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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: 031 - (29/08/06)

A political dispute has arisen in India after the former foreign minister Natwar Singh accused India's Prime Minister Manmohan Singh of leaking a judicial report, which had been critical of Natwar Singh's role in the United Nation's Iraq oil-for-food program. Three political parties, including the main opposition BJP, have agreed to support the move to censure the prime minister. This led to angry exchanges in parliament; the latter being forced to be adjourned. Natwar Singh has refused to yield to Congress pressure and withdraw his privilege motion against the Indian prime minister. N. Singh has created history by becoming the first member of a ruling party to file a privilege notice against his own prime minister. In an interview with the Indian daily, the Asian Age, Natwar Singh made it clear that he had nothing personal against Prime Minister Singh. "I have good relations against him, but the Pathak Committee report has been leaked from the Prime Minister's Office and someone has to be held accountable," he said. The Congress Party has reacted defensively to the former minister's decision to declare war. He said he was quite prepared to be expelled from the party now. Visibly disillusioned with the party's attitude towards him, Natwar Singh said he would welcome the expulsion order as "then I will be free". He said the party had made it apparent during the crisis that he had no place there and so now they could not turn around and claim otherwise. Several leaders in the party are supportive of Natwar Singh and have been critical of Congress president Sonia Gandhi's refusal to support him. The allegations against Natwar Singh first surfaced in a UN report published in October 2005, in which the then Indian foreign minister Natwar Singh and the ruling Congress party were named as non-contractual beneficiaries of the oil-for-food program. The report, written by former US Federal Reserve chairman Paul Volcker, said more than 2,000 firms made illegal payments to Saddam Hussein's government. Under the UN program, Saddam Hussein's government could sell oil as long as the proceeds were used to buy humanitarian goods. Singh resigned from his post as foreign minister in December following the allegations.

India has been carefully assessing the collapse of the ceasefire in Sri Lanka. The prospect of a failed state on its borders has made India cautious about its dealings with Sri Lanka. Violence has continued in Sri Lanka's north and east during the fourth week of the worst fighting since 2002 and showed no sign of stopping. Thousands have fled their homes, many taking refuge in churches or camps. Hundreds have fled to India by boat. Aid workers say 160,000 people have been displaced. All sides estimate the fighting has killed hundreds. "We're an impotent regional power and have abdicated our responsibilities in Sri Lanka," says Major General Ashok K. Mehta, a commentator on strategic affairs who served as a divisional commander in the IPKF in 1988-1990. India, he argues, has failed to pursue a coherent foreign policy in Sri Lanka because of the dictates of coalition politics. Both the Congress-led United Progressive Alliance coalition and its BJP-led predecessor have depended on powerful Tamil regional parties for their majorities in parliament. With more than 50m indigenous Tamils in southern India, and 75,000 refugees from Sri Lanka living in camps there, instability in the Jaffna peninsula is felt in India. As a result, politicians from the state of Tamil Nadu, where militants have over the years procured arms, cash and training, have an effective veto on Indian policy. Although India has banned the Tamil Tigers and refuses to countenance the partition of the island, it also denies the Sri Lankan army supplies of weapons and has prevaricated for years over a defence pact. "Delhi has got stuck without a policy and is simply reacting to events," says Paikiasothy Saravanamuttu, executive director of the Centre for Policy Alternatives in Colombo. India's concerns for Tamil "aspirations" and calls for a "fair" negotiated settlement appear to be annoying Colombo. At the same time, New Delhi's fundamental opposition to the creation of a separate Tamil homeland - because of the boost that would give to separatist groups in India's north-east - is incompatible with the Tamil Tigers' one-point political program. But both the rebels and the government also see India as the only guarantor of an eventual peace deal and have called for greater involvement. Indian diplomats say that they are working with the co-chairs on an acceptable "political package". Meanwhile, officials in New Delhi see an outright military victory for either side as disastrous. If the Tigers win new territory, India might have to intervene to prevent de facto partition. If the government pushes into the Tamil north-east, India fears a "burnt earth policy comparable to East Timor". Continued stalemate may be the least bad outcome. 

"Year of friendship" !
China and India are embarking on a rocky road to neighbourly relations they hope will be mutually beneficial. The two nations, who fought a border war in 1962, are realizing the importance of becoming world economic and political powers which demands cooperation and stability among neighbours. Experts predict the two Asian giants, which together account for one-third of the world's population, will, along with the United States, have the world's largest economies by 2050. The latest breakthrough in Sino-Indian relations was the recent decision to reopen the strategic Nathula pass, the Silk Road trade route high in the Himalayas, closed since the war. The two also are trying to reduce military tension. They have designated 2006 as their "year of friendship" culminating in a summit of Chinese President Hu Jintao and Indian Prime Minister Manmohan Singh. Major hurdles remain, as well as suspicions on both sides and India's distrust of China's relations with Pakistan. But experts on both sides feel economic realities, such as growing bilateral trade that is expected to reach US$20 billion this year, will help overcome these obstacles.

India has offered to strengthen its bilateral trade relations with Nepal by proposing a comprehensive economic partnership agreement (CEPA) to include services and investment. It has also offered to negotiate a more liberal bilateral investment promotion and protection agreement (BIPPA). According to senior government officials, India is keen to expand the scope of the economic engagement to include sectors like information technology, tourism, education and healthcare. The offer to deepen economic engagement with Nepal is part of the broader strategic importance of Nepal in the wake of recent political changes there. The issue was raised by Commerce Secretary S N Menon with his Nepalese counterpart Bharat Bahadur Thapa during the two day India-Nepal Inter-Governmental Committee on Trade, Transit and Cooperation to control unauthorized trade which concluded in the capital today. Nepal has agreed to examine the proposal and officials say that if Nepal agrees, both sides would initially set up a task force to examine the viability of the CEPA. The two sides discussed the extension of the bilateral trade treaty which is expiring in March 2007. Officials said that India conveyed its readiness to work with Nepal to address the latter's concerns on non-tariff measures. The Nepalese delegation sought assistance for new economic infrastructure projects, which would be discussed further by the two sides. Officials said both sides had agreed to resume negotiations for a BIPPA which would be based on the lines of the proposed SAARC Investment promotion and protection agreement. The two sides had been talking of a BIPPA earlier which was later stalled. Commerce Ministry officials said that the present bilateral trade agreement was likely to be extended by another five years. 

The Asian Development Bank (ADB) is currently revising framework agreement and inter-state agreements between Turkmenistan, Afghanistan and Pakistan (TAP) in a bid to include India in the US$6.9 billion project. The three countries are interested to develop a complete energy corridor under multi-billion dollar TAP project including two parallel gas and crude oil pipelines, railway track, road and optic fibre system but India is interested in a gas pipeline alone. Sources said India is seeking to incorporate in the agreement special clauses that could guarantee that gas volumes contracted to India would in no circumstances be disturbed at any stage if Pakistan required higher quantities than original contracts for Gwadar port. This would, however, not restrict Pakistan to have maximum supplies subject to pipeline capacity. The revisions in the framework agreement would allow the ADB to include extension of the TAP gas pipeline to India in the pre-feasibility study including routes, pipeline capacity, design and security aspects. The agreement would also define in clear terms the right of the participating states to inject or draw gas from the pipeline in case of additional gas quantities. 

Diamond exports from India, the world's biggest processor of the stones, may drop by US$1 billion this year after the country's main polishing centre was flooded by heavy rains. Surat city in the western state of Gujarat, which accounts for 75% of India's diamond polishing industry, was swamped this month, forcing jewellery factories to shut for more than two weeks. India's jewellery exports were worth US$16.6 billion last year, accounting for a fifth of the nation's export revenue. Bakul Mehta, chairman of India's Gem & Jewellery Export Promotion Council, said that the losses could rise." India needs faster exports to boost growth in Asia's fourth-largest economy, and narrow a widening trade deficit. Several diamond factories in Surat have yet to resume working at full capacity as workers left the city amid fears that the floodwaters could trigger outbreaks of disease, Mehta said. Equipment worth 3 billion rupees (US$64 million) was damaged by the floods, he said. India processes 11 out of every 12 of the world's diamonds, accounting for 80% in terms of volume. Gem and jewelry exports, including cut and polished diamonds, dropped 4.4% to US$4.8 billion in the four months ended July from a year ago because of volatility in the rupee, according to the council. Heavy rains in Gujarat and Maharashtra caused rivers and reservoirs to overflow. India ordered the army into Surat to help with relief and evacuation operations. (Bloomberg) 
India's headline annual inflation rate neared 5 per cent in mid-August, data showed on Friday, and the government said it was trying to keep the rate below that level in the financial year ending March 2007. The widely-watched wholesale price index rose 4.92 per cent in the 12 months to Aug. 12, higher than forecast and above the previous week's annual rate of 4.82 per cent due to an increase in food and manufactured product prices. The government has taken steps to curb price rises, including cutting import duty on wheat, and the central bank raised interest rates in June and July to keep inflation down. The rupee weakened marginally to 46.60/61 per dollar from 46.59/60 but the yield on the 10-year benchmark bond was unchanged at 7.90 per cent, a two-month low. The Reserve Bank of India (RBI) raised its main short-term rate by 25 basis points to 6.0 per cent on July 25, its second increase in six weeks, as it stepped up its fight against mounting price pressures in the fast-growing economy. It forecasts inflation to end the financial year between 5.0-5.5 per cent but analysts expect inflation pressures to continue in the months ahead.

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