Economy & Trade

India’s Nuclear Deal Flares Up

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July 2 – There are always two sides to the coin and India's ruling coalition congress party is facing off against their leftist counterparts. While the Congress party claims the nuclear deal with America will put an end to India's energy problems, the left is convinced its a bid to sell India to the U.S. and have threatened to pull out their support from the ruling coalition government.

The following are key events and meetings planned this week that could decide the fate of the government, as compiled by Reuters.

Thursday, July 3: The Communist Party of India (CPI), an ally of the ruling coalition and India's second largest left party, holds its secretariat meeting. The nuclear deal will figure prominently as the party has been very critical of the government.

Thursday, July 3: The United National Progressive Alliance (UNPA), a coalition of smaller parties, holds a meeting to decide their final stand on the nuclear deal.

Interest Rate Rises to 8.5 Percent

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June 25 – The Reserve bank of India raised interest rates for the second time this month and asked lenders to set aside more money as reserves to cool inflation running at a 13- year high.

The repurchase rate was lifted to 8.5 percent from 8 percent, and the cash reserve ratio to 8.75 percent from 8.25 percent, India's central bank said. The increase was the biggest since 2000 and followed a quarter-point rise on June 11.

Governor Yaga Venugopal Reddy is under pressure from the finance ministry to tighten monetary policy after record oil prices drove inflation to 11.05 percent in the week ended June 7. That may further hurt consumer demand and threatens to derail India's record 8.8 percent annual economic growth since 2003, the fastest after China among the world's major economies, Bloomberg reported.

Bollywood Weds Hollywood

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June 20 – BOLLYWOOD'S songs are hummed in Morocco, its films are rented in California and its stars are cast in wax at Madame Tussauds in London. But India's new money has an appeal even its melodrama cannot match. On June 17th the Wall Street Journal reported that one of India's biggest conglomerates, Anil Ambani's Reliance group, was in talks to form a film-making partnership with Steven Spielberg's DreamWorks studio, owned by Viacom, a media giant. Mr Spielberg and David Geffen, the studio's co-founders, want to regain their independence when their contract with Viacom ends, and are looking for funding.

India’s Roadmap to be 40 times bigger by 2050

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June 17 – Goldman Sachs authors of the famed BRIC's report of 2004, which outlined the emergence and dominace of Brazil, Russia, India and China by 2050, has recently published a 10 point roadmap for the Asian subcontinent. The roadmap points out India's flaws and how the country can make constructive changes to emerge as the second largest economy next only to China's by 2050 when it would have a gross domestic product of $40 trillion.

Written by Jim O'Neill, chief economist at Goldman, and Tushar Poddar of the Asia Economic Research team, the report indicates that India needs to improve its governance, control inflation, introduce credible fiscal policy, liberalise financial Markets and increase trade with its neighbours. It also needs both to significantly raise its basic educational standards, and increase the quality and quantity of its universities. The country needs to boost agricultural productivity, improve its infrastructure and environmental quality.

to read the entire report click here.

FDI rises to US$25 billion in 2007-08

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June 17 – Foreign direct investment into India has surged to over US$25 billion in 2007-08 and the country's Foreign Exchange Reserve crossed US$341 billion as of on Tuesday, Ashwani Kumar, Minister of State for Commerce and Industry the Hindustan Times reported.

To support his argument of the sustainability of GDP growth of over 8 per cent in the long run, he observed that India had the advantage of a huge young workforce (24 percent of the population are below the age of 28 years, 54 percent of the population are in the working group) and a very high savings and investment rate (over 35 percent of GDP).

Obama or McCain – Who Will Be Better For India?

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June 12 – With the Barack Obama winning the democratic seat, and John McCain being his only rival, its time India decided which candidate its going to root for. The next five years are crucial to India-US relations as the world gets smaller and the economies more inter dependant. The Sunday Times of India ran an interesting piece on which potential U.S. president would be best for India. Exercpts –

While Conventional wisdom in Indian circles is that a McCain win will result in a broad continuation of Bush administration policies, including a possible revival of the US-India nuclear deal in the event of a favourable political alignment and atmosphere after the general elections. Beyond that, US-India ties, at least from Washington's perspective, would continue to be largely security driven, subject to conservative impulses arising from fears of an extremist Islamist agenda to India's west and an expanding Chinese influence everywhere. Obama on the other hand promises to be different, he will bring in fresh informed change to the region.

Investment gets hotter in India

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June 6 – Following China, Central Europe and Western Europe, India has been ranked the fourth most attractive investment destination in a survey of 834 respondents across the world. The survey conducted by Ernst and Young found the South Asian country being preferred in terms of prospects of alternative business locations, according to the Economic Times.

While China received 47 per cent votes, Central Europe and Western Europe got 42 per cent and 33 per cent votes respectively. With 30 per cent votes, India emerged ahead of the US and Russia, which received 21 per cent votes each.

Exports Rise 32 percent to US$14 billion in April

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June 3 – India's export growth accelerated in April as companies shipped more gems, jewelry, oil and other manufactured products to overseas markets, reported Bloomberg.

Shipments jumped 31.5 percent to US$14.4 billion from a year earlier, faster than March's 26.6 percent gain, the government said in a statement in New Delhi today. Imports in April rose 36.6 percent to US$24.3 billion, widening the trade deficit to an all-time high of US$9.87 billion.

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