Indian Economy - News & Updates - Archive

[Bushroda]

Indian Government Seeks to Tame Chaotic Roads
Voice of America
By Anjana Pasricha
New Delhi
20 May 2007

The Indian government has proposed a stiff increase in penalties for traffic offenses. As Anjana Pasricha reports from New Delhi, reckless driving and chaotic conditions on the country's roads are blamed for tens of thousands of accidents.

Morning rush hour in Delhi is not a scene for the faint hearted. Millions of cars, buses, motorcycles, and three-wheel scooters jostle for space on the city's roads. Drivers jump signals, change lanes recklessly, overtake from the wrong side, and fail to notice pedestrians trying to weave their way through the madness.

Delhi's traffic is considered to be more chaotic than in other cities, but bad driving is the norm on most roads in the country. The result: India tops the world in road fatalities with 100,000 people dying in road accidents every year. Tens of thousands of others suffer grievous injuries.

In a bid to curb reckless driving, the Indian government has introduced a bill in parliament proposing stiffer fines for traffic offenses. For example, speeding could attract a penalty of $10 to $25, and rash or drunken driving a fine of up to $50, along with a prison sentence.

Traffic experts feel the fines might have a sobering effect on drivers, who think little of paying the existing $2 penalty for offenses such as jumping signals.

Rohit Baluja, head of the Institute of Road Traffic Education, says the problem is huge.

"There are 146 million traffic violations committed by motorized road users every single day," said Baluja. "It is a culture of degeneration that people are doing whatever they want, you cannot anticipate a person, how will he behave."

The Delhi government has already increased penalties in the capital, but not to the extent proposed by the new bill.

But traffic experts say stiffer fines alone will not bring order on Indian roads. They also want authorities to improve road engineering to reduce the risk of accidents.

Baluja gives just a few examples. He says traffic signals are sometimes not clearly visible, and there are inadequate provisions for pedestrian crossings.

"We have problems with signals, with road markings, signages, design failures, that is a large contributory factor," added Baluja. "Signals you cannot see, behind bushes, they are not properly placed, if there are no stop lines, how would you know that you have crossed a stop line? "

Harman Sidhu, a resident of the northern city of Chandigarh, has been campaigning to improve road safety since he was paralyzed in an accident 10 years ago.

He says higher fines must be accompanied by better training and testing of drivers, and stricter procedures for issuing licenses.

"The government is actually focusing on enforcement, but the education part which is an important aspect is still not being covered," said Sidhu. "People have to pay more for offenses, but they don't really know under what condition are they making an offense. Most of the drivers get their licenses through some illegal channels or through some middlemen, there is no standardized testing."

All agree that India needs to step up efforts to improve road safety as it adds new cars at a dizzying pace, and builds new expressways that could turn into death traps if traffic behavior does not improve.

 

[Neo]

Tuesday, May 22, 2007

India may have to buy more wheat

NEW DELHI: An Indian tender for the import of one million tonnes of wheat is unlikely to generate much market interest due to tight supplies, and purchases could be trimmed by high prices, trade sources told Reuters on Monday.

Most traders contacted said the State Trading Corp. would probably buy much less than the tendered one million tonnes, with prices likely to range between $280 to $300 per tonne, nearly 25-30 percent higher than last year.

But he said the government would soon have to issue a second tender, with purchases from farmers expected to fall short of what was needed for a second year in a row. “India will have to import, as the procurement from local farmers is quite low. They may have to import 3 to 5 million tonnes,” the trader said.

An official involved in import negotiations said the tender would not be extended, and said it was too early to talk about the kind of response expected.

Others said it would make more sense to buy wheat overseas in a few months time, when supplies have improved. “India will not get bids for one million tonnes import as wheat from Europe will be ready only in June-July,” said a trader with a Netherlands-based commodities firm.

Few suppliers: Traders added that since Ukraine only lifted an export quota on wheat last week, it was doubtful it would be in a position to sell anytime soon, and differences with the United States over quality controls remained.

“There will be no US participation. Nothing has really changed in terms and conditions of this tender from previous ones on fumigation and sampling, which could open up their participation,” said another official with an international commodities trading firm.

Despite India scouring world markets from more than 5.5 million tonnes of wheat last year, the US did not supply any of the grain due to fumigation, inspection, and sampling problems. reuters

http://www.dailytimes.com.pk/default.asp?page=2007\05\22\story_22-5-2007_pg5_18

 

[Bushroda]

India sees 8.5 pct growth in 07/08, to watch prices
May 22, 2007
By Surojit Gupta

NEW DELHI (Reuters) - Prime Minister Manmohan Singh said on Tuesday the economy would grow by over 8.5 percent in the fiscal year ending March 2008, and the government would keep a close watch on prices.

Releasing a report to mark three years of his Congress party-led government, Singh said credible steps had been taken to tame inflation.

"We have taken credible steps to control inflation and will continue to be vigilant on this front so that the poor and vulnerable sections of society do not suffer unduly," he said.

Singh's premiership has seen annual growth rates of between 8 and 9 percent, but analysts say his government has failed to provide the investment in infrastructure and education needed to build a solid base for future expansion.

Already some sectors of the economy are showing some signs of overheating, and rising inflation has been ringing alarm bells.

Ambitious programmes to help poor farmers and create millions of jobs in the countryside have raised hopes, but many of these have foundered on poor implementation. Rural areas remain mired in poverty.

"In a democracy, people's aspirations become the goals that the governments have to measure up to. Measured against the rising aspirations of a billion plus people -- which is a sixth of humanity -- any government would fall short," Singh said.

Singh's communist-backed government swept to power in May 2004 partly because the poor in Asia's third-largest economy voted the previous government out of office after feeling left out of a city-based boom.

Measures taken by the government to tame inflation were beginning to show results, the report said, and the ruling coalition is confident of keeping inflation under control in future.

India's annual inflation rate fell below 5.5 percent in early May after running at more than 6 percent for much of the year, data showed last week.

The Reserve Bank of India, the central bank, aims to keep it close to 5 percent this fiscal year, and bring it down to 4.0-4.5 percent over the medium term.

Inflation hit 6.7 percent in early 2007, its highest in more than two years.

The central bank has raised its key lending rate five times in less than a year to contain price pressures. Although it left rates unchanged at a review last month, it said it would act swiftly if conditions warrant.

Singh said his government faced many challenges and he promised to announce a major initiative to boost public investment in the farm sector within 10 days.

"There is much we have done in these three years but much more that we need to do to win the war against poverty, ignorance and disease, and the fight against extremism, communalism and terrorism," Singh said.

 

[Bushroda]

Should Indians drive cars?
Justin Rowlatt 22 May 07, 05:11 PM

Now that my year of living ethically has come to an end I am free to explore the question that has haunted me throughout the last year.

The question was raised wherever I went and whatever I did and it went to the very heart of the Ethical Man project.

What people wanted to know was whether my ethical efforts really counted for anything when India and China are building new coal-fired power stations every single week.

That’s why a few weeks ago Sara, the Ethical Man producer, and I boarded a plane to Mumbai. I’m hoping that our decision to fly won’t incur the torrent of criticism that followed my trip to Jamaica last year. The question is whether our report is worth the carbon cost.

What we set out to explore was what Indians made of the whole idea of “ethical living”. We wanted to see if we could create an Indian Ethical Man.

Within days of arriving in India I got a pretty good indication of Indian attitudes. I opened the Times of India over breakfast to find that the Indian parliament had scheduled May the 8th for its first ever debate on India’s role in global warming.

That seemed a clear sign that Indian politicians are recognising that there is a problem but any optimism this might have inspired was quelled by a restatement by the country’s environment minister of the Indian government’s official position - global warming is not the responsibility of developing countries like India.

Yet India is a world-class polluter. It has already overtaken Japan to become the fourth biggest producer of greenhouse gases on earth. In 2000 India was responsible for 1.89 billion tonnes of CO2 (5.6 per cent of the world total) – just a few million tonnes behind the Russian Federation - 1.91 billion tonnes (5.7%).

(For more on these figures see the World Resources Institute’s Climate Analysis Indicators Tool CAIT)

Of course India isn’t yet the carbon catastrophe that is the Chinese or American economy. In 2000 China produced a whopping 4.96 billion tonnes of CO2 (14.7 per cent of the world total). But even China’s carbon count was dwarfed by the 6.87 billion tonnes of CO2 America spewed out. That’s a fifth (20.3%) of the world total.

Nevertheless Indian emissions show every sign of continuing their rapid growth. India has over a billion people and its population is booming. By 2050 it is expected to have overtaken China to become the most populous nation on earth with 1.6 billion people to China’s 1.4 billion (see Population Reference Bureau).

By comparison to India, Britain’s emissions – 0.66 billion tonnes (1.95% world total) - seem relatively modest.

Indeed, you only need to do some simple maths to see why the growth of the Indian economy could have such a consequence for global warming. Even relatively small increases in the incomes of Indians could lead to huge increases in carbon emissions.

For example, imagine every Indian bought a car or took a return short haul flight or even just used a tumble dryer 90 times a year. That would be enough to increase their carbon footprint by a tonne of CO2 and would add (obviously) a billion tonnes to the national total – almost twice Britain’s current total emissions.

So does that mean that India should curb its population’s carbon consumption?

The Indian Government’s policy of blaming global warming on the West is based on the fact that, over the years, India has emitted significantly less greenhouse gasses than the leading developed countries.

Between 1950 and 2000 India emitted 17.58 billion tonnes of greenhouse gasses. That makes it the 13th biggest polluter over the period with 1.58% of all world emissions. Britain has emitted almost twice that – 29.73 billion tonnes putting it in 8th place with 2.67% of global emissions.

Once again America dominates the table. Between 1950 and 2000 it emitted a staggering 186.70 billion tonnes of carbon – 10 times the emissions of India – 16.77 per cent of world emissions.

But take a look at the emissions per person and you can see why even the Indian branch of Greenpeace argues that the primary responsibility for tackling global warming lies with the West.

Between 1950 and 2000 each American produced 642.0 tonnes of CO2 emissions. Each Briton toted up 499.1 tonnes. Over the same period the average Indian was responsible for just 16.5 tonnes. That is one of the lowest figures for any country on earth - 164th out of 185 countries - and is less than the average American is responsible for in a single year.

That is why – after a week in India – I found it easy to understand the Indian Government’s position. It is also why I found it hard to begrudge Indians – in particular the two families we filmed with - some of the luxuries like cars and holidays abroad we in the West have been enjoying for years.

We are told the world needs to reduce carbon emissions worldwide if we are to avoid catastrophic global warming. If India is going to increase its emissions that means someone somewhere will need to make some carbon cuts.

The question is who.

 

[Bushroda]

India’s talent resources better than global peers
TANEESHA KULSHRESTHA
Posted online: Wednesday, May 23, 2007 at 0000 hours IST

NEW DELHI, MAY 22: Those shouting doom for the Indian economy because of the impending talent crunch can take heart from this one. In 2007. Only 9% of Indian employers found it difficult to fill positions because of lack of suitable talent as against 41% of employers worldwide.

What’s more, as opposed to the global trend, the crunch seems to be easing off in India as just last year 13% of Indian employers reported difficulty in hiring. Remarkably, the 2007 figures are also the least of all country statistics reported by the global recruitment firm Manpower that conducted the study in late January 2007.

The survey covered 37,000 employers across 27 countries, including 4,858 employers in India. Other countries where the talent shortage is not so severe are Ireland (17%), Netherlands (17%) and China (19%). Those looking for a job can also head out to countries like Costa Rica (93% reporting shortages), Mexico (82%), New Zealand (62%), Australia (61%) and Japan (61%) and Singapore (57%) that have stark demand-supply gaps when it comes to human resources. All the above countries reported an increase in difficulty in hiring over 2006. (Costa Rican figures for 2006 are not available). Clearly, the talent crunch situation in these countries is much worse in comparison to India.

Within India, the top ten jobs that employees find difficult to fill—in order of ranking—are engineers, IT staff, technicians, sales representatives, teachers, marketing staff, management/executives, skilled manual trades, accounting and finance staff and receptionists and front office staff.

The Indian situation is similar to the rest of the world when it comes to specific skill pool scarcity. “Across North America and Asia, the top three talent shortages are identical-sales representatives rank number one, followed by engineers and technicians,” said Jeffrey A Joerres, chairman & CEO of Manpower Inc.

The Manpower survey also notes that while demograhic immobility can cause talent shortages within countries, in India’s case the problem seems to be easing with much of the recruitment being done outside of Bangalore and Mumbai, cities that were hubs of recruitment earlier.

“The talent crunch is strongest in engineering jobs as compared to last year when sales representatives topped the list of jobs lacking suitable talent availability,” said Manpower India’s executive chairman Soumen Basu.

 

[Bushroda]

Leighton taps into Indian boom with joint venture
May 22, 2007

A SUBSIDIARY of construction and mining group Leighton Holdings has signed a $US2.5 billion ($3 billion) joint venture with a major Indian developer.

As part of the deal, design and construction work will be carried out by Leighton Asia (Southern) with developer Emaar MGF Land Pvt over five years. The project is a 50:50 joint venture and will be known as Leighton Construction India Pvt.

Leighton signed the deal in Delhi yesterday, with the executive vice chairman of Emaar, Shravan Gupta, and Leighton Asia managing director David Savage undertaking the formalities.

"Both the Indian economy and property market are booming," Mr Savage said. "By forming a partnership with India's leading developer we will be able to benefit from this boom."

Emaar has projects planned across India in residential, hospitality, commercial and retail. It is also involved in IT, education and health care.

Mr Savage said the large pipeline of projects would consolidate the company's long-term future in India.

The announcement comes as Emaar plans the development of a series of residential and retail projects. Some of the community developments would include hospitals and schools. Offices and IT parks are among other projects.

Since establishing operations in Mumbai two years ago Leighton Asia (Southern) has secured 10 projects worth almost $US600 million, including contracts for Nokia, Motorola and Reliance.

Leighton shares rose $1.42 to finish at $43.05 yesterday.

Agencies

 

[Bushroda]

GEs outgoing India head upbeat about reform
Wednesday, May 23, 2007 10:24 AM

BANGALORE (AFP) - General Electric's outgoing India CEO Scott Bayman says he is confident politics won't alter the course of economic reform that has changed the face of a country he made his home for 14 years.

Bayman, 60, whose retirement was announced on Tuesday, took the helm of the US giant in India two years after a bankrupt government reversed decades of socialist-style economic policies that shut the doors on foreign investors and fettered private enterprise.

He has watched a variety of coalition governments riven by factional rivalries come and go and witnessed the transformation of the nation of 1.1 billion people into an emerging economic powerhouse.

"I have been here through six governments and five prime ministers," New Delhi-based Bayman said in a phone interview with AFP on Tuesday. "Certainly I can say today that liberalisation is not dependent on any one political party."

During Bayman's Indian tenure, overseeing businesses ranging from jet engine sales to consumer loans and water to power plants, the pace of economic reforms has varied as the nation passed through an era of coalition governments.

Resistance from leftist allies has forced Prime Minister Manmohan Singh's Congress party-led government, in power for three years, to put on hold moves to fully open up the retail industry to foreign companies.

It has frozen asset sales and stalled banking and insurance industry reforms.

But the spirit of reform is here to stay regardless of politics, said Bayman, who swears by the potential of an economy that has expanded at a yearly pace of 8.5 percent for the past three years the most after China.

"I think this country has a terrific future," the GE executive said. "For an emerging economy, the country risk is very attractive you got a very strong regulatory environment, the rule of the law, a strong domestic market.

"India isn't very dependent on exports so it can sustain an external downturn better than most. And manufacturing is proving to be a powerful force, as much as IT-enabled services."

For Stamford, Connecticut-based General Electric, India has become the fastest growing market in the world, after once being an often frustrating place to do business.

"We were initially disappointed by the lack of growth and market size," said Bayman.

"Some others left but we said we are going to stick it out," he added. "Today it's looking much more like what we thought it would be."

A 300 million-strong middle class that prospered as the economy grew and incomes rose has been at the forefront of the economic change.

Indians are travelling more by plane, opting for better-quality healthcare and taking loans.

"We have got growth pretty much across the board," Bayman said. "Infrastructure first, jet engines, oil and gas, energy, healthcare, financial services... we are not dependent on any one particular business."

From one billion dollars of sales in 2005, GE India expects to log close to three billion dollars in revenue this year, a figure that it expects to swell to eight billion dollars by 2010, Bayman said.

Bayman will hand over to Tejpreet Singh Chopra, a 10-year GE veteran and the first Indian to be given the conglomerate's top job in the country.

 

[Bushroda]

City of London offers a helping hand
Express News Service

Mumbai, May 22: Look who is ready to help Mumbai. The City of London, considered to be the world’s leading international business district along with New York, has offered to support the city’s mega plan to become an international financial centre.

Lord Mayor of the City of London John Stuttard, who represents UK-based financial services, said: “India’s high-powered expert committee on developing Mumbai as a world-class financial centre described the City of London as its ‘natural reference point’ and we are keen to partner with the Indian government as it works to develop its national economy.”

Stuttard, accompanied by a 40-strong senior business delegation, will be in city this week to explore how the City of London can work with the Government of India to help in making Mumbai’s dream a reality.

“There is of course tough competition from other regional financial centres: Singapore, Dubai, Hong Kong. To compete with these, business in Mumbai needs to be given the right platform for growth,” he told Newsline.

Echoing what the Percy Mistry Committee report says—it has been released for public debate—Stuttard made it clear that more action is needed. “A good location is not sufficient, regulation has to be business friendly, taxation competitive and market infrastructure needs to be in place.”

“The City knows ambition and vision can succeed, but also that it takes hard work and determination and innovation. It’s an exciting time for Mumbai and the UK is looking forward to continuing dialogue on how it may help with the challenges that lie ahead,” Stuttard said.

The UK is already on India Inc’s radar for expansion with companies making several big-ticket acquisitions—Tata takeover of Corus and UB acquisition of Whyte and Mackay—in the recent past.

“The first thing I would say is that the Indian Government’s continuing economic reform programme is welcome, indeed vital, to enable the country to secure a permanent place as one of the world’s most prosperous nations,” he said.

“Secondly, the City is here to share our experience of what public private partnerships (PPP) can offer in terms of funding both social and trade infrastructure. These can help drive economic growth.”

In general terms, partnerships are key to India’s future development in a global economy. “So my final advice would be to work with the UK companies seeking to foster closer links with India and break down protectionist barriers which hold back trade and investment,” Stuttard said.

 

[Bushroda]

Supermarkets devour Indian traders
By Sanjoy Majumder
BBC News, Delhi

For generations, Indians have shopped for food and groceries at open markets and from roadside vendors.

But this is now beginning to change as a number of large Indian companies are setting up western-style supermarket chains to cater to the country's growing middle class.

The American chain Wal-Mart is poised to enter India next year and the UK-based Tesco is hoping to follow - all hoping to corner a part of a retail market valued at $330bn a year and growing all the time.

But as Indians change the way they shop, it's also beginning to affect the lives of millions of people who work in the large, unorganised retail market.

The vast majority of them are poor villagers who migrate to the city in search of work and end up selling fresh produce in a neighbourhood market or from a pushcart on the street.

Noisy and colourful

As dawn breaks out, most Indians head out to their local market.

Noisy and colourful, the markets are typically set up in the open air, with only the simplest of protection against the elements.

Most of the sellers squat on the ground, on burlap mats, surrounded by an astonishing variety of seasonal fresh fruits and vegetables.

Spencer's Vice President Samar Shekhawat

Succulent watermelons compete for space with apples and oranges while in another corner green leafy spinach and fresh mint is piled up high.

Bag in hand, the seasoned shopper moves from store to store as the sellers call out to them.

They stop to examine and haggle before they strike a bargain.

At the end, they walk away with a day or week's supply of fresh produce for the family at unbeatable prices.

This is the Indian retail industry - unorganised, seemingly chaotic but generating sound business.

But now, there are signs of a change.

Competitive prices

Across Indian cities and towns, brand new supermarkets are rapidly cornering a slice of the business.

In the capital, Delhi, India's giant Reliance group have set up a chain of Reliance Fresh stores, selling fresh produce at competitive prices.

But for a sign of the future, I head to the upmarket suburb of Gurgaon and the newly opened Spencer's hyper mart.

It's aimed at suburban shoppers - most of the people wandering through the shiny aisles are professionals - doctors and lawyers, IT workers and bankers.

Indian shopper Mrs Chibber

On offer is several thousand square feet of air conditioned space with just about everything under one roof - fruits and vegetables, meat and fish and freshly baked bread.

There are also electronic goods, clothes, fast-food counters and a bookstore.

Samar Shekhawat, vice-president of Spencer's, says this is one of eight hyper marts spread across the country.

"We would like to provide consumers a 360 degree solution - the husband can browse through the bookstores, while his wife shops and their children grab a snack at the cafe.

"It is our belief that people have moved from asking for value for money to paying money for value," he adds.

With a wide-range of produce and products, chains like Spencer's can offer competitive prices and it's an experience that's clearly going down well.

Mrs Chibber is a lawyer and has a family of four. She's shopped in traditional, local markets all her life but now she's made a lifestyle change.

"In my local market, I had to spend a lot of time going to several different shops in the hot sun. And you still may not get what you want," she says.

"But here you have a wide variety of goods, everything is available and it's comfortable. You are not exhausted by the time you go home," she says, as she wheels her trolley towards the check-out line.

Most vulnerable

Even as middle-class Indians are beginning to enjoy the fruits of a retail revolution, it's beginning to threaten many others who survive on the trade.

Indu Prakash Singh works for Action Aid and believes that it is creating a major problem.

"Millions work in the unorganised retail sector. They are also the most vulnerable because they work long hours for relatively low margins. They are being directly affected.

"We have already seen that in places where these supermarkets are coming up, local vendors are losing 40% of their business. What we are seeing is a big divide being created, between the super elite and the poor."

You don't have to travel far to cross the divide. Less than a few kilometres from affluent south Delhi is the sprawling neighbourhood of Sangam Vihar.

It's congested, with houses built so close to each other that they block out natural light.

Dirt-tracks pass for roads where children play amid ***** - from the open-drains on either side and the garbage strewn around with flies buzzing.

This is where many of the vegetable sellers who cater to south Delhi live.

Mukesh, a vegetable seller, is slowly wheeling his cart back home.

His day began at four in the morning, when he set out for the wholesale market an hour away by foot. From there, it's another hour to the market where he plies his trade and then another couple of hours back home.

But the past week has been nothing short of disastrous for him.

Booming economy

A brand new Reliance Fresh store opened down the street and he's lost half his business.

"I'm struggling to sell most of my vegetables. Whatever is left over is simply sold at half-price or thrown away. I cannot store them," he says.

He has four children and his wife is worried about the future.

"It's expensive living in Delhi. If we have no money, there's not enough to eat and pay our bills. I really don't know what we'll do," she says.

I ask Mukesh if he can find any other work - maybe even at the supermarket.

He laughs.

"There are educated people in this city who are unemployed. How can an illiterate man like me expect to find work?

"No, I don't think there's much else to do. If I can't make it here, we just have to go back to our village."

There are 40 million people like Mukesh employed in India's unorganised retail industry.

Like him, they depend on daily earnings to support their families. And as India transforms under its booming economy, they're beginning to wonder if there's a place for them in the new India.

 

[Bushroda]

Railways to clear tracks for development
RAJAT GUHA
TIMES NEWS NETWORK[ WEDNESDAY, MAY 23, 2007 01:42:07 AM]

NEW DELHI: The country’s biggest land owner, the Indian Railways, will soon be able to freely use vast tracks of its unutilised land to build malls, agri business hubs, a dedicated 2,700 km freight corridor and a bullet train project each in four corners of the country.

The government plans to amend the Railways Act, 1989, empowering the railway ministry to utilise excess land without hindrance, in the same manner the National Highway Authority of India acquires land for highway projects. The Railways are currently unable to tap nearly 43,000 hectares of land alongits tracks for commercial purposes dueto legal interference by the state governments.

The move will pave way for the construction of the Rs 30,000-crore freight corridor which despite having been cleared by the Union cabinet is held up due to objections raised by respective state governments. The amendment, which have been proposed in a cabinet note, would take away the powers of the states, a source in Rail Bhawan said.

The amendment among others would help the Railways to evict illegal occupants of its land. In Delhi alone, about 40 hectares of land is being illegally occupied for more than three decades. Despite repeated efforts by the Railways, the state authorities have not been able to remove them.

The Railways have circulated the note to seek the comments of other ministries after which it will put up the amendment for Cabinet’s approval.The Railways are pushing for the amendments as delays in implementation of the freight corridor and the agri-hubs would not only result in huge losses for the government but also delay the creation of much needed infrastructure to sustain a booming economy. The cabinet has already cleared a East corridor linking Kolkata with Ludhiana and a west corridor connecting Mumbai with New Delhi. The corridors pass through around a dozen states and was slated to be completed in five years. Companies such as GE, Alstom, Siemens, Bombardier are hoping to cash in on the freight corridor to expand their business.

In addition, the Railways are planning to utilise part of the land to build commercial projects like agri business hubs and organised retail. It has been in talks with companies like Reliance Retail, Future group (Pantaloon), Tatas and AV Birla group for setting up agri business hubs on its land. It would also require land from states to construct four high-speed bullet train corridors in all four corners of the country.

 

[Bushroda]

Appeal To The Indian Left From A Progressive Pakistani: Evolve Alternative Paradigm of Economic Growth
by M.B. Naqvi
Saturday 19 May 2007

The following is what the author wanted to present at a meeting in Karachi when the leaders of the two Indian CPs—the CPI and CPM—visited Pakistan in the recent past. —Editor

I intend to ask a few questions to you. But first the perspective in which I am talking.

The international order as it has developed since the 1990s has been profoundly disturbing. I am sure you will share my overall assessment of a unipolar world in which one nation possesses far too much military strength and has consciously decided to make the fullest use of that military strength for its political as well as economic interests. In the name of leadership it has dominated the world. It seeks unquestioning privilege of intervening wherever it wants to and reserves the right to pre-emptive military action. Its conduct is not always truthful. I believe you share my belief that this international order is not acceptable. There is far too much of imperialism in it.

Insofar as imperialism is concerned, it has gone beyond the export of capital as Lenin in 1919 had defined. It focuses today on a certain economy containing a given quantum of resources and the potential for development. The name of the game now is to develop an economy for the greater profit of the developer.

But the name of the game in politics for the US is to get control over the sources of strategic raw materials, especially oil. The American thrust in Asia stands on a tripod. The first leg is the Middle East that the US regards as its backyard insofar as Asia is concerned. The second leg is its strategic alliances with Japan and Taiwan. The third leg is the US-India alliance with Pakistan somewhere precariously attached. One does not mention in it the smaller Far Eastern countries and Australia that I regard as more or less a part of the American power system in Asia (the first leg).

An additional theatre is the policy toward the former Soviet Union and China. Insofar as the Soviet Union is concerned, it began by befriending it and in the name of promoting human rights and democracy it is ensuring the dilution of the old Russian influence in the Central Asian Republics as well as encouraging minority states within the Russian Federation to assert against Russian authority. How that is to be assessed is the question. Does it or does it not sum up a policy of encouragement of fissiparous tendencies in the Russian power system so that it comes down?

More questions concern China. The rise of Chinese power and its economic growth has caused worries to the US. But until the end of the Clinton era in American politics the policy was to encourage China’s growth and try and assimilate it in the American-led comity of nations. There were, of course, voices from what is described as the security community. They regarded China as a potential rival. But those voices remained in a minority. The government was committed to a policy of assimilating China in the American-led international system. But the start of the Bush era changed that. The Americans have not entirely given up the policy of engagement. The growth of Sino-American trade is a staggering phenomenon that rivals the American-Japanese trade. China appears to be earning $ 163 billion per year surplus in trade with the US. But the Americans dare not blackball Chinese exports. Supplies of consumer goods and simpler technological goods is so vital a component of American consumption that its discontinuation or even diminution would hurt America more because it is sustaining a standard of living that cannot be paid for by American exports alone. America has of necessity to run huge deficits with China, Japan, Germany and, of course, oil producers around the globe. It is easy for it. All it has to do is to print dollar bills. The US is today world’s greatest debtor. But instead of being vulnerable to foreign pressure, it holds its creditors in thrall. The creditors dare not withdraw the bulk of their deposits from the American financial system for fear of the dollar’s crash. All their credits will become worthless. It is the Americans who hold the whip hand despite being the Big Debtor.

The American modus operandi in the economic field is, of course, to earn as much as it can. It has revived the cruder form of capitalism everywhere. The policy originated in what is remembered as the Washington Consensus that gradually became the credo of the governments of Margaret Thatcher in Britain and Ronald Reagan in America. It came to be known as the deregulation, privatisation and liberalisation paradigm. Free trade has become the chief slogan. The intention is to create a global market in which there are few or no tariffs. The whole globe should comprise one economy. This economic theory is supposed to benefit all manner of countries at all stages of development. Let’s look at what has so far occurred?

—

THE former colonies comprising the so-called Third World are increasingly at the receiving end. A growing number of economies have gone belly up, especially in Africa. In the normal course of events in all capitalist economies, there are some winners and some losers. Only the losers are many more than the gainers. That is the normal feature of capitalism as you know better than what I do. At the international level, it is the same. Scores of countries have become basket cases with heavy indebtedness. The IMF and World Bank have a hard time rescheduling and writing off some of their debts without hurting the financial system of the West. The process is going to accelerate as globalisation increases.

Globalisation’s working inside each developed economy is the same. It produces losers—who lose jobs and whose standards of living tend to become lower—while the gainers, of course, become richer still. The process can be watched not far from the place we are sitting today. I mean the spectacular economic growth of India in recent years has intensified poverty, whatever its quantum or extent. I find it is a controversial matter among economists. The Indian Government insists that it is no more than 24 per cent and it is decreasing. The independent economists, especially those on the Left, find it actually growing or at the very least stagnant. But those above the poverty line as defined are also not necessarily rich. The cream is appropriated by some 250 to 350 million Indians. The rest try to make the two ends meet by my non-scientific estimate. It is the same in Pakistan. Its governments did mimic its Indian counterpart about the prospects of growing at eight per cent and above. And poverty was to get reduced through the trickle-down process. Although the recent earthquake in the northern parts seems to have created doubts whether really high growth rates can be maintained in the sectors of economy that are prone to grow faster.

This is a field about which I need not go further. But I would ask a question: those who do not like the present paradigm of economic growth known as ‘reforms’ or the globalisation scheme carry a moral responsibility. They have to offer an alternative paradigm. It is not enough to condemn globalisation as iniquitous and as something that will not help the poor. It helps mainly the rich. There is no doubt that it will go on doing these things. The point is: how do we counter it? I am aware that the American masses surprised the world by the strength of their protest in Seattle some years ago. Then the Europeans picked up the theme and their protests against G-8 and even OECD have only grown. Today the leading capitalist countries meet in international conferences amidst the tightest possible security. They dare not operate freely even in the developed West that stands to gain more than the people in Asia. The popular protests against Americans and the other leaders of the West, who are propagators of the globalisation programme, are now a familiar feature, as Hong Kong the other day has shown. There is something missing that is terribly important. What is missing is an alternative vision—a vision of what can replace it.

Needless to say that even the Left today cannot go back to Stalinist planning and theover-centralised and bureaucratic economic management. A certain amount of market mechanism for allocation of resources and various other purposes, including pricing of goods and services, will be needed. Private capital as such has to be given a defined scope for doing its business. The allocation of resources by bureaucrats is not now an option. But will it now be free market forces that will determine everything from choosing what to produce and selling it at whatever prices they wish? That is what the Americans advocate. The point is: what does the Left advocate?

—

FRIENDS, I wish to address mainly our guests from India. Naturally the question arises: what can Pakistanis learn from the Indian political life? I suggest that the Left in India has to evolve a coherent economic policy or paradigm that should guide Indian economic development in days to come. That would provide the means for mass mobilisation to preserve India’s independence in decision-making and to give its affairs direction that will enable the people of India to make economic progress primarily for the benefit of the common man. But immediately following it is the consideration that all freedoms guaranteed by the Indian Constitution, that distinguish it from semi-dictatorships in the Third World, should be preserved. In other words, the economic paradigm must preserve all political liberties while raising the standard of living of the common Indians—who are today being left out of the economic miracle that is supposed to be underway. It does look to me that the Indian mainstream parties have not adequately learnt the lesson from the election of May 2004. The downfall of the NDA Government represented the disenchantment of the common people, particularly in the villages, with the economic policies which Dr Manmohan Singh originally initiated. Dr Manmohan Singh is not expected to move far out of the four walls of that policy which happens to be what the World Bank, IMF and American Treasury believes to be the panacea for all the world’s ills. The aim of most of our Indian guests today can only be to overcome poverty of the bottom 50 per cent of the population and to raise their cultural level—the real purpose of economic development. It requires thoroughgoing research in economics in the quest for a set of economic policies that would directly attack the poverty of the broad masses and which raises their political and cultural awareness amidst all necessary freedoms. I would underline the need for this research. India particularly is endowed with a wonderful human resource base; there are excellent economists on the Left as well as the Right. I would suggest that the parties of the Indian Left should pool their human and financial resources to create a Planning Commission with a view to arriving at a proper economic development plan for India.

Immediately following that I would suggest that India should actually become a leader of South Asia. There are historical similarities in all the South Asian countries, particularly with India in each member of the SAARC today. These are all neighbours of India primarily and most of the ethnicities in India have overshot the political boundary to share with particular neighbours. For instance, the language, culture and sensitivities of West Bengal are, to a large extent, shared with Bangladesh. Similarly there are many commonalities of ethnicity between the Indians and the Nepalese. Much the same can be said about Pakistan and India. And so on with Sri Lanka. Only Afghanistan, a new member, is not contiguous to India. But via Pakistan there are historical and some ethnic commonalities among India, Pakistan and Afghanistan. All these countries need economic development as well as democracy. The need for freedom is as strong in Pakistan as in India or in Bangladesh or in Nepal or Sri Lanka or other places. The Planning Commission that the Indian Left parties may establish should aim at creating a viable regional economic entity in the shape of a reinvented SAARC by putting a social and economic content in the idea behind SAARC: regional integration of a given kind.

The purpose of planning in all the six countries has necessarily to be the same as in India. That Planning Commission can have a political wing too. It should consider political strategy primarily for the Indian Left and extend it to relations with various members of the SAARC. Politics in all the countries have to be not merely informed with the spirit of the economic policies but also be based on those economic policies. In other words, the main thrust of the politics of the pro-people parties should be basically similar economic programmes.

One would suggest that a set of common slogans or policies has to be found that will fire the imagination of the masses. My humble suggestion would be that it is now time for the Indian Left to go well beyond the limited Employment Guarantee Scheme that is hopefully being implemented by the UPA Government today. It should call for a bold departure here: the aim should clearly be Social Security for all; jobs for all have to be created and in the case of not being able to provide jobs to all unemployed, or largely unemployed, the state should be provided with some compensatory allowances. The size of the allowance can be as low as indicated in the Indian scheme today or better. But any country that is embarking on a plan to make Social Security the sheet-anchor of its economic policies will have to reorient its politics in the same way. The present rush of the Indian establishment to make India a tremendously strong military power is actually unnecessary and a wastage of scarce resources. India needs to make Social Security the sheet-anchor of its policies. That will ensure its social and political integrity much better than a much stronger Indian Army. Human security ought to be taken seriously, at least by the Left. If economic programmes are made that way, the Left can perhaps move out of its provinces of West Bengal, Tripura and Kerala. It is time for the Left to properly lead India directly on its own behalf.

Incidentally while suggesting a broad shift from the present course of making India a great military power, this can only succeed if the Left presents and makes it acceptable to most Indians a new policy vis-à-vis Pakistan, the arch rival that has nuclear weapons. Pakistan needs to do exactly the same. Should there be a strong Leftist push against militarisation of the economy and society in India, it will rub off on Pakistan. The much smaller Left here, that does not like militarisation, can take a harder line if they are strongly supported by a more pacific Pakistan policy by India. Similarly India should have pacific policies toward other neighbours based on equality and fair-play. But it is not a very simple matter. India has come of age as a capitalist economy. Imperialism is just a step ahead of capitalism’s success anywhere. The more a capitalist economy succeeds, the more it moves into other parts of the globe, tries to corner markets exercising control over the resources of other countries. Indians are entering that stage. Indian multinationals are beginning to find their feet—elsewhere too. This is now the time to make a great dash for pacific and true development-oriented policies. That would help Left-learning liberal elements in other countries of the region to do the same. South Asia should be aimed at becoming an island of prosperity and social progress in the globalised village.

—

THERE is a short-term policy conundrum for the Left in India. I do not think it is a major or fundamental question but it remains a question for today: how far can the Left go in supporting the UPA Government in Delhi, when the Delhi Government is hell-bent on becoming the core ally of the US and pursuing a military policy that virtually pre-empts social progress of the kind implied here? It is obvious that either the UPA Government has to restrain its love for America and globalisation or the Left will have to draw a line somewhere. One sometimes fondly thinks that there would be a split in the Congress now. It has become necessary. Those who go with Dr Manmohan Singh’s preferred course would be those who are ideologically or otherwise closer to the BJP than to the Nehruvian Congress. The other Congress, possibly run by Sonia Gandhi, would remain loyal to an independent foreign policy and an economic policy which is at least quasi-socialist. If this were to happen, the Left can then have a stronger working arrangement with that Congress. But I do not see today an Indira Gandhi who would intentionally split the Congress and isolate the true succesors of the Syndicate of the 1960s.

There is another minor question of there being half a dozen Communist Parties and a few nominally Socialist ones. The origins of most divisions date back to the 1920s and 1930s. That age has gone. The issues that divided the various Leftist-inclined parties are no more. In India one is told the activists of various Leftist factions or parties are freely cooperating over local matters. It is only the leaderships that differ. Even they do not differ much over significant matters of economic or foreign policies. They only differ among themselves for personal or at most for partisan reasons. The controversial issues today are globalisation, foreign policy in this new age and the security questions about Asia. On these questions there are deepening differences now emerging in India whereas in the last almost six decades there has been a consensus over foreign policy. Economic policy should now divide the Indians. The issues of today should be purposefully focused on and new programmes have to be evolved. For that purpose the old differences between the Leftist groups and parties are meaningless. They refer to the controversies of the past, especially over who would interpret Marxism better for the comrades. The challenge today is a new programme to be evolved by all the Leftist groups and parties together. That would produce political unity as well.

The author is a renowned veteran Pakistani journalist based in Karachi

 

[Bushroda]

China, India 'a huge opportunity' for UK financial services sector - ITEM
Published : Mon, 21 May 2007 00:18

LONDON (Thomson Financial) - China and other emerging markets represent a 'huge opportunity' for the UK financial services sector, but the government must invest to maintain the UK's comparative advantage in the sector, a leading economic consultancy has said.

According to the Ernst & Young ITEM Club special report on the financial and business services sector (FBS), the UK's comparative advantages in the sector -- which span from its open economy and regulations to its initiative-taking work culture -- allow it to sell these services very competitively across the board, including in emerging markets such as India and China.

'There are huge opportunities for UK services in India and particularly in China as those markets become more open and their customers become wealthier,' said Peter Spencer, chief economic adviser to the ITEM Club.

The UK's long-established reputation is another key to its success in the area, Spencer said.

'We have a reputation for high quality in financial and business services. We have the same type of 'Made in Britain' label in this area as we used to have in manufacturing,' he said.

Furthermore, the UK's lead in the area has been self-reinforcing, as talent from elsewhere has been attracted to the UK, creating a 'dynamic comparative advantage', Spencer said.

The ITEM report predicts the UK financial and business services sector will continue to grow at 4 pct or more annually over the rest of the decade, after rising by 3 pct a year on average since 1997 -- in stark contrast to the fortunes of the manufacturing sector, which has barely grown in that time.

More than half of the new jobs created in the past 10 years have been in financial and business services, and the sector now employs nearly 30 pct of the workforce as against 14 pct in 1980, it notes.

'It is the key to the UK's future prosperity,' Spencer said.

However, the sector's continued success is not guaranteed. ITEM warns that the UK government must invest in skills and infrastructure to support the sector, as well as ensuring that regulations do not drive business away from London.

The most obvious risk to the sector comes from competition from emerging markets, which have cheaper labour costs. Some UK jobs in the sector are bound to be off-shored to cheaper labour markets, Spencer acknowledges.

'We will certainly lose business,' he said. 'A lot of legal work, for example, will be carried out in India.

'But the more sophisticated, value-added work will take place in London and it will take places like Hong Kong and Mumbai an awfully long time to catch up.'

 

[Bushroda]

India’s slice of global trade gets thicker
ECONOMY BUREAU
Posted online: Wednesday, May 23, 2007 at 0000 hours IST

NEW DELHI, MAY 22: India’s share in total world trade, including trade in merchandise and services sectors, has gone up from 1.1% in 2004 (the initial year of the Foreign Trade Policy from 2004-09), to 1.5% in 2006, according to statistics released by the WTO.

“Based on the current rate of growth of merchandise and services trade, it is expected that India’s share in world trade covering merchandise plus services sector may double from the level of 2004 to cross 2% in 2009,” commerce and industry minister Kamal Nath said.

As far as only merchandise trade is concerned, India’s share in global merchandise trade may increase from 1.2% in 2006 to 1.5% in 2009, Nath projected. India’s share in merchandise trade has increased from 0.9% in 2004 to 1.2% in 2006.

Meanwhile, trade in the services sector has recorded an even higher growth, resulting in an increase in the share in world services trade from 2% in 2004 to 2.7% in 2006.

In the Foreign Trade Policy in August 2004, a medium term horizon for export growth was envisaged and the share of India’s merchandise trade in world trade was targeted to double in 2009.

According to the World Trade Statistics of the WTO in 2006, India’s total merchandise trade (export and import) was valued at $294 billion in 2006 and trade in the services sector inclusive of export and import was $143 billion.

Thus, India’s global economic engagement in 2006, covering both merchandise and services trade, was worth $437 billion, up by a record 72% from a level of $253 billion in 2004. According to WTO, the world economy and trade grew vigorously in 2006, the 8% expansion in merchandise trade being the second highest since 2000.

The report said the least developed countries’ trade grew 30%, fuelled by higher prices for petroleum and other primary commodities. Developing countries’ share of world merchandise exports reached an all-time record of 36%.

 

[Bushroda]

Kashmir's thriving economy
Despite being labeled a conflict zone for 17 years, Kashmir shows surprising economic potential.

Four years ago, when Jehangir Raina, a UK-based Indian businessman, decided to start an information-technology company in Indian Kashmir instead of in hot spots like Bangalore and Gurgaon, business analysts frowned at the risky plan. But Jehangir Raina saw in this conflict zone what only a few others did: business potential.

"Initially, our clients were reluctant to do business with a company not based in a metro, but in a conflict zone in the Himalayas," the Indian businessman told ISN Security Watch. "Once they saw potential in us, their reluctance disappeared."

Over the years, I-Locus, Raina's market-research IT company, has managed to woo more than 200 international clients, including Microsoft and Wipro.

Raina has come to believe that more than the threat itself, the perception of threat dissuades the outside world from looking at Kashmir as an investment option. His business success story seems awe-inspiring in a region that has been a crucible of terror and fear for 17 long years. Nearly 40,000 people have died since the insurgency began in Kashmir in the early 1990s.

However, Kashmir 's economy, growing at nearly 5 percent - although sluggishly compared to India 's national average growth of 9.2 percent - defies the myth that conflict must stymie economic potential.

Surprisingly, Kashmir negates all perceptions of a troubled region. Unlike most conflict zones, there are no bombed out houses here, no empty shops, and few people living in abject poverty. What is conspicuous, in fact, is a booming real estate market and a populace that has formidable spending power under the circumstances.

That was enough reason for HDFC, a private bank, to open a branch in Srinagar, the state's summer capital, two years ago. Like I-Locus, many prudent financial analysts in the country blanched at HDFC's ambitious move. No private financial institution was then willing to risk investing in a conflict zone often roiled by bomb attacks.

"Many businessmen are scared of coming to this dangerous place," Adil Nisar, a senior manager at HDFC, told ISN Security Watch during an interview at his plush office in central Srinagar. "We dared."

That daring is today earning the bank rich dividends. After a short period it has accumulated over 8,000 accounts and has fetched business worth nearly INR 2,500 million (approximately US$61 million).

This year, the bank plans to start five more branches in the state, two of which will be in Baramullah and Pulwama, both districts often in the news for militant activities. The move, although potentially dangerous, demonstrates instinctive business acumen. HDFC hopes to cash in on a rich orchard-owning clientele that has long felt the void of a full-service bank.

Extreme poverty is rare in Kashmir. According to government statistics, in the rural and urban areas, only 3.97 percent and 1.98 percent of Kashmiris, respectively live below the poverty line. In the rest of India, those figures are 27.09 percent and 23.02 percent.

Thanks to land reforms in the early 1950s by Sheikh Abdullah, Kashmir 's first prime minister, a majority of Kashmiris are land owners, something that has contributed to the personal wealth of a large population here.

Ironically, the conflict, too, has enriched Kashmir in some ways. Over the last 17 years, the state has built a large conflict-economy with the central Indian government in New Delhi granting it special treatment. Since 1990, when the insurgency exacerbated security problems, 100 percent of Kashmir's budget has been financed by New Delhi, of which only 20 percent is repayable. Generally, the central government funds only 20 percent of the cost of federal state development, requiring the states to raise the rest.

Also, even though tourism, Kashmir's main revenue earner, declined during the years of militancy, the huge expansion of the Indian armed forces in the region since the insurgency began made up for some of the losses, say local businessmen. Over 600,000 Indian military personnel, all potential buyers for local products, are currently based in Kashmir.

Shifting fortunes

But now that the violence is ebbing, Kashmir's fortunes may shift, Daniel Markey, senior South Asia Fellow at the Council on Foreign Relations in Washington, says in an email.

"Now, we may be seeing the beginnings of a post conflict economy in Kashmir," he says. "Reducing violence means that the cash of the conflict economy can now safely be invested in the state to build lasting businesses."

Kashmir's political class seems eager to slough off its image of a conflict-zone. Setting an ambitious target of 8 percent growth in the next few years, Tariq Hameed Karra, Kashmir's finance and planning minister, says the region's economy is at a "take-off stage."

The government, in a bid to lure investors, has for the last few years been offering industries setting up operations in Kashmir 100 percent excise tax exemption for 10 years from the date of commencement of commercial production. In its annual budget this year, India 's finance minister announced that this tax holiday would continue for five more years, until 2012.

Initiatives in IT are new in a state where almost 90 percent of the population has long eked out a living on agriculture, handicrafts and tourism.

Buoyed by the tax incentives offered by the government, BQE Software Inc. set up office in Kashmir six years ago. Since then, its manpower has gone up from six to 40. A software company based in Torrance, California, and owned by Shafat Qazi, a Kashmiri-American, BQE sources a major part of its software development to its Kashmir office.

Kashmir offered Qazi some advantages. One, the work force came considerably cheaper, nearly at half the rate compared to other Indian cities. Two, setting up business infrastructure was cheap and relatively free of red tape.

In a region that virtually shuts down after the sun sets due to security concerns, observes office manager Ikhlaq Bhat, his staff's office hours have transcended the work culture generally prevalent in this troubled region.

"Now the staff works late hours," Bhat tells ISN Security Watch. "Work continues even if there's a hartal in the city, or even if a bomb goes off."

A drive down a smooth macadamized road 10 kilometers from Srinagar leads you to Rangreth, a mammoth, high security industrial estate that houses some 189 small and big business and industrial units, including fruit processing, electronics, power generation and IT. Set up in the mid-1990s by the Kashmir government, this was intended to woo businesses.

Amid the whirring of generators in the estate, it is hard not to notice a few units that remain desolate. A few industries, because of security concerns, packed up and left Kashmir for good in the 1990s.

In the last couple of years, some as enterprising as I-Locus and BQE, have begun exploring opportunities here again. Even if there is a terror attack close by, work continues unabated in this cocooned estate. The government is doing its best to spruce up infrastructure to lure businesses. In the vicinity of the estate, the Software Technology Park of India (STPI) has come up which provides broadband connectivity.

However, over the years, the scale of businesses has remained very small compared to the rest of India. In a country bursting with the excitement of an economic boom, as India Inc. has taken a strident leap, Kashmir Inc. is still far behind, local businessmen rue. At US$419, the per capita income of the region is only two-thirds of the national average of US$632.

Unemployment in Kashmir - regarded to be a reason that lures the youth towards militancy - stands at 4.21 percent, according to the National Sample Survey Organization (NSSO), against a national rate of 3.09 percent. Kashmir, according to government statistics, today has 183,000 unemployed youth in the highly educated category.

Obstacles to development

Analysts say that Article 370, a piece of legislation that guarantees autonomous status to Kashmir, is also a big obstacle towards the economic development of the State. Article 370 prevents non-Kashmiris from purchasing land or any immovable property in the state, thus dissuading investors from showing interest.

According to government statistics, the militants declared hartals disrupting work for 1,356 days between 1990 and 2003, forcing many private businesses to remain shut on many of those days.

Nissar Ahmad Baba was forced to dissolve his business of electrical spare parts in 1991 after perpetual hartals compelled him to shut shop for more than 100 days of the year.

With a government loan, however, in 1997, he started Alba Power, a small-scale industrial unit manufacturing transformers in Rangreth. In the in the last two years, Alba Power has emerged as a leading manufacturer of transformers across northern India.

But manufacturers like Alba Power are forced to keep the scale of their operations small to minimize risks and have a small, yet assured profit. Despite the potential, heavy- and large-scale industries in the valley have not been set up due to a dearth of investments.

With nearly 600,000 Indian security forces in a state home to some 8.5 million people, Kashmir has the highest soldier-to-civilian ratio in the world. And concerns over the security situation are still keeping investors at bay.

"We need more private investors in Kashmir," says Abid Shah, a supervisor at Alba Power. "This is a state with talented human capital. It still needs to unlock its full potential."

 

[Bushroda]

Half done’s well begun

The United Progressive Alliance assumed office three years ago with the hubris of an India Shining etched on its mind. A countryside that thought otherwise shooed out those who coined that unfortunate phrase. This message has informed the Congress-led alliance’s attitude to economic reforms. That and the bountiful dividends of an earlier era of economic course-correction appear to have tempered the zeal of India’s original reformers. The economy has grown at above 8 per cent since 2004-05; Indians are investing a third of their income and the GDP and stock market capitalisation is nudging $ 1 trillion. Wide swathes of the economy are going about their business under a rough and ready form of competition and the country is about to hit the demographic sweetspot. Why fix it if it ain’t broke?

Yet the countryside is still saying, ‘show me the money’. Agriculture, growing at around 2 per cent, is causing rural distress — from headline-grabbing farmers’ suicides to tribals fighting pitched battles for a better price for their land. The government’s flagship social sector programmes on rural employment, education and health are small steps towards moving millions of people out of farms and into factories and offices. Industry and services are facing a skills shortage that threatens to drive wages up and obliterate India’s labour cost advantage. Add to this a creaky infrastructure and the India story could lose some of its sheen. The infrastructure story is decidedly grim: the government has pared its targets for electricity generation; work on highways is not appreciably faster than it was during the previous regime.

Having set its sights lower this time, the government can claim credit for its incremental reforms. The government’s books are in better shape and the investment landscape has improved. No mean achievements for the UPA, but the omissions are equally glaring: full rupee convertibility; financial sector reforms; labour market inflexibilities and privatisation in a limbo. From a government that has left political hot potatoes well alone till now, it is too much to expect any movement in the one year to go before the election machinery cranks up.