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  2003 2002 2001 Ranking(2003)
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)

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Update No: 028 - (30/05/06)

May 2006 has been a rather colourful month for the Congress party. It started with Sonia Gandhi's resignation as Member of Parliament as she was accused of holding an office of profit, as a consequence of which she also resigned from her seat at the National Security Council. Gandhi's stepping down from parliament was seen as a strategic move to strengthen the image of the Congress party. Thereafter, in state assembly elections held in Uttar Pradesh, Sonia Gandhi's son, Rahul Gandhi took over the political reins to campaign for Sonia Gandhi from their constituency in Amethi. Rahul Gandhi has emerged as a dynamic forerunner of the Congress party. After his father Rajiv Gandhi's death in 1991, Rahul Gandhi was reluctant to enter politics and most people expected his older sister, Priyanka Gandhi to take over owing to her close association with political campaigns and her striking resemblance to Indira Gandhi's style and personality. Instead, Rahul Gandhi has outshone in politics by deftly managing Sonia Gandhi's campaigns to ensure that she wins the state elections by a large majority. His efforts at campaigning have proven successful with Sonia Gandhi winning a thumping majority in Amethi and Rae Bareilly. 
A separate issue has come to the fore in national politics this month. The government has been trying to introduce more reservation for other backward classes, the scheduled castes and the scheduled tribes in university admissions and jobs. This has sparked a heated debate amongst Indian youth who took to the roads in Delhi to protest against the passage of any reservation bill. Many students from the reserved category in the North-East have come out against reservations. Even students from backward classes are claiming that admissions to universities should not be made on the basis of reservations. Instead, merit should be the sole factor determining admission policy to universities. These students argue that despite their hailing from "lower castes", they have performed as well as any other student purely because of their merit. While students in Delhi have been agitating against any such reservation policy, people in other states feel differently about the issue. For instance, in Andhra Pradesh, there has been a demand for the sub-classification of scheduled castes and sub-reservation. In such states, it is not caste that has divided the people but belonging to an affluent community is considered more complex. Some individuals are not allowed into certain temples only because they are less affluent than other members of the same caste. As an example, in a village in Nalgonda district, most people do not step into the Pochamma temple of the village because it belongs to the Malas, another dalit caste that apparently considers itself superior to the predominantly Madiga caste of dalits in the villages. The question of reservations is a complex one but the government should avoid distinguishing students on the basis of caste or class. Instead merit should be the only prerequisite. Unfortunately many within the government are in favour of such policies either because they themselves hail from the backward classes or have a vested interest in promoting certain classes over the others. Such types of policy, are detrimental to the quality of Indian secularism and democracy. 

US Under Secretary of State Nicholas Burns met with Indian Foreign Secretary Shyam Saran as part of ongoing negotiations on the nuclear deal. Referring to the July 2005 agreement with India, Burns stated that "if you look at the Joint statement issued by both the governments, there is a reference to India's moratorium on nuclear testing. That was a very important commitment made to our government by the Indian government, and it provided a backdrop for the subsequent negotiations on the separation plan that India would engage in." Ever since President Bush's visit to India, Burns has been trying to obtain Congressional support to push the nuclear deal through. Indian Foreign Secretary, Shayma Saran's meeting with Burns is a necessary step in persuading the American legislature to take notice of the nuclear agreement between India and the United States. Senior BJP member and Leader of the Opposition, Jaswant Singh accused the Centre of selling India's foreign policy to the United States. In his words, "there is a sense of disquiet in the overall management of the country's international relations, particularly in dealing with the neighbourhood." And with regard to Iran's weaponisation, Singh believes that the government's foreign policy had been paralysed by the nuclear agreement with the US because breaking ties with Iran would mean betraying several years of history, geography, and regional security with the nation. This perhaps is an interesting argument because it sheds light on how an improvement of India's relations with the United States might have negative consequences for its relations with other countries. There is always a trade off and much depends on India to judge who is to be foe or friend. 
On the other hand, the Indian Space Research Organization (ISRO) and NASA brokered a deal in Bangalore which allows India to carry on board two US scientific instruments on India's 2008 mission to the moon. The unmanned mission, Chandrayaan-1 will also carry five Indian payloads and four European payloads. The NASA Chief also visited India; one of the first visits in 30 years. Dr. Michael Griffin, Chief Administrator of NASA said that President Bush's visit to India has opened doors for collaboration in various other areas with India, the most important being science and technology and space research. Space commerce had received a boost with an increase in the number of imports from the United States. Chandrayaan-1 will be launched on the PSLV which will place the lunar craft in an elliptic orbit around the earth. The liquid motor will later fire to take it away from the earth's gravity over 3,86,000 kilometres over five and a half days towards the moon. Lunar gravity will then capture the craft which will finally reach a 100 km polar circular orbit of the moon. The craft will circle the moon for two years collecting remote sensing data from the moon's surface. In addition a Moon Impact Probe (MIP) will be detached from Chandrayaan once it reaches the orbit and will impact on the moon. This will carry instruments to analyse the surface of the moon, including the dust raised by the impact. The two NASA payloads will be used to look for water on the moon and also analyse the mineral composition of the moon's surface. Chandrayaan will also carry three payloads of the European Space Agency and one from Bulgaria. 

Pakistan's Leader of Opposition Maulana Fazlur Rehman and a five member delegation met Prime Minister Manmohan Singh in Delhi this month and both discussed bilateral relations, particularly the ongoing Composite Dialogue process. The meeting took place a day after Rehman met National Security Adviser MK Narayanan and argued that the Taleban had been misperceived because it had set an example of good governance in Afghanistan. Rehman also called for an end to Afghanistan's isolation by the US. What Pakistan and Afghanistan need to recognize is that a few "good" Taleban do not represent majority of the Afghani population. While the US could reduce its presence in Afghanistan, however, doing so could turn the internal politics of the country on its head. A less prominent role for the US in Afghanistan is certainly feasible but to characterize the Taleban as anything more than fine is missing the point. For India, handling a sensitive issue of this nature is challenging given its ongoing geo-strategic partnership with the United States. 

The Government of India has approved the infusion of additional equity capital up to Rs 1,500 crore (fifteen billion rupees) in Teletech Investments (India) Ltd for making downstream investments in Indian companies. The Cabinet Committee on Economic Affairs gave the permission for additional equity in Teletech Investments to Essal Metal Holdings Ltd, Essar Logistics Holdings Ltd and Essar Power Holdings Ltd. The investment by Teletech Investments will be under the automatic route of FDI in Indian companies. The investment will also be used for repaying liabilities, subject to the condition that the downstream investment will be in sectors where FDI is permitted. The cabinet also approved conversion of original investment in foreign exchange by Infotech in Teletech from non-repatriable basis to repatriable basis.
Intel's Chief Executive Officer (CEO) Paul Otellini, is scheduled to visit Delhi, Mumbai and Bangalore to talk to business entrepreneurs. At Mumbai, he will deliver the keynote at the Intel Capital CEO Summit which brings together top managers of the companies funded by Intel through its venture capital arm and global 2000 organizations. Last year, Intel announced one billion dollar investment in India over the next five years and a 200 million dollar Intel Capital India Technology Fund to help stimulate investment and growth. The investments will focus on expanding the company's research and development centre in Bangalore in addition to marketing, education and community programs. 
Wipro India has signed a major agreement to acquire US-based Quantech Global Services LLC and its Indian arm. Quantech Global LLC designs for companies in the automotive, aerospace, consumer goods and heavy engineering industries. Wipro will gain over 500 domain specialists through this acquisition which will enable it to provide superior mechanical engineering design and analysis services, The consideration includes upfront cash payment on closure of the transaction and earn-outs on achieving agreed financial targets over a three year period. The company did not disclose the financial details of the deal. The entire transaction is expected to be closed during the next one month. "Quantech's key strength in Mechanical Design services complements Wipro's core strength of Embedded Software and System Design capabilities and helps us strengthen our position as an Original Design Engineering (ODE) solutions provider"

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India's banks thrive on new loans

Indian bank shares could climb higher as demand for new loans continues to grow on the back of a robust economy, despite rising interest rates, the Wall Street Journal reported on April 27th.
HDFC Bank Ltd and UTI Bank Ltd recently announced strong earnings for the January-March quarter, indicating demand for consumer and corporate loans remains strong even as the Reserve Bank of India has raised lending rates and tightened policies on property-sector credits.
"The credit growth of banks was still above 30% (in the fiscal year ended March 31st), and we expect the credit growth to be 25% to 28%," in the current year, says Kanan Shah, a senior analyst at Networth Stock Broking would out-perform" the overall market.
With India's economy expanding 8% in the year ended March 31st and economists expecting 8% growth again this fiscal year, consumers are taking out a record number of mortgages and personal loans while companies are borrowing more to expand capacity. Meanwhile, local governments are borrowing to build roads, power plants and ports.
The borrowing binge illustrates the high level of business confidence in India, which boasts one of the world's highest growth rates as well as one of the best-performing stock markets. The benchmark 30-share Bombay Stock Exchange Sensitive Index, Sensex, has surged more than 75% in the past 12 months.
India's central bank has raised its key short-term interest rate several times in the past year, which has forced banks to lift their deposit and lending rates. Mortgage rates, for example, have risen to more than 10% from about 8% a year ago.
At its quarterly meeting recently, the central bank didn't lift rates, but it increased the amount of money banks have to put aside for potential defaults on mortgages and other property market. Analysts and investors expect the tighter restrictions to spawn higher lending rates.
But while higher rates may eventually slow consumer borrowing, any decrease in loan growth will be offset by fresh demand for corporate and infrastucture loans, some analysts predict.
Some of India's lumbering state-run banks, which still dominate the industry, may see their margins and loan portfolios squeezed by higher rates and business shifts. But nimble non-government banks are expected to continue to rack up annual profit growth above 20% over the next three years, the analysts forecast.
HDFC Bank, which is listed on the New York Stock Exchange and is India's third-largest bank in terms of market capitalisation, recently said its net profit rose 30% to 2.63bn rupees (US$58.6m) in the quarter ended March 31st. Mumbai-listed UTI Bank also announced a 30% rise in quarterly net profit, to 1.52bn rupees. New York-listed Icici Bank, India's second-largest bank in terms of market capitalisation is expected to announce double-digit growth for the quarter. State Bank of India, the largest bank was little changed during the quarter.
Banking shares have under performed the market in the past 12 months, with State Bank of India, HFDC Bank, Icici Bank and UTI Bank all rising between 40% and 50% well below the Sensex's rally.
"The sector will outperform in the long term," predicts Ms Shah, whose favourite bank shares include Punjab National Bank, UTI Bank and Federal Bank.
Ms Shah says UTI's stock price could rise more than 30% in the next 12 months to 466 rupees, while Punjab National Bank could climb more than 40% to 638 rupees. Federal Bank's stock price could rise 15% to 240 rupees, she says.
To be sure, a jump in inflation at home or a higher-than-expected rise in US rates could prompt a sharper rise in interest rates in India, which would likely blunt a rally in Indian bank shares.
Analysts also warn that some of the strongest Indian banks - such as Icici Bank and HDFC Bank - are already looking expensive, with their shares trading at more than three times the book value of their assets.
The average price-to-book ration in Asia is closer to 2.5 times, says Hugh Young, managing director of Aberdeen Asset Management Asia in Singapore.
"We are impressed with the professionalism in the (Indian banking) sector, but we are worried things are getting a little overheated," he said.
While Aberdeen hasn't been aggressively selling Indian stocks, it has allowed India holdings to slip to 13% of its total portfolio from 15% last year, when it invested fresh capital for its Asia funds.
Still, many analysts say investing in strong Indian banks is a good way to seeks gains from India's growth.

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India won't pull out of gas project with Iran 

India's Petroleum Minister, Murli Deora, recently said that the United States could not pressure New Delhi into pulling out of a tri-nation gas pipeline project with Iran and Pakistan. "I don't think America is pressurising us on the issue. I think America cannot pressurise us (to give up the project)," Deora told reporters ahead of his talks with Iranian Deputy Oil Minister, Hadi Nejad Hosseinian, New Europe reported.
The Iran-Pakistan-India project, which was conceived by Iran over a decade ago and received a boost with the improvement in India Pakistan relations, has met with opposition from the US, which has also offered New Delhi a lucrative civilian nuclear technology cooperation deal to woo it from its dealings with Tehran. "We are very serious about this project. Our prime minister (Manmohan Singh) made the statement that the pipeline is for peace and progress of the region," Deora added. Pakistan and Iran have already decided to go ahead with the US$7.2-billion project.

New Delhi renews interest in trans-Afghan pipeline project

The Indian Petroleum Ministry has prepared a proposal to raise the possibility of India using natural gas supplied through the proposed Turkmenistan-Afghanistan-Pakistan (TAP) gas pipeline, the New Delhi-based daily "The Indian Express" reported on May 11th.
In its proposal, the ministry reportedly says that in view of "burgeoning gas demand...joining the TAP project offers [India] the possibility of an alternative source of gas supply." Indian Foreign Secretary, Shyam Saran, wrote in April to the Petroleum Ministry that New Delhi's participation in the TAP project would give India "leverage with Iran on the IPI [Iran-Pakistan-India pipeline] project." Saran expressed concern over international tension concerning Iran's nuclear program. Moreover, TAP "would be in tune with the latest US strategic thinking" for the Central Asia region, Saran wrote, adding that New Delhi's interests would be better served it were part of the TAP project rather than outside it. The TAP pipeline is an estimated US$3.45 billion undertaking designed to transport natural gas from the Dawlatabad field in Turkmenistan through Afghanistan into Pakistan and then eventually to India. In February, India expressed its interest in joining TAP pending approvals that should be forthcoming in May. With Indian participation, the pipeline will be renamed TAPI, for Turkmenistan-Afghanistan-Pakistan-India. 

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Sequoia and WestBridge form Indian VC alliance

Sequoia Capital, a leading Silicon Valley venture capital fund, is deepening its presence in India by merging with the country's leading source of funding for start-up technology companies, the Financial Times reported on May 4th.
The US fund's merger with Bangalore-based WestBridge Capital Partners is the latest in a slew of foreign entries into India's thin venture capital industry.
They include: Kleiner Perkins Caulfield and Byers, Norwest Venture partners, Matrix Partners, Benchmark Capital, Draper Fisher Jurvetson and Greylock partners, some of which are busy building local teams.
Their mass entry mirrors a similar passage into India by private equity groups, which specialise in buy-outs and latter-stage funding of private companies bound for the stock market.
People in the industry say the new VC entrants into India are following the private equity lead, drawn partly by hopes of early-stage investment opportunities that could emerge from stepped-up research in India by companies such as Microsoft and Intel.
India's venture capital industry is usually shallow, reflecting a paucity of innovative start-ups that make it to public markets and deliver returns that venture funds have become accustomed to in the US.
That has forced WestBridge to widen its mandate, and Sequoia Capital India, as the merged entity will be known, will follow suit, focusing on companies with high growth and the potential to build brands.
"Our outlook will be broader based than traditional venture capital plays in mature markets such as the US," said Mr KP Balaraj, managing director of WestBridge, whose management will run the new entity.
Sequoia and WestBridge's merger caps a growing relationship as co-investors in Indian assets.
For WestBridge, the marriage was described by one observer "as a defensive move to align with a global brand at a time when the biggest names in the global industry were descending on India."
The financial details of the merger were not disclosed.
WestBridge manages two funds with assets of US$350m spread across 26 investor companies.
Sequoia and WestBridge have jointly invested in two companies in India - in mobile software services - totalling US$25m, and a third, in outsourcing valued at US$40m, will be announced soon.
Douglas Leone, general partner at Sequoia, said the group had built up a record on investment in India over the past 15 years and "we are now ready to (make) another step by establishing Sequoia Capital India."
The Indian team had been approached by several VC funds but "we settled for a global brand that creates a powerful compelling platform and proposition," said Mr Balaraj.

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