BRICS Summit in China, Modi Cabinet Reshuffle – India Market Watch

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After Doklam stand-off, Modi and Xi shake hands

A military stand-off in Doklam – an area bordering India, Bhutan, Tibet, and China – came to a dramatic close last Monday as China and India opted for an “expeditious disengagement”.

The next day, Prime Minister Modi confirmed his participation at the BRICS Summit in Xiamen, China – a three day affair from September 3rd to 5th.

The ongoing summit began on a positive note with a much awaited handshake from Modi and President Xi Jinping.

Giving political context to the summit are tensions that erupted between India and China in late June after Chinese troops began building a road in the border region of Doklam. After two and a half months of military posturing, media propaganda, and aggressive missives, both countries agreed to mutually de-escalate tensions.

India and China are facing testier times of late as China seeks India’s support for its One Belt, One Road (OBOR) – renamed the Belt and Road Initiative (BRI). India remains reluctant as the BRI project includes plans to build power plants, roads, and railways connecting Pakistan with Xinjiang – all of which will impact the region’s political status quo.

Nevertheless, economic interests trump geopolitical concerns, and both countries are still committed to growing trade and investment ties. Chinese outbound investments have increased in India’s startups and manufacturing sector. India is also looking to balance its trade with China.

During the course of the stand-off, India had tightened FDI rules in sectors with Chinese investments, namely power transmissions and telecom equipment, while Indian SMEs in the solar power sector faced difficulties in procurement with their Chinese suppliers. These sectors will be watching India – China ties more closely.

Job creation, infrastructure, 2019 elections behind Modi’s latest cabinet reshuffle

In his third cabinet reshuffle, Prime Minister Modi appointed new ministers in three key ministries, namely, labor and employment, skill development and entrepreneurship, and the ministry of micro, small, and medium enterprises (MSMEs).

Lagging job creation continues to be a problem for the Modi government, now in its third year, as it looks to consolidate its position before the 2019 general elections.

At the center of the government’s ambitions has been the improvement of India’s infrastructure. Key federal ministers – Piyush Goyal and Nitin Gadkari – were rewarded with additional responsibilities for their efforts in furthering clean energy goals, national highway construction, and boosting the profitability of India’s ports.

Goyal will now take on the increasing corporatization of India’s railways while Gadkari is expected to focus on the development of inland waterways.

India manufacturing hub for foreign automakers

Foreign automakers are increasingly looking to manufacture in India for exports.

The latest move comes from South Korea’s Hyundai Motor Company, which is completely shifting the production of its mid-size sedan – the Verna – to India. Taking advantage of the Make in India initiative, Hyundai will use its manufacturing facility near Chennai to supply the Verna to almost all its global markets, starting January 2018.

Hyundai has already been manufacturing a range of small cars to larger vehicles at its India base, shipping about 45,000 units of the Creta SUV to overseas markets in 2016.

Other foreign automakers manufacturing in India for exports include Fiat Chrysler Automobiles and Volkswagen. MG Motors India Ltd, a subsidiary of China’s largest automaker SAIC Motor Corp. Ltd, will take over General Motors’ manufacturing facility in Halol, Gujarat in 2019.

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