Sino-India border dispute best left dormant

In Ladakh, along the border between China and India, Chinese troops hold a banner that reads: You have crossed the border — please go back, 5 May 2013. (Photo: AAP).

Authors: Santosh Sharma Poudel and Stefanie Kam, RSIS

The border dispute between China and India has come to the fore once again despite an exponential increase in bilateral trade between the two countries. The border dispute highlights the growing strategic competition and lack of trust between them. But it is better left dormant while both governments focus on more immediate issues. Read more…

Modi should use future budgets to build, build, build

An Indian labourer works at a construction site in Mumbai, India, 18 July 2014. Infrastructure was a key sector addressed in the first budget of Finance Minister Arun Jaitleythe and the Modi government. (Photo: AAP).

Author: Geethanjali Nataraj, Observer Research Foundation

Expectations of the Modi government’s first budget were high. But, in the face of difficult fiscal circumstances and volatility in oil and food prices, the new government and Finance Minister Arun Jaitley had limited options. Seen in this light, this year’s budget is balanced and gives a sense of direction to the economy. In fact, it has laid the base for a whole set of reform measures that will be put into the place around the next budget. 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…

China gingerly taking the capital account liberalisation path

A Chinese clerk counts renminbi banknotes at a bank in Lianyungang city, Jiangsu province, 4 June 2014. Renminbi internationalisation is one non-price measure of Chinese capital account openness. (Photo: AAP)

Author: Guonan Ma, Bruegel

The Chinese government recently pledged to substantially liberalise its still heavily regulated capital account. Since China is the number one trading nation, the second largest economy and a large net creditor, the world has a huge stake in how China manages its tricky transition from a state of binding capital controls to one of closer integration with the global financial market and system. Read more…

Export-oriented FDI can jumpstart Indian manufacturing

Indian laborers nap during a lunch break at a workshop in Mumbai, India, 31 May 2010. (Photo: AAP).

Authors: Abhirup Bhunia, Institute of Economic Growth and Geethanjali Nataraj, Observer Research Foundation

Addressing a joint session of parliament, Indian president Pranab Mukherjee laid out the roadmap of the new Modi government by emphasising three distinct economic policy thrusts: FDI, jobs and manufacturing. Talk of encouraging investment — including by foreign investors — and boosting labour-intensive manufacturing is not new. Scholars such as Arvind Panagariya have long attributed India’s poor performance in manufacturing to the lack of suitable policy designed to utilise the country’s abundant unskilled labour force. Read more…

India looks east to RCEP for economic growth

Billboard of an aircraft on final approach outside the venue of the  India-ASEAN Business Fair and Business Conclave in New Delhi, (Photo: AAP).

Author: Ganeshan Wignaraja, ADBI

Indian Prime Minister Narendra Modi is set to visit Japan after the budget session of parliament in mid-August 2014 for his first state visit outside South Asia. Reinvigorating economic ties with Japan and the rest of East Asia presents a critical opportunity for the Modi Government to foster new business opportunities and address India’s recent growth slowdown. By looking to East Asia, business and government can work together to foster economic gains for India. Read more…

How much rupee is really stashed overseas?

An Indian vendor counts Indian currency notes at a vegetable market in Mumbai, India, 19 May 2014. (Photo: AAP).

Author: Raghbendra Jha, ANU

The decision of the Modi government in India to constitute a special investigative team to probe the illicit accounts of Indians outside India — the first action of the new government — reflects both the sincerity of the government and the political sensitivity of this issue. A recent report has found that India’s losses due to these activities are substantial, with wide-ranging effects on the Indian economy. Read more…

The unintended legacy of Manmohan Singh

Indian Prime Minister Manmohan Singh attends a press conference on the Germany-India summit 11 April 2013. (Photo: AAP).

Author: Suhas Palshikar, University of Pune

Manmohan Singh is the only prime minister of India to have completed two full and consecutive terms since Jawaharlal Nehru, who became the first elected prime minister in 1952 and remained in office until his death in 1964. Singh, however, was not a politician until he was appointed finance minister by Narasimha Rao in 1991 — he had always distinguished himself primarily as an economist. His departure in May 2014 was marked by a stunning defeat of both his party and government. Read more…

Will India’s social development stagnate under Modi?

Muslim students studying at a school in India. New Delhi must ensure economic growth is shared by all social groups in India, including Muslims. (Photo: AAP).

Author: M Niaz Asadullah, University of Malaya

India under Modi faces a difficult development agenda. Despite significant economic growth from 1990 to 2010, progress on key Millennium Development Goals (MDG), particularly those in the areas of education and health, has been lacking. The country lacks social infrastructure such as toilets and schools. In Modi, Indians have chosen a leader who may be able to improve the country’s poor infrastructure, arrest the slide in governance, and give a much needed boost to economic growth. But will everyone share in the economic prosperity Modi is hoping to stoke? A comprehensive vision for India’s development must ensure that the basic needs of all of its population are addressed. Read more…

Time to break down investment barriers between India and Pakistan

Indian Prime Minister Narendra Modi shakes hands with his Pakistan counterpart Nawaz Sharif prior to a meeting in New Delhi, India, 27 May 2014. (Photo: AAP).

Author: Samridhi Bimal, ICRIER

On 26 May, Pakistan’s Prime Minister Nawaz Sharif travelled to New Delhi to attend the swearing-in ceremony of Indian Prime Minister Narendra Modi. This was followed by a period of ‘letter and sari diplomacy’ between the two leaders, in which both expressed their commitment to a peaceful and cooperative working relationship. These moves are unprecedented and point to a significant change in India–Pakistan relations. One of the most promising areas for cooperation is foreign direct investment (FDI). Read more…

China’s growing reach in South Asia

Chinese Foreign Minister Wang Yi and Indian Prime Minister Narendra Modi  shake hands during a meeting in New Delhi on June 9, 2014. (Photo: AAP).

Author: Samam Kelegama, Institute of Policy Studies of Sri Lanka

China’s economic reach in the South Asian region has grown considerably since the late 1990s, while that of India has lagged behind. In 2012, India’s trade with its South Asian neighbours — those in the South Asian Association for Regional Cooperation (SAARC) — amounted to US$17 billion, compared to China’s trade with the same countries which amounted to US$25 billion. China is currently the largest trading partner of India, Pakistan and Bangladesh, and the second largest trading partner of Sri Lanka and Nepal. 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…

Wildcards may trump India–China relations

A masked man is seen during a battle in Kashmir where two militants from the Lashkar-e-Taiba outfit, responsible for the 2008 Mumbai terrorist attacks, were killed, 13 April 2014. Kashmir and India’s strained relationship with Pakistan is one of a number of wildcards in Sino-India relations. (Photo: AAP)

Author: Sandy Gordon, ANU

Commentators have generally assumed that the Obama administration’s wrong-footedness over Modi’s US visa, along with the latter’s pragmatic approach to Chinese investment in Gujarat, has prompted a new tilt by the BJP away from the United States and toward China. Read more…

Modinomics will need a modern GST

Indian Prime Minister Narendra Modi addresses the media during the first session of the newly elected parliament in New Delhi on 4 June 2014. (Photo: AAP).

Author: Sijbren Cnossen, CPB

India is at a crossroads in its fiscal history. It has made do for years with archaic systems of excise duties and sales taxes. Now it has the opportunity to introduce a modern goods and services tax (GST) at the central and state level.

There are more than 150 countries with a GST (or ‘value-added tax’) around the world from which to learn. Some of these countries, such as New Zealand, Australia, Canada, Singapore and South Africa, have efficient GSTs with broad bases and (nearly) uniform rate structures. Read more…

Food for thought on Modi’s inflation problem

An Indian vendor weighs onions at a wholesale vegetable market in Allahabad, Uttar Pradesh state, India, on 22 May 2014. (Photo: AAP)

Author: Mathew Joseph, Rajagiri Centre for Business Studies

The most important task of the newly elected central government in India is to revive an economy that has gone into slow-growth mode for the past two years. Some say the new government should focus on improving the business climate. Yet this betrays a lack of understanding of the true nature of the Indian economy. Read more…