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…

The Indian economy: a rough 2012 but tougher 2013

Mahatma Gandhi's statue overlooks Indian Parliament House as lawmakers debate on FDI in New Delhi, India, Wednesday, 5 December 2012 (Photo:AAP).

Author: Pravakar Sahoo, IEG

In economic terms, 2012 has been a remarkable year for the Indian economy.

The year started in the shadow of the policy reversal on FDI in multi-brand ownership, followed by a working budget without major policy reforms and concrete steps to control fiscal deficit, subsidies and tapering growth. Read more…

India’s economic reforms: light at the end of the tunnel

People walk through a Bharti-Walmart store on the outskirts of Chandigarh, India, on 16 September 2012. India agreed to open its huge market to foreign retailers such as Wal-Mart as part of a flurry of economic reforms aimed at sparking new growth. (Photo: AAP)

Author: Pravakar Sahoo, IEG

The Indian government announced, in response to claims that it is responsible for India’s slowing economy, new reform measures on 14 September.

The reforms include a revision of fuel prices, allowing 51 per cent FDI in multi-brand retailing, allowing international airlines to invest in domestic airlines, increasing FDI equity from 49 per cent to 74 per cent in broadcasting services and disinvestment of four public sector undertakings. Read more…

India and APEC: time to move from observer to member

APEC leaders wave as they leave after their group photo on the final day of the APEC leaders summit in Vladivostok, Russia. (Photo: AAP)

Author: Pravakar Sahoo, IEG

The APEC leaders’ summit just ended in Vladivostok, and focused on free trade, food security, and sustainable and quality growth.

These are crucial issues that would help global economic recovery and set out a roadmap for the medium- and long-term growth of Pacific Rim countries. Read more…

The free-falling rupee: a blow to the Indian economy

An Indian counts currency notes near the Reserve Bank of India, 22 Nov 2011. The Indian rupee plunged to an all time low against the dollar Tuesday despite central bank efforts to staunch the decline. (Photo: AAP)

Author: Pravakar Sahoo, IEG

A falling currency may be normal and acceptable when the economy is slowing, but the rupee’s apparent free fall over the last few months — more than 15 per cent since August — is a serious blow to the Indian economy.

Though a depreciating rupee is not surprising given India’s international investment position, with its higher rate of liabilities than assets, such a sudden fall is worrisome. Read more…

India’s war against inflation victimises growth

A daily wage porter loads goods onto his bicycle for delivery at a spice market in Mumbai. (Photo: AAP)

Author: Pravakar Sahoo, IEG

In its latest monetary policy review, the Reserve Bank of India (RBI), continuing with its tight monetary policy, revised policy rates upwards for the eleventh consecutive time.

Both the repo rate and the reverse repo rates went up by 50 basis points to 8 per cent (from 7.5 per cent) and 7 per cent (from 6.5 per cent) respectively. Read more…

India’s 2011-12 budget fails to see the big picture

A placard is displayed on a tree during a protest by garment retailers against the proposed mandatory 10 percent excise duty on branded garments in the recent federal budget in New Delhi, India, Tuesday, March 15, 2011. (Photo: AAP)

Author: Pravakar Sahoo, Institute of Economic Growth

India’s 2011–12 budget is too conservative. It simply goes with the flow, faithfully assuming that a 9 per cent GDP growth will continue next year.

But there is a good chance growth will slow down; a sluggish business environment and a lack of confidence from both domestic and foreign investors portend this. Read more…

India’s twin deficits jeopardise national growth

An Indian police personnel stands guard outside the headquarters of The Reserve Bank of India in Mumbai on July 27, 2010. (Photo: AAP)

Author: Pravakar Sahoo, IEG

The forthcoming budget for the Indian finance minister is going to be tough to balance. He is juggling a number of issues: inflation is the most important, but containing the fiscal deficit, current account deficit, slowdown of manufacturing output, declining FDI inflows and sustaining growth are also major challenges. Absence of a serious effort at reducing the fiscal deficit and current account deficit implies a growing risk of adverse change in market sentiment, which would lead to an increase in inflation, high interest rates and low private and public investment, thereby hurting growth.

Since 2007–08, the fiscal deficit has increased to around 6.5 to 7 per cent of India’s GDP, subsequently leading to a combined federal and state deficit of over 10 per cent of GDP in 2009–10. The actual numbers are higher, by at least 1 per cent, as some items were kept off the balance sheet. Read more…

India-Japan CEPA: A strategic move

Mumbai Highway to Pune. (Photo: Flickr user 'Viraj Paripatyadar')

Author: Pravakar Sahoo, IEG, India

India’s Prime minister, Dr. Manmohan Singh and Japanese Premier, Naoto Kan signed India-Japan Economic Partnership Agreement covering trade, investment and intellectual property rights on 25th October 2010. The EPA will eliminate tariffs on goods that account for 94 per cent of their two-way trade over ten years.

This is a strategic move given the over dependence of Japan on China for trade in goods and the recent uneasiness in their relation due to arrest of Chinese sailors by Japan. In addition to the diplomatic row, there are reports of protest in China not to use Japanese products and rising cost of production in China. This makes a perfect case for Japanese exporters and investors to explore the Indian market as export destination and a production hub respectively. Read more…

Increasing FDI in India: Does the Budget go far enough?

The Jawaharlal Nehru Port Trust in Navi, Mumbai, India, which handles 65 per cent of India's container traffic. (Photo: Wikimedia Commons)

Author: Pravakar Sahoo, IEG

India and China not only survived the financial crisis — over the course of the financial crisis their economies grew. This is the perfect time for India to attract much needed non-debt creating capital flows through foreign direct investment (FDI). The Indian Budget for 2010-11 has rightly proposed to simplify the FDI regime, maintaining FDI flows particularly by recognising ownership and control issues and liberalising the pricing and payment system for technology transfers, trademarks, and brand name and royalty payments. More importantly, the budget shows an intention to introduce user-friendly regulations and guidelines for FDI.

But while India is macro-economically well placed to attract FDI inflows, merely showing an intention to introduce user-friendly regulations without addressing the core regulatory, institutional and policy issues affecting FDI may not be enough to attract the huge amounts of FDI the country needs. Read more…