Modi changes the state of play for Indian federalism

Indian Bharatiya Janata Party (BJP) national president Amit Shah (L), Prime Minister Narendra Modi (C) and Finance Minister Arun Jaitely look on during a BJP office bearers' meeting held on the eve of the party's National Executive committee meeting in Bangalore on April 2, 2015. (Photo: AAP).

Author: Pravakar Sahoo, IEG

India’s 14th Finance Commission has made some fairly revolutionary statutory recommendations.

The commission proposed increasing the share of the ‘divisible pool’ — the pot of tax revenue that is allocated between the federal and state governments — that goes to states without any strings attached from the 32 per cent recommended by the last commission to 42 per cent. This would represent a historic increase. Read more…

No easy task for India’s labour reforms

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Author: Pravakar Sahoo, IEG

Investors find labour laws in India restrictive. Although progress has been made since reforms began in 1991, the labour market is still subjected to around 250 labour rules at the central and state level. India, a democracy, has found it harder than China — where labour laws are more flexible and business friendly — to undertake important reforms. Read more…

India and Japan boost cooperation, but no nuclear power deal

Indian Prime Minister Narendra Modi is welcomed by his Japanese counterpart Shinzo Abe upon his arrival at the State Guest House in Kyoto, on 30 August 2014. Modi flew into Japan for a five-day official visit as their governments seek to boost security ties and counter a increasingly assertive China. (Photo: AAP).

Authors: Pravakar Sahoo and Abhirup Bhunia, IEG

Modi’s visit to Japan from 31 August to 3 September was dubbed a success. But what has been achieved? And what do these achievements mean for both countries?

Modi’s visit assumed far greater significance than any previous visits by Indian prime ministers. This is because Modi has a powerful mandate and, of course, because of the reported bonhomie between Modi and Abe. When Modi was Gujarat’s chief minister, Japanese firms participating in the Vibrant Gujarat Summit invested between US$2–3 billion in various manufacturing and infrastructure projects in that state, in response to its investor friendly environment. Modi shares this business friendly attitude with Abe. Read more…

BCIM Corridor a game changer for South Asian trade

A vender weights corn for a customer at a market in Yingjiang, near the Myanmar border, Yunnan Province, China, 26 May 2012. (Photo: AAP).

Authors: Pravakar Sahoo and Abhirup Bhunia, Institute of Economic Growth

The Bangladesh–China–India–Myanmar (BCIM) Economic Corridor will increase socioeconomic development and trade in South Asia. The initiative seeks to improve connectivity and infrastructure, energy resources, agriculture, and trade and investment. It will connect India’s Northeast, Bangladesh, Myanmar, and the Chinese province of Yunnan through a network of roads, railways, waterways, and airways under a proper regulatory framework. The current focus of BCIM talks is on an inter-regional road network. This makes sense, as roads are the cheapest route of trade. Read more…

Will India smash FDI ceiling on defence?

Military personnel successively test an Akash missile in very low altitude in Balasore, Orissa, India, 18 June 2014. India is looking to increase its FDI ceiling for the defence industry. (Photo: AAP)

Author: Pravakar Sahoo, Delhi University

In a bid to invite foreign investment, increase domestic production and modernise India’s defence industry, the new government has initiated cabinet note to raise the industry’s foreign direct investment (FDI) ceiling from 26 to 100 per cent. The FDI ceiling for defence will be increased in graded steps to incentivise technology transfer — it will be raised to 49 per cent in cases where there is no technology transfer, up to 74 per cent in cases where a technology transfer is being proposed, and there will be a no-cap policy for cases which bring in state-of-the-art technology. Read more…

Leaving Pakistan–India trade barriers up ties political progress down

A group of Indian fishermen sits on the ground after their release from a prison as they show their temporary travel documents while crossing into India through India-Pakistan Wagah border near Lahore, Pakistan, 24 August 2013. Pakistan recently announced that it would not consider conferring most favoured nation status on India. (Photo: AAP)

Author: Pravakar Sahoo, Institute of Economic Growth

The recent announcement by Pakistan’s finance minister that most favoured nation (MFN) status to India will not be considered is an additional blow to India-Pakistan relations.

While improved trade relations could significantly enhance political ties between the two countries, and this announcement makes it more likely that bilateral relations will continue to languish at current low levels. Read more…

India’s insurance industry needs foreign investment

An Indian hand rickshaw puller pulls a passenger early morning in Calcutta. Indian insurance companies need foreign investment if they are to appeal to a more diverse range of clients (Photo: AAP).

Author: Pravakar Sahoo, Delhi University

India’s current account deficit is expected to be 5 per cent of GDP this fiscal year. With the deficit still growing and FDI inflows declining (with the exception of the numbers for January 2013), the government needs to facilitate investment in the economy.

Read more…