greater relations between the two countries,"
Indian commerce ministry official, Christy Fernandez, was quoted as saying by
the Press Trust of India.
The famed Silk Road was an ancient trading route that once connected China with
India, West Asia and Europe.
Indian media boom moves to market
One of the most striking aspects of India's resurgence is the dizzying array of
cable-television channels and newspapers that have sprouted with the expanding
economy. Now they are making an impact on the stock market, too, through a spate
of initial public offerings that analysts say could be long-term buys, the Wall
Street Journal reported.
So far, many of the new shares have been slow to take off, reflecting investor
disquiet about tight regulation in the cable industry and an increasingly
crowded newspaper market. Analysts contend that these worries are likely to fade
faster in the electronic-media segment, which despite having high valuations
seems a better long-term play than print.
The boom in electronic and print media is driven by a new generation of young
consumers whose spending has driven advertising revenue growth of between 12 %
and 14% annually for print media and cable TV.
Sixty-one million families in India have cable television, out of 108 million
households that own TV sets. Ten years ago, a couple of cable news channels had
almost no competition. There are now 22 news channels across the country,
according to PricewaterhouseCoopers.
In a March report, the consultant predicted that electronic media revenues would
climb to 427bn rupees or nearly US$9.5bn, in 2010 from 148bn rupees in 2005.
Print revenue is expected to increase to 195bn rupees from 109bn rupees during
the same period, it added.
Cable-television stocks should benefit from this growth, say analysts,
especially when an end is called to a freeze on cable subscription charges
imposed by the government-appointed industry regulator nearly three years ago.
Analysts expect the price freeze to ease gradually in coming years.
Moreover, the cable industry awaits the introduction of a conditional-access
system, expected in several months. The system would allow viewers to pay for
only the channels they want to watch. Analysts say such a system would help
boost advertising revenues for companies running popular channels.
"Television stocks are in for huge growth" when conditional access
comes in, says Phani Sekhar, an analyst at Angel Broking in Mumbai. He expects
cable networks to command premium-advertising rates compared with print by using
their ability to instantaneously reach markets across the country in a way
News channel New Delhi Television, a leading cable-TV network, is expensive
compared with peers, as it trades at a multiple of 30 times forecast earnings
for the fiscal year ending March 31st 2007, according to KR Choksey Securities
Jigar Shah, a director at the brokerage firm, believes the premium is justified
given NDTV's growth prospects. NDTV listed in 2004, and so far in 2006 its
shares have climbed 28% to close at 258.20 rupees on May 17th. The Bombay Stock
Market's Sensitive Index, meanwhile, has climbed 30% during the same period.
Mr Shaft expects NDTV's share price to reach 320 rupees by the end of the 2007
fiscal year, driven by the success of its marquee English- and Hindi-language
news channels, which rate first and second, respectively, in their markets.
TV Today Network, which broadcasters one English and two Hindi news channels, is
also poised for growth, Mr Shah said. Though its stock has been comparatively
weak this calendar year, rising only 6%, he expects a revenue lift from new
channels overseas and from direct-to-home satellite television.
Though still in its infancy in India, direct-to-home service could transform the
industry by doing away with local cable operators that control the so-called
last mile of cable into viewers' homes. Currently these operators under declare
subscriber numbers to broadcasters, thus keeping as much as 85% of subscription
revenue for themselves.
"In the long term, when under-declarations are reversed, it will have a
huge gain," Mr Shah said in reference to TV Today's stock, which his
brokerage firm predicts will hit 125 rupees by March 31st 2007.
The performance of print-media stocks has been less spectacular. Shares of
Jagran Prakashan, which publishes India's biggest Hindi newspaper, have fallen
7.5% since its IPO in February, and finished on May 17th at 296 rupees. HT
Media, which publishes the Hindustan Times, has relied this year after listing
last September, but has only just managed to surpass its issue price of 530
Nonetheless, some analysts believe print offers better value compared to pricier
Sanjeev Prasad, who covers the sector for Kotak Securities in Mumbai, favours
print-media stocks over their splashier electronic rivals. He believes that
print is being overlooked because investors are looking at the travails of the
global print industry, where many newspapers and magazines are struggling to
Mr Prasad believes India is a special case and there is room for further growth,
as its citizens are still underserved by newspapers. He favours HT Media, which
he expects to outperform the Sensex over the next 10 months. By that time, he
contends, the share price will have consolidated at around 550 rupee. HT Media's
stock has risen 21% this year, and closed up 2.4% at 530.65 rupees on May 17th.