Indian Holocaust My Father`s Life and Time - SEVEN HUNDRED
Palash Biswas
http://indianholocaustmyfatherslifeandtime.blogspot.com/
http://basantipurtimes.blogspot.com/
Gold at record, stocks off on growth, credit fear, Reuter reports from New York. you may remember that I have been Insisting on the Imminent Break Down of Dollar Hegemony since first Gulf War. But Most of my friends did make joke of my Novel AMERICA SE SAVDHAN! Indian Neo Liberal Era since 1991 began just after the First Gulf War and since then Zionist Brahaminical Hegemony LINKED Destiny of India with United States of America. The IMMINENT Great Depression in America would make Indian Economy with DEPLETED Production System SURVIVING on EXPLOITATION and EXCLUSION of Majority Bahujan Indigenous Aborigin Rural Masses, is bound to get BANRUPT!The Parliamentary EXERCISE of Reforms, thus , is SUICIDAL! Growth based on SERVICE sector and Livelihod dependent on Commision, Call Centres, Bribe, Cut Money and all round Corruption would DESTROY the COLONY!
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How America Benefits from EconomicEngagement with India
India, as well as an assessment of their impacts on theAmerican economy. .... percent of all U.S. jobs linked to exports to India in 2009, indicating that ...
Rajya Sabha adjourned till 12 noon following uproar over price rise
New Delhi: Both houses of parliament were adjourned till 12 noon Tuesday, the second day of the monsoon session, following protests by opposition MPs demanding that question hour be suspended so that debates on price rise and corruption could be held.02/08/2011
US House passes historic debt deal
Washington: With the US House passing a compromise debt-ceiling deal crafted by President Barack Obama and congressional leaders, the United States made it all but certain to avoid a catastrophic default.
Overcoming opposition from liberal Democrats and tea party conservatives for ideologically different reasons, the hastily written 74-page bill was cleared by the House on a 269-161 vote late Monday, with 95 Democrats joining 174 Republicans in support.
The Senate is poised to act at noon Tuesday, just hours before the government runs out of cash to pay its bills. However, given the margin in the House and unified support of Senate leaders of both parties, the measure is expected to sail through the upper chamber.
The agreement reached Sunday by Obama and congressional leaders from both parties calls for up to $2.4 trillion in savings over the next decade, raises the debt ceiling through the end of 2012 and establishes a special congressional committee to recommend long-term fiscal reforms.
The legislation needs to reach Obama's desk by Tuesday at the latest. If the current $14.3 trillion debt limit is not increased by that point, Americans could face rapidly rising interest rates, a falling dollar and shakier financial markets.
02/08/2011
Stop slaughter: US to Assad
Washington: The United States is ratcheting up its condemnation of Syrian President Bashar Assad's violent crackdown on pro-reform protesters, calling on the regime to "stop the slaughter" of its own citizens.
President Barack Obama on Monday met with US Ambassador to Syria Robert Ford, who is in Washington for consultations.
Obama said the latest attacks on demonstrators, launched as the Muslim holy month of Ramadan began, were "outrageous." Secretary of State Hillary Rodham called on Assad "to stop the slaughter now" and urged UN Security Council action.
Earlier, Syrian forces shelled the city of Hama for a second day and fired at worshippers heading to Ramadan prayers. Violence on Sunday left 74 people dead throughout the country, 55 of them from Hama and nearby, according to rights groups.
Source: AP
Meanwhile,the Senate on Tuesday passed legislation that heads off an unprecedented U.S. financial default and begins the process of curbing the country's spiraling debt. With less than 12 hours to go before the deadline, President Barack Obama promised to sign the measure immediately.
After weeks of some of the nastiest political battles in recent U.S. history, both the Senate and House of Representatives, which voted Monday night, easily adopted the plan that raises the current $14.3 trillion cap on U.S. borrowing, which expires at midnight. In tandem with increasing the borrowing limit, legislators approved more than $2 trillion of budget cuts over the upcoming decade.
The administration had said that without the new borrowing authority, the government could not pay all its bills. Administration officials say a default would ensue that would severely damage the global economy.
Because the deal prescribes significant cuts to U.S. federal spending, it was widely expected to buoy global investors and diminish chances of Treasury bonds undergoing a credit downgrade. That would increase the cost of borrowing both for the government and consumers.
But as the measure cleared its last legislative hurdle, a 74-26 vote of approval in the Senate, and headed to Obama for certain signature into law, world markets were down, the U.S. Dow Jones Industrials off for an eighth straight day.
Investors were unnerved by spreading debt troubles in Europe and a decline in U.S. consumer spending to the lowest level in two years. The bad news signaled a further slowing of the fragile U.S. economic recovery and snuffed out optimism over the hard-fought vote in Congress.
The compromise deal deeply angered both conservative Republicans and liberal Democrats. Many Republicans contended the bill still would cut too little from federal spending; many Democrats said much too much. Still, Republican lawmakers supported the compromise, 174-66, while Democrats split, 95-95
The measure was crafted through the crucible of one of the United States' nastiest political fights in recent history. It carefully threaded the needle between the philosophically opposite ends of the political spectrum.
Polls showed that Congress and Obama have taken a sharp hit in U.S. public opinion because of the prolonged battle over lifting the debt ceiling, something that past Congresses have done as a matter of course.
Without legislation in place by the end of Tuesday, the Treasury would run out of cash needed to pay investors in Treasury bonds, recipients of Social Security pension checks, anyone relying on military veterans' benefits and businesses that do work for the government.
Treasury Secretary Timothy Geithner told ABC News Monday that he doesn't know if the bruising debt-limit battle will harm America's Triple-A credit rating, but says he fears ``world confidence was damaged by this spectacle.''
Geithner told ABC that credit rating is ``not my judgment to make.'' But he also says ``this is, in some ways, a judgment on the capacity of Congress to act.''
Standing Committee on finance supports FM on sector reforms
Published on Tue, Aug 02, 2011 at 16:53 | Source : Moneycontrol.comUpdated at Tue, Aug 02, 2011 at 19:28
In a meeting yesterday Finance Minister Pranab Mukherjee assured India Inc that five key financial bills would be passed during the monsoon session.
Now CNBC-TV18 learns that the FM has found support from the Standing Committee on Finance too on three of those five bills.
Sources say that the committee, headed by BJP leader Yashwant Sinha is ready to finalise and send its report on PFRDA Bill, Factoring Bill and the Banking Amendment Bill to the government within 15-20 days.
However, the committee is not in any hurry to submit its report on Insurance Bill, one of the four crucial bills on government's reform agenda. The bill, sources say, could take a year or two before it is cleared.
It's not just the Insurance Bill, the Standing Committee may also not be looking at clearing the Goods and Services Tax (GST), Direct Tax Code (DTC) and UIDAI Bill any time soon as well.
http://www.moneycontrol.com/news/business/standing-committeefinance-supports-fmsector-reforms_572072.html
GoM may finalise urea price decontrol policy on Aug 5
A group of ministers (GoM) headed by Finance Minister Pranab Mukherjee would meet on August 5 to finalise the policy on partially decontrolling urea prices.Urea is the only fertiliser that remains under full price control. The government, last fiscal, partially freed prices of phosphatic and potash fertilisers.
"The meeting of the GoM is scheduled on August 5 at 1700 hrs. The GoM may finalise the much-awaited policy on urea price decontrol," a senior Fertiliser Ministry official said.
The GoM will discuss the draft policy, prepared by the Committee of Secretaries (CoS) headed by Planning Commission member Saumitra Chaudhuri, that has suggested partially freeing the retail price of urea besides hiking the rate by 10 per cent after a year of implementing the new policy.
It has also recommended notional price pooling of natural gas for the fertiliser sector and an additional subsidy for under-performing units to improve the production.
Under notional gas price pooling, the government will calculate the subsidy on urea on the basis of weighted average pooled gas price.
The CoS has noted that the gas price pooling model and freeing of urea retail prices would enhance domestic output, as the cost of production of gas-based units is much lower than the imported urea price.
As much as 80% of India's production of urea is gas-based and the urea manufacturers now buy gas from suppliers through separate Production Sharing Contracts.
The draft policy has also suggested that the Government should purchase natural gas directly through the Fertiliser Industry Coordination Committee and supply to companies at a weighted average price.
Notional gas price pooling has been recommended for 17 fertiliser units. However, four units -- RCF Trombay, GSFC and two units of BVFCL -- will be kept out of the ambit of this gas price pooling arrangement.
Demand for urea is expected to rise to 30 million tonnes in the next five years. The domestic production remained stagnant at 21.2 million tonnes in 2009-10.
After the GoM approval, the draft proposal would be sent to the Cabinet.
02/08/2011
Govt agrees to vote over price rise in Parliament
New Delhi: Faced with a delicate situation, the Government arrived at a compromise with the Opposition and decided to take up a discussion on price rise in the Lok Sabha tomorrow under a rule which entails voting.
Parliamentary Affairs Minister Pawan Kumar Bansal told reporters that the resolution on the price rise will be framed in such a way that it would be acceptable to all.
The resolution is likely to express concern over price rise and spell out immediate and effective steps to check inflation.
Finance Minister Pranab Mukherjee will reply to the day-long debate which will start at 1200 hours, Bansal said.
As the resolution will be a consensual one, it saves the government from any embarrassment even as it will be put to vote. The ruling party too has given a notice for it.
Former Finance Minister Yashwant Sinha of BJP is likely to initiate the discussion. NDA convenor Sharad Yadav as also K S Rao from Congress have also given notice.
The decision was taken in a meeting of the Business Advisory Committee after which Bansal and his two junior ministers Rajiv Shukla and Harish Rawat had tea with Leader of the Opposition Sushma Swaraj in her Parliament House office.
The discussion is expected to pave the way for the smooth running of Parliament after the disruption of both Houses on the first two days of the Monsoon session.
Ahead of the session, Congress leaders had admitted in private that it would be difficult for the ruling alliance if the Opposition closed ranks on the issue of corruption and price rise and pressed for discussion under rules which entail voting. The Congress-led UPA has no majority in the Rajya Sabha and its strength is not comfortable in the Lok Sabha despite the ruling coalition enjoying a majority.
Rajya Sabha too will discuss the price rise issue under rule 167 next week, which enables voting.
Tomorrow the Upper House will take up a discussion on internal security and Mumbai blast, which will be taken up in Lok Sabha next week through a short duration discussion.
Asked whether the government walked the extra mile to resolve the deadlock, Bansal said it was due to everyone's positive contribution and genuine interest of all sections of Parliament for a structured debate.
Sources in the government said it will try to bring about a similar consensus for the methodology of discussion even on the issue of corruption.
In today's meeting, it was decided to hold discussion on one issue a week and to take one or two calling attention motions during that period.
Meanwhile Congress spokesperson Shakeel Ahmed rued that the Houses were disrupted even today and said the Opposition's attitude is harmful for democracy.
At an AICC briefing, Ahmed said the BJP was not allowing discussions to happen as it fears that the "skeletons in its cupboard" will be exposed.
Without naming the Left parties, he attacked them for allegedly associating with BJP in the House to corner the government, despite saying outside that they oppose the main opposition party.
Source: PTI
| Prosperity of US linked to that of Asia: Obama |
| Press Trust of India / Washington November 13, 2010, 11:26 IST |
Taking note of the "economic miracle" in Asia, US President Barack Obama today said that prosperity of America is linked inextricably to that of its trading partners in the region, including India.
Winding up his four-nation Asia tour that took him to India, Indonesia, South Korea and Japan, Obama noted that "Yokohama (Japan) is my last stop on a journey that's taken me from Mumbai to New Delhi to Jakarta and to Seoul.
"And in each place, we have deepened friendships, we have strengthened partnerships, and we have reaffirmed a fundamental truth of our time: In the 21st century, the security and prosperity of the American people is linked inextricably to the security and prosperity of Asia," he said in his address to CEO Business Summit in Yokohama.
"That's why this was not my first trip here, and it will not be my last. America is leading again in Asia," Obama said.
He said the story of Asia over the last few decades is the story of change that is so rapid and transformative that it may be without precedent in human history.
"The economic miracle that began here in Japan after the Second World War has now swept across the Pacific and throughout the wider region," he said as he recollected his visits to the cities in these four countries beginning with Mumbai a week ago.
"When I was in Mumbai, I met with young entrepreneurs who were putting American technology into Indian electric cars and selling clean water to Indians from filtration equipment purchased from the United States. These are breakthroughs that will continue to fuel growth in a nation that has already lifted millions from poverty," Obama said.
Within five years, Asia's economy is expected to be about 50 per cent larger than it is today. And for at least the next four years, Asia Pacific economies will grow faster than the world average, he said, adding that undoubtedly, this rapid growth will lead to a healthy competition for the jobs and industries of the future.
"As the largest economy in the world, an engine for global growth, that's particularly important for the United States. As Prime Minister (Manmohan) Singh of India said when I was visiting there, 'a strong, robust, fast-growing United States is in the interest of the world' and 'would help the cause of global prosperity'," Obama said.
The US President said that one of the important lessons the economic crisis taught them is the limits of depending primarily on American consumers and Asian exports to drive economic growth.
"Going forward, countries with large surpluses must shift away from an unhealthy dependence on exports and take steps to boost domestic demand. As I said, going forward, no nation should assume that their path to prosperity is simply paved with exports to America," he said.
Noting that he has set a goal of doubling US exports over the next five years, Obama said: "Over the course of this trip, we've made good progress towards our export goals. While we were in India, I was pleased to announce a set of trade deals that total nearly $10 billion in US exports."
From medical equipment and helicopters to turbines and mining equipment, these deals support more than 50,000 jobs in the US.
US Stocks declined on Tuesday, putting the S&P 500 on track for its longest down streak since October 2008, on worries over the United States' debt and economic outlook. Investors feared a possible downgrade of US credit despite passage by the US House of Representatives Monday of a last-minute compromise to raise the US debt ceiling and avert a US debt default.
Gold prices hit a new record high and riskier assets like stocks fell further on Tuesday as investors focused on slowing global economic growth and the euro zone's spreading credit problems.
The deliberations have taken a toll on stocks. The S&P 500 is down for its seventh straight session. Last week, the market suffered its worst week in a year.
Even with the deal, analysts say it is possible the United States top credit rating could still be cut.
In the latest economic data, US consumer spending fell unexpectedly in June to post the first decline in nearly two years as incomes barely rose, the government reported.
The United States' debt woes still threaten the global economy despite a last-minute deal struck by the White House and political party leaders, China's main official newspaper said on Tuesday, nonetheless adding there was no short-term escape from the dominance of the dollar.
The comments were published by the People's Daily, the chief paper of China's ruling Communist Party, in anticipation of a final debt deal reached in Congress between Republicans and Democrats.
"Although the United States has basically avoided default, its sovereign debt problems remain unresolved. They have merely been pushed off, and there is a tendency for them to grow," a brief commentary in the paper said of the US debt deal.
"This has cast a cloud over US economic recovery, and also increased the risks and perils facing the world economy."
Such comments in an official Chinese newspaper do not necessarily reflect the conclusive views of top leaders. But these latest wary comments echo other recent critical remarks in official media from Beijing, which is worried about its big holdings of dollar assets.
The House of Representatives on Monday approved a last-gasp deal to raise the US borrowing limit in a decisive step toward averting a catastrophic debt default by the world's largest economy. The Senate will vote on the deal on Tuesday. and it will then go to the desk of President Barack Obama.
As the largest creditor to the United States, China has repeatedly urged Washington to protect its dollar investments, estimated to account for about 70 percent of its $3.2 trillion in foreign exchange reserves, the world's largest.
But Chinese officials have avoided publicly commenting on the debt showdown in Washington.
The People's Daily said the credibility of US treasury debt had been damaged since the outbreak of the sub-prime mortgage crisis, but other economies still have no way of shaking off dependence on the dollar.
"Although confidence in US debt has suffered a short-term fall, and credit agencies could downgrade its rating, its basic credibility has not altered," said the paper.
It added that "the dollar remains a hard currency that all countries have no choice but to accept."
The official China Daily said Beijing is likely to view the plan as a positive step in restoring investor confidence in the dollar and the US bond market.
"The agreement is likely to avert default by Washington and it certainly is a relief for China," Chen Daofu, a researcher at the State Council's Development Research Centre, was quoted as saying by the newspaper.
WARY OF FUTURE
Several Chinese economists fretted that the world's largest economy is still saddled by a mountain of debt.
Zhu Baoliang, chief economist at a government think - tank the State Information Centre, said a $1 trillion reduction in the U. S. fiscal deficit over the next 10 years was not enough to avert another debt crisis in future.
"As alarm over a debt default eases, China will not suffer any immediate impact," he was quoted as saying in the China Daily. "But any impact would eventually be seen in the long term . "
Although the deal prevented a sudden shock to the US economy, Li Xiangyang, a researcher at the Chinese Academy of Social Sciences, said US politicians in the future could ignore creditors' interests while pursuing domestic politics.
To escape the dollar trap, China must stop investing its foreign exchange reserves in dollar assets in future, he said .
"The raising of the US debt ceiling is a double-edged sword for China," Li wrote in an article published in the People's Daily's overseas edition .
Monday, June 13, 2011
Another Move towards Market-Linked Interest Rates...
A government panel, headed by RBI deputy governor Shyamala Gopinath, was set up to review the small investment schemes of post offices and banks. The panel has recommended — a 0.5% raise in the interest rate for post office savings account to 4% in line with the rate on savings bank deposits; raising the annual contribution limit in Public Provident Fund (PPF) to Rs.1,00,000, from the current Rs.70,000; discontinuation of the Kisan Vikas Patra; reduction in the maturity period of National Savings Certificates (NSCs) to five years from six, and introduction of a 10-year NSC scheme.
The panel has also advocated benchmarking of interest rates on other small savings schemes to rates of government securities of similar maturity with positive spread of 25 basis points for most schemes, while it proposes a 100 basis points spread for senior citizens' schemes, keeping in view its social objective, and a 50 basis points spread for the proposed 10-year NSC, keeping in view of its higher illiquidity.
The administered rates may be notified by the government at the beginning of every financial year based on the average yields on government securities in the previous calendar year. The Committee also agrees with an earlier recommendation made by the Rakesh Mohan Committee on placing a cap of 100 basis points so that the administered rates are neither raised nor reduced by more than 100 basis points from one year to the next, even if the average benchmark interest rates rise or fall by more than 100 basis points. This would keep in check undue volatility in the administered rates, which if approved will be effective July 1, 2011 .
The proposed benchmarks and the administered (/current) rates for various instruments are given in the following tables (Table 1 and Table 2).
The share of small savings as a percentage of net financial savings of households increased sharply from 7.9 per cent in 1996-97 to 22.3 per cent in 2004-05. Thereafter, the share declined and even turned negative during 2007-08 and 2008-09 as the alternative savings instruments became relatively more attractive. The outstanding amount of collections under small savings stand at Rs. 7,93,447 Crore in 2010-11. The measures to reform the small savings plans offered by the government, if implemented, would help to ensure transparency, move towards market-linked rates and reduce the government's fiscal burden.
http://ecofin-surge.blogspot.com/2011/06/another-move-towards-market-linked.html
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Among the day's weakest sectors was consumer discretionaries, with the S&P sector index down 1.6 per cent.
A weak reading on manufacturing on Monday underscored growing concerns about the economy's strength.
"I think people are worried about a double-dip recession and the softening economic statistics," said Jeffrey Saut, Raymond James Financial chief investment strategist, in St. Petersburg, Florida. But he said, "it's not the snake you see that bites you, and these figures are so well advertised."
Saut sees the market bottoming in the weeks ahead, especially if the S&P 500 trades between 1,220 and 1,250.
The Dow Jones industrial average was down 98.61 points, or 0.81 per cent, at 12,033.88. The Standard & Poor's 500 Index was down 13.48 points, or 1.05 per cent, at 1,273.46. The Nasdaq Composite Index was down 22.50 points, or 0.82 per cent, at 2,722.11.
European debt problems returned to the forefront after French bank BNP Paribas SA took a $768.3 million write-down linked to Greece's debt woes.
Markets moved on from the approval of a rise in the US statutory borrowing limit by the House of Representatives on Monday night. The US Senate is expected to pass the measure later on Tuesday, but fear that the United States could still lose its triple-A credit rating persisted.
In economic data on Tuesday, US consumer spending dropped in June for the first time in nearly two years, adding to worries the world's largest economy would remain stagnant in the third quarter.
"With the debt ceiling almost in the rear view mirror, the market has turned its attention to peripheral spreads in Europe which are widening despite efforts by the (European Union) to contain the crisis," said Steve Van Order, fixed income strategist with Bethesda, Maryland-based Calvert Investment Management Inc, which has more than $14.5 billion in assets under management.
The preference for safe haven assets helped lift gold to its ninth record high this year. Spot gold was up at $1,635.66 an ounce by 10 am New York time (1400 GMT), having touched an all-time high of $1,640.39 earlier in the day.
US Treasuries rose for a fourth-straight day with the benchmark 10-year up 8/32 to yield 2.722 per cent.
Stocks opened lower on Wall Street as investors feared the compromise reached to raise the US debt ceiling does not do enough to satisfy credit rating agencies which have threatened a downgrade that could increase Treasury yields and raise borrowing costs.
"There's been no clear direction given about how these issues will ultimately be resolved, which is another reason the market is concerned," said Kenneth Buckfire, chief executive officer at Miller Buckfire in New York. "The growth prospects of the US are limited."
The Dow Jones industrial average dropped 40.38 points, or 0.33 per cent, to 12,092.11. The Standard & Poor's 500 Index fell 6.13 points, or 0.48 per cent, to 1,280.81. The Nasdaq Composite Index lost 3.52 points, or 0.13 per cent, to 2,741.09.
MSCI's world equity index fell 0.7 per cent on the day, to its weakest since June 28. The benchmark index is almost flat since January.
European stocks fell 1.1 per cent and Ialian shares fell 1.4 per cent.
"The fear of the market is that the world is going into recession again... and in the euro zone the peripheral markets are the ones that will suffer most," said Alessandro Giansanti, strategist at ING in Amsterdam.
Italian bond yields hit their highest level in the euro's 11-year lifetime, a sign that Rome is overtaking Madrid as the main focus of investors' concern about debt sustainability.
The Italian 10-year BTP yield was up 6.09 per cent and the 10-year Spanish government bond yield rose to 6.28 per cent after hitting 6.47 per cent, its highest since 1997.
The two countries have been under increased pressure in recent weeks as markets feel the size of the euro zone's bailout fund is too small to protect larger fringe economies if contagion from the Greek crisis cannot be stopped.
The Swiss franc rose to a record high against the euro and held close to a record versus the dollar on concerns about euro zone sovereign debt problems.
The euro pared losses against the greenback after the weak US spending data, and later turned positive.
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Government seeks Parliamentary nod for Rs 34,724 crore extra spend in 2011-12
Government on Tuesday sought Parliamentary approval for additional gross expenditure of Rs 34,724 crore for 2011-12 with an assurance that the net cash outgo of Rs 9,016 crore will not push fiscal deficit beyond projections in the Budget.
This is the first batch of supplementary demand for grants in the current year.
The Supplementary Demands were presented in the Lok Sabha by Finance Minister Pranab Mukherjee with the promise that while extra expenditure of over Rs 34,724.5 crore was being earmarked, "there would be overall savings in other grants."
As the government aims to stick to the fiscal defict target of 4.6 per cent of GDP in 2011-12, it is seeking additional resources in a conservative way.
The additional demands for grants include a provision of Rs 2,300 crore for Rural Development Ministry for meeting expenditure for conducting surveys on BPL, a crucial requirement for implementing the proposed National Food Security Act.
The additional provision of about Rs 10,612 crore is being sought for providing loans to International Monetary Fund.
Government is also seeking Parliamentary nod for Rs 1,585.7 crore for additional equity investment in the bonus shares issued by ONGC.
Rs 410.73 crore have been asked for providing payment of ex-gratia to victims of Bhopal gas tragedy.
As much as Rs 434.6 crore are being provided in the supplementary demands to Air India towards payment of maintenance of aircraft used for VVIP travel.
Besides, the government plans to provide Rs 1,000 crore more on the national clean energy fund.
Extra spending won't impact fiscal gap target: MukherjeeIndia on Tuesday sought parliamentary approval for a net 90.16 billion rupees ($2.04 billion) extra spend in the current fiscal year ending March and said the additional expenses will not impact its fiscal deficit and borrowing targets.
The government, which plans to spend an additional gross 347.24 billion rupees, will fund the bulk of the extra spending from its internal savings and the remainder through its cash balance, documents presented by the finance minister in parliament showed.
"It (additional spending) will not affect (fiscal deficit) that way if revenue buoyancy is there," Pranab Mukherjee told reporters after seeking parliamentary approval for the higher spending.
"I will keep the borrowing within my limit."
In February, the government had budgeted a total spending of$284 billion for 2011/12, projecting a fiscal deficit target of 4.6 percent of the gross domestic product (GDP).
New Delhi plans to borrow a gross 4.17 trillion rupees ($94.7 billion) in 2011/12, with 60 percent of the target to be completed by the end of September.
With high global commodity prices, particularly oil prices threatening to inflate India's subsidy bill, debt market participants are bracing themselves for a higher fiscal deficit and higher borrowing this year.
Most market participants believe the government will increase its market borrowing by 300 billion to 700 billion rupees, depending on its fiscal performance.
The government has budgeted to spend about $30 billion on major subsidies in 2011/12.
The fuel subsidy bill was budgeted at around $5 billion, assuming global oil prices at below $100 a barrel. Brent crude currently trade above $116 a barrel.
Mukherjee on Tuesday did not provide any additional spending for oil subsidies nor did he specify when he intends to provide for higher spending on oil subsidies.
However, he said the government will again seek parliament's approval for additional spending in November-December.
In June, after dragging its feet for long, the government had raised state-controlled prices of diesel, kerosene and cooking gas to rein in its mounting subsidy bill.
The increase was the first in a year and would pare revenue losses for state-run oil companies by 50 billion rupees to about 1.2 trillion rupees in this financial year.
State-run refiners such as Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum that buy oil at global prices are partially reimbursed for selling fuel at low prices through a complex cross subsidy scheme.
1 AUG, 2011, 11.26PM IST, ET BUREAU
Finance Minister asks India Inc to present 5-point action plan for each sector
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NEW DELHI: India Inc on Monday made a strong pitch for bolder reforms, fresh policy initiatives and speedy clearances to boost the investment sentiment to place the country back on a high-growth trajectory.
"You should provide us a long, solid runway so that we can take off," Bharti group chairman Sunil Bharti Mittal is understood to have said at an industry-government interactive session called by Finance Minister Pranab Mukherjee on Monday.
The UPA government's key crisis manager was meeting industry leaders to assure them that the government was committed to reforms, amid a general perception of a policy paralysis.
"There has been some cynicism expressed of late regarding lack of adequate movement on policies and institutional processes....I find this view to be based more on perception than facts," Mukherjee said.
On Monday, the Prime Minister's Economic Advisory Council lowered GDP growth forecast to 8.2 % from its earlier estimate of 9%, and called for urgent policy action.
In the two-and-a-half hour meeting, Mukherjee asserted that fundamentals of the economy remained strong and growth drivers were intact.
Over the last two weeks, the finance minister has also met the media to put across the government's view.
Mukherjee asked the industry leaders for five suggestions from each of their sectors.
Commerce Minister Anand Sharma said a task force was being set up by the department of industry policy and promotion to take up policy issues raised by India Inc.
The industrialists attending the meeting included Tata group chairman Ratan Tata, ADAG chairman Anil Ambani, Essar chairman Shashi Ruia, Mahindra & Mahindra managing director and vice-chairman Anand Mahindra, Infosys founder N R Narayana Murthy, ITC chairman Y C Deveshwar and RPG Group chairman emeritus R P Goenka.
Reliance Industries chief Mukesh Ambani and Aditya Birla group chairman K M Birla did not attend the meeting.
Mittal said industry had some concerns and discussions were centered around elements that could result in slow economic activity. "The government and industry are together working on forming a coalition to address it," he said.
ADAG chairman Anil Ambani said, "The interaction today (Monday) will certainly go a long way in building the momentum needed to catalyse economic growth. Mr Mukherjee and Mr Sharma were receptive to a large number of suggestions made by industry to accelerate growth in key infrastructure sectors."
M&M's Anand Mahindra said, "If there was a trust deficit, it has vanished and there's a sense of renewal and motivation. There was a time-bound assurance of action from the government and no doubt we'll have to work together."
Mahindra also raised the issue of high interest rates that had begun to pinch industry, particularly the rate sensitive sectors.
http://economictimes.indiatimes.com/news/economy/policy/finance-minister-asks-india-inc-to-present-5-point-action-plan-for-each-sector/articleshow/9449242.cms02/08/2011
Lokpal bill to be tabled in Parliament on Thursday
New Delhi: The much talked about Lokpal Bill will be introduced in the Lok Sabha on Thursday, Parliamentary Affairs Minister Pawan Kumar Bansal said today.
He said Minister of State for Personnel V Narayanasamy has already given a notice to Speaker Meira Kumar to waive the two-day period so that the Bill could be introduced on August 4.
Bansal said since all parties favour introduction of the bill at the earliest, Narayanasamy wrote to the Speaker.
The Speaker can waive the two-day period required to distribute copies of any new Bill to political parties so that they can come prepared during the introduction.
The Lokpal Bill seeks to keep the office of the Prime Minister outside the purview of the ombudsman during his term in office and also exclude higher judiciary and conduct of MPs inside Parliament.
The Lokpal, consisting of the chairperson and eight members, half of them judicial, will have its own prosecution and investigation wing with officers and staff necessary to carry out its functions.
Persons with impeccable integrity, with 25 years of experience in administration who have dealt with corruption and vigilance, would also form part of the Lokpal.
The institution would inquire into allegations of corruption in respect of the Prime Minister only after he demits office.
Besides, it would take up corruption matters allegedly involving ministers, MPs, Group 'A' officers and others equivalent to this grade in any body, board, authority, corporation, trust, society or autonomous body set up by an Act of Parliament.
The Lokpal would not require sanction or approval under Section 197 of the Code of Criminal Procedure, 1973, or Section 19 of the Prevention of Corruption Act, 1988, in cases where prosecution is proposed.
The Lokpal will also have powers to attach the property of corrupt public servants acquired through illegal means.
The government hopes that if the Standing Committee comes out with its recommendations on the Bill by August-end, then it could go ahead with its passage.
Source: PTI
1 AUG, 2011, 08.13AM IST, ET BUREAU
Rupee most undervalued currency in the world: Big Mac index
Why are Indian exports surging (up 46% during Apr-Jun 2011) when the rupee is at a 3-year high against the US dollar? It's because the most quoted exchange rate of the rupee ( versus $) is also the most misleading right now. In real terms, the rupee is actually one of the most undervalued currency in the world.
The famous Big Mac index proves this conclusively. Developed by The Economist 25 years ago, the Big Mac index uses the price of McDonald's burger in different countries to construct an informal (but surprisingly accurate) indicator of real exchange rate.
 * |
India, which makes a debut in the index this week, has one of the most undervalued currencies vis-a-vis the dollar-even more than the Chinese yuan. As The Economist says, it's fast food for thought.
http://economictimes.indiatimes.com/news/economy/indicators/rupee-most-undervalued-currency-in-the-world-big-mac-index/articleshow/9438840.cms2 AUG, 2011, 09.44AM IST, AFP
ADB warns of bumpy road into 'Asian century'
TOKYO: Asia could be as wealthy as Europe by mid-century, but only if it tackles key challenges from inequality and corruption to climate change, an Asian Development Bank study said Tuesday.On current trends, Asia will make up half the world's economic output by 2050, and another three billion people will have joined the ranks of the affluent, their incomes matching those of Europe today, said the report.
But the ADB study also pointed to a paradox -- the fact that the world's fastest-growing region, dubbed "Factory Asia", is still home to almost half the world's absolute poor, who earn less than $1.25 a day.
Asia's decades-long march to prosperity, the study said, is being led by seven economies with more than three billion people between them -- China, India, Indonesia, Japan, South Korea, Thailand and Malaysia.
Under the best-case scenario, Asia's combined GDP -- also including poorer nations such as Laos and Pakistan -- will rise from $17 trillion last year to $174 trillion in 2050, with per capita GDP of $40,800 in current terms.
But in order for Asia's rise to be sustainable, the study warns, the diverse region must emulate the past successes of top performers Japan, South Korea and Singapore by promoting inclusive and equitable growth.
"Asia is in the midst of a historic transformation," said the report, "Asia 2050: Realizing the Asian Century", commissioned by the Manila-based ADB and launched by its president Haruhiko Kuroda in Tokyo.
Kuroda pointed out that developing Asia has led the way out of the global financial crisis and recession with a V-shaped recovery.
On current trends, the study said, "by 2050 its per capita income could rise sixfold in purchasing power parity terms to reach Europe's levels today. It would make some three billion additional Asians affluent by current standards.
"By nearly doubling its share of global gross domestic product to 52 percent by 2050, Asia would regain the dominant economic position it held some 300 years ago, before the industrial revolution."
However, the study warned that Asia's rise is by no means inevitable.
"Many see the ascendancy of Asia -- or 'the Asian Century' -- as being on autopilot, with the region gliding smoothly to its rightful place in destiny," wrote Kuroda in a foreword to the report.
"But complacency would be a mistake. While an Asian century is certainly plausible, it is not preordained."
The report warned that emerging economies face the risk of being stuck in the "middle-income trap" as bursts of rapid growth, driven by export-based manufacturing, are followed by periods of stagnation or decline.
The report highlights other key challenges -- rising inequality within and between countries, poor governance and corruption in many of them, and intensifying regional competition for finite natural resources.
In the worst case, it warned, Asia could face "a perfect storm" of bad macro-economic policies, unchecked financial sector exuberance, conflict, climate change, natural disasters, changing demography and weak governance.
8.2% GDP growth projection not disappointing: Finance Minister Pranab Mukherjee
The 8.2 per cent growth projection for the Indian economy in FY'12 is not "disappointing", in light of the uncertainty in major economies the world-over, Finance Minister Pranab Mukherjee said here today.
"In the overall global scenario, when European recovery is fragile and US recovery is uncertain, I don't think that 8.2 per cent (projected growth) is disappointing," he told reporters here.
The Prime Minister's Economic Advisory Council (PMEAC) yesterday lowered the country's GDP growth projection for the current fiscal to 8.2 per cent from 9 per cent earlier, citing the uncertain global outlook, high domestic inflation and subdued industrial performance.
The Finance Minister, however, noted, "There are certain aspects which are also positive," like impressive export growth and a reduction in India's current account deficit.
The robust growth in exports indicates that Indian merchandise has found a diversified global market, he added.
During the April-June quarter, exports grew by 45.7 per cent to USD 79 billion.
2010: The growing US-India defence ties
248366 2/11/2010 13:07 10NEWDELHI287 Embassy New Delhi SECRET "VZCZCXYZ0007
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" "S E C R E T NEW DELHI 000287
SIPDIS
E.O. 12958: DECL: 02/10/2020
TAGS: PREL, PTER, ECON, SENV, AF, PK, IN
SUBJECT: SCENESETTER FOR CODEL KERRY'S VISIT TO INDIA
Classified By: A/DCM Uzra Zeya. Reasons: 1.4(B, D).
1. (S) Summary: You will find an Indian government that is more committed than ever to building a durable and wide
ranging USG-GOI relationship after Prime Minister Singh's Washington visit in November. New Delhi has been broadly
supportive of USG goals in both Pakistan and Afghanistan. After refusing post-Mumbai to engage broadly with Pakistan
until Islamabad took action against the attack perpetrators, New Delhi has now offered unconditional talks to Islamabad. This is a calculated risk on PM Singh's part given the political fallout over last summer's India-Pakistan joint
statement at Sharm al Sheikh. On Afghanistan, there are underlying concerns that U.S. policy foreshadows an early
exit from Afghanistan with negative security consequences for India. India has expressed concern about the outlines of the reintegration policy promoted by the Karzai government and supported by the United States. The GOI has begun to weigh a policy response that may include increased Afghan police and military training/assistance. They will be interested in your views on India's role in Afghanistan. Our bilateral Civil-Nuclear Agreement no longer dominates the headlines, but the goodwill it generated has contributed to our improved relationship across the board and to India's gradual movement toward the nonproliferation mainstream. Several Agreement implementation measures remain unresolved. The U.S.-India defense relationship is progressing rapidly, and defense sales could reach USD 4 billion in 2011. The U.S.-India economic relationship, for decades practically nonexistent, has grown quickly and U.S. exports to India have increased five-fold from USD 3.6 billion in 2000 to USD 17.7 billion last year. On climate change, the Copenhagen conference marked a fundamental shift in India's position, and India is beginning to understand it must address the climate issue not as a poor developing nation but rather as the major economy
it has become. End Summary.
Pakistan
——–
2. (S) The Indians understand our message about the importance of resuming a robust dialogue with Pakistan and
the necessity of increased GOI communication to reassure Pakistani officials about India's intentions in Afghanistan.
India has now offered to hold Foreign Secretary-level talks with Pakistan, but has rejected Islamabad's attempts to
condition resumption of discussion on picking up the thread from the Composite Dialogue India paused after Mumbai.
3. (C) PM Singh is taking a calculated political risk in pushing forward with an offer of talks with Pakistan. While
there is a general recognition that the policy of not engaging with Pakistan except on counterterrorism issues has
exhausted its usefulness, that does not necessarily translate into strong or consistent support for broad talks with
Pakistan among the political class, given continuing terrorist threats. There are heavyweights in the Congress,
including Finance Minister Mukherjee, who were not supportive after last year's Sharm al Sheikh Joint Statement fiasco, and they will seize on any missteps to argue against a policy that reaches out to the Pakistanis. This is also likely to be the last time for some time that PM Singh will have sufficient support to reach out to re-engage on dialogue.
The PM took a beating after Sharm al Sheikh and his government's post-election honeymoon came to a crashing halt.
If this renewed effort falters because of lack of interest on the part of the Pakistanis, many could point to newly
appointed NSA Shiv Shankar Menon as the scapegoat. Menon was lambasted for his role as Foreign Secretary at Sharm and will equally be identified with this proposal.
Afghanistan
———–
4. (C) The reaction to the President's December 1 West Point speech announcing the way forward on Afghanistan drew
guardedly positive support from most of our interlocutors. While the President's emphasis on development and agriculture assistance and a re-affirmation of USG commitment to the region drew approval, many were apprehensive about the setting of July 2011 as a beginning date for the transfer of U.S. troops out of Afghanistan. India's fears that its views and interests are not being taken into account has intensified lately: India was kept out of the Istanbul regional conference on Afghanistan (based on a Pakistani veto) and New Delhi was the odd man out at the London Conference over reintegration.
5. (U) India is proud of its own ongoing ""development partnership"" with post-Taliban Afghanistan that began in late 2001, and the GOI claims the sum of its performed and pledged assistance to date totals USD 1.3 billion. Civilian aid is
channeled into three main areas: infrastructure development (centerpiece is a 218km road in Helmand); capacity building (scholarships and civil service training in India); and humanitarian assistance (daily food aid to 2 million Afghan school children). Virtually all GOI aid is administered through the Afghan government or NGOs.
6. (S) Indian support for Afghanistan's government is long-standing and motivated by a variety of reasons, not the least being Afghanistan's strategic value as New Delhi seeks regional influence. India, with the exception of the Taliban era, has always had strong ties to Afghanistan since Partition; conversely, Islamabad with the exception of the
Taliban period, has had strained ties with Kabul. Pakistan's expectation that the government in Afghanistan will be pro-Pakistan and anti-Indian is unrealistic, particularly given Karzai's own long-standing ties to India and the goodwill that India's assistance and other elements of India's soft power have created in Afghanistan.
7. (S) While India's assistance to Afghanistan has primarily focused on reconstruction and stabilization, there has also
been limited military aid. The MEA told us after the West Point speech that the GOI wishes to do more to help develop
Afghan capacity, especially with regard to the police and military, but is also cognizant of USG ""sensitivities"" about
such assistance. Currently, the GOI trains approximately 100 ANA members annually in India, and would like to step up this program. India has offered its Advanced Light Helicopter to Afghanistan as well as pilot training to the new Afghan air force. The GOI has provided cars and trucks to the Afghan military. Officials tell us they have discussed with Afghan officials the possibility of training Afghan police women and bomb disposal specialists, but no large-scale training has yet taken place.
Internal Politics: a Raucous Democracy
————————————–
8. (SBU) We have a true partner in the current Indian government led by Prime Minister Singh, but its capabilities
are not without limits. The strong performance by the Congress Party and its United Progressive Alliance (UPA) allies in India's national elections in 2009 gave the Prime Minister Singh's coalition a mandate to govern and — freed
from dependence on half-hearted allies on the Left — to promote a closer relationship with the United States. Despite the strong endorsement by the electorate and a floundering opposition, the UPA government has gotten off the blocks somewhat slowly. The government grew less confident after its honeymoon period was cut short by the fallout over a joint statement from Singh's July 2009 Sharm-el-Sheikh meeting with Pakistani Prime Minister Gilani. The Sharm debacle rallied Singh's otherwise disjointed political opponents, while reminding the Prime Minister of his
constraints despite his mandate. The tentativeness of the government was again on display during the winter session of Parliament, during which an unruly opposition united over populist causes and sidelined civil nuclear liability legislation and long-awaited financial sector liberalization. The government is again on the defensive over demands for the creation of a separate state of Telangana from Andhra Pradesh. On February 3 it bowed to political pressure and announced the formation of a five-person Committee to evaluate the issue.
Civil Nuclear Cooperation
————————-
9. (SBU) India viewed the signing of the U.S.-India Civil Nuclear Cooperation Agreement as an historic event and an essential part of transforming our relationship. India has since followed through on its nonproliferation commitments by signing its IAEA Safeguards Agreement and concluding an Additional Protocol with the IAEA. We are working with the government to implement commercial cooperation, providing U.S. firms access to an estimated USD 150 billion market and leading to the creation of thousands of high-skilled jobs, as well as providing India's growing economy with access to clean energy. The Agreement no longer dominates the headlines, but the goodwill it generated has contributed to our improved relationship across the board and to India's gradual movement toward the nonproliferation mainstream.
10. (SBU) The Indian government made substantial progress on implementing commercial cooperation ahead of PM Singh's visit to Washington, though some important hurdles remain. In recent months, India announced two favorable reactor park sites for U.S. firms in the states of Gujarat and Andhra Pradesh, and submitted its declaration of safeguarded facilities to the IAEA. We have held five rounds of reprocessing consultations pursuant to the 123 Agreement, and hope to conclude negotiations soon. The government responded to our request for Part 810 license assurances on the eve of Singh's visit, a top priority of U.S. industry, and we awaitclarification on two issues. The cabinet approved draft liability legislation, a top priority for U.S. firms, but Parliament was not able to pass the legislation in the just-concluded session.
The Defense Relationship
————————
11. (SBU) The U.S.-India defense relationship has progressed rapidly since sanctions were removed in 2000 following
India's 1998 nuclear test. Today's relationship is focused on bilateral exercises, Subject Matter Expert Exchanges (SMEEs), and personal exchanges at schools, conferences and seminars. Billion-dollar defense sales are a growing component and a superb opportunity to expand the relationship. Exercises are the most visible of the activities between our two militaries. In October, the Army completed its most ambitious exercise with the deployment of 17 Strykers to India for a two week exercise which included live firing of a combined mechanized task force for the first
time. Simultaneously, the Air Force had five transport aircraft participating in exercise COPE INDIA held in Agra
that included a Special Forces component. The Navy conducts an annual exercise, Malabar, that has been conducted both bilaterally and multilaterally. The Marines hold an annual exercise with the Indian Army, Shatrujeet, which focuses on amphibious operations. The Indians have been cooperating
with the Joint POW/MIA Accountability Command for recovery of
remains from downed Second World War planes in the politically sensitive state of Arunachal Pradesh. To date, we are still working on obtaining permission to repatriate all of the remains so as to properly identify and recover lost Airmen.
12. (SBU) Defense sales are growing quickly from roughly one billion USD in 2008, to over two billion so far this year. There is good potential for over four billion in sales next year, especially with the recent Ministry of Defense approval
to pursue the C-17. For the first time, India can afford (politically and financially) to purchase front line U.S. equipment. They recognize the quality of U.S. systems and have been astounded by the mission capable rates quoted for U.S. aircraft compared to their older Russian inventory. They are becoming increasingly sophisticated in their analysis of costs and now use life-cycle cost instead of cost on delivery for some purchases, giving U.S. products an
opportunity to beat cheaply made competitors. Most important, the July 2009 agreement on End Use Monitoring (EUM) has opened the door for FMS sales at a time when there is growing frustration with Russia – previously India's supplier of choice. The near doubling in cost and extensive delays in delivery of the ex-Russian aircraft carrier GORSHKOV, issues with transfer of technology on the T-90 tank, and universal problems with spare parts have convinced the GOI that new sources of supply are needed to balance Russia. Given an opportunity, we ask that you endorse Indian purchases of U.S. equipment as an important part of our defense relationship and support our ongoing sales efforts.
Economic Ties
————-
13. (SBU) The U.S.-India economic relationship, for decades practically nonexistent, has grown rapidly and has
significant potential to expand further. At the same time, India is an increasingly important player at the table in
multilateral economic fora, from the WTO Doha Round negotiations and the G-20, World Bank and IMF to the UNFCCC
negotiations in Copenhagen. While India was seen in the United States as a spoiler when the World Trade Organization
Doha Development Agenda talks broke down in July 2008, India's new Commerce Minister showed leadership and
significantly improved the tone of discussions when he hosted a Doha ""Mini-ministerial"" meeting in September, attended by U.S. Trade Representative Kirk.
14. (U) The United States is India's largest trading partner in goods and services and one of its largest foreign
investors. Investment has surged between our countries in recent years, prompting agreement to launch negotiations on a bilateral investment treaty. U.S. exports to India has increased five-fold from USD 3.6 billion in 2000 to USD 17.7
billion last year. Two-way merchandise trade grew to a record USD 44.4 billion in 2008, a 76-percent increase from
2005. Reflecting the global economic downturn, exports to India fell 9.7 percent in January-September 2009 (to USD 8 billion), but Indian exports to the United States fell more sharply. Thus, the U.S. trade deficit with India fell 43.8
percent to just USD 3.2 billion in January-September 2009. Despite the size of its economy, India was only the United States' 18th largest trading partner in 2008. One of the major goals of the U.S.-India Trade Policy Forum is to resolve barriers to trade and investment to improve this ranking.
15. (U) India was somewhat shielded from the global economic downturn due to its conservative central bank and
SEC-equivalent restricting many of the derivative innovations linked to the global financial crisis, and its relatively low reliance on exports. However, although India's ""Wall Street"" was less affected, its ""Main Street"" bore the brunt of the
downturn, with slower growth, tighter access to credit, declining exports, higher unemployment, and less investment.
In response, India's central bank and SEC-equivalent relaxed many of its restrictions on foreign capital inflows and
investment procedures and the GOI enacted several fiscal stimulus programs, both pre- and post-election, to boost
economic growth.
16. (SBU) The Indian economy continues to be one of fastest growing economies in the world, even as the global slowdown and financial crunch moderated GDP growth from nine percent in fiscal year (FY) 2007-08 to 6.7 percent in FY 2008-09, which ended March 31. Growth in the second quarter was 7.9 percent and growth in fiscal year 2009-10 is now expected to be in the seven percent range. The Commerce Ministry announced December 15 that it expects to see a return to positive export growth soon. With the expected return of higher growth rates, rising inflation, and the highest fiscal deficit (approximately 11 percent of GDP) in 20 years, the GOI has begun to reverse some the measures it enacted during the financial crisis and has announced plans to decrease subsidies and increase disinvestment. Lagging agricultural productivity and poor — but improving — infrastructure continue to constrain growth. Accordingly, the top Indian economic priorities remain physical and human infrastructure development and spreading economic benefits into rural India.
17. (U) The United States continues to have concerns about agricultural trade with India. The recently released Senate
Finance Committee Report on Indian agricultural trade barriers — a U.S. ITC investigation — highlighted the essentially defensive agricultural trade policy long promoted by the Indian government. The United States is particularly interested in gaining marketing access for U.S. dairy products which are blocked due to a series of non-scientific GOI rules. Discussions are ongoing, but the effort to resolve long-standing agricultural trade issues is a Mission priority.
Climate Change/Clean Energy
—————————
18. (SBU) The 16th Conference of Parties (COP-16) at Copenhagen marked a fundamental shift in India's climate
change position. Minister of Environment and Forests Jairam Ramesh claimed victory for India's negotiating team in a December 22 address to parliament stating India was ""entirely successful"" at COP-16 in that there was no dilution of either the Bali Action Plan or the Kyoto Protocol, India was not required to agree on a peak year for its emissions, and that it avoided any legally binding emission commitments, including a long-term global goal of reducing emissions 50
percent by 2050. Although India's current position is that the Kyoto Protocol and Bali Action Plan are sacrosanct and
must be the basis for all future climate negotiations, both Ramesh and Prime Minister Singh have publicly supported the Copenhagen Accord pursuant to the Accord, India communicated its domestic mitigation action of reducing it's carbon intensity by 20 to 25 percent by 2020 from a 2005 baseline to the UNFCCC Secretariat on January 30. In addition, Ramesh has drawn India farther from the G77 by telling parliament India was not in the same category as other developing countries such as Bangladesh, Maldives, Grenada, or African nations, that it did not need to demand technology transfer at low or no cost, and that India should be selling green technology to the world. India's association and close coordination of its climate negotiating position with the Basic Group of nations, comprised of Brazil, South Africa, India, and China, indicates India is beginning to understand it must address the climate issue not as a poor developing nation but rather as the major economy it has become.
19. (SBU) During the November visit of the Prime Minister, Secretary Clinton and her Idian counterpart signed an MOU to Enhance Cooperation on Energy Security, Energy Efficiency, Clean Energy and Climate Change. Both countries share an interest in rapid expansion of clean and renewable energy production. India has massive investments planned in energy production, both conventional and renewable, as the government recognizes the need to continue to power India's economic growth and extend access to electricity to ever more of the significant portion of the population which still does not have it. The bilateral MOU calls for stepped up engagement beyond the existing Energy Dialogues to include a focused Clean Energy Research and Deployment Initiative to rapidly disseminate clean energy technologies, including solar, wind, hydro, as well as shale gas and cleaner coal. The USG is holding ongoing inter-agency consultations and is finalizing recommendations for the organization of these new initiatives. DOE has the lead on a Joint Clean Energy Research Center, while USAID is heading a multi-agency team to create the Clean Energy Deployment Center in coordination with State, Commerce, OPIC, EXIM, USTDA and others. Completed designs for the centers are expected by early spring. We expect that they will accelerate existing
initiatives as well as launch numerous others in order to have broad impact in building the Indian clean energy market.
ROEMER
"
2 AUG, 2011, 04.41PM IST, ET NOW
Emerging equity markets will start to outperform again: Credit Suisse
2 AUG, 2011, 04.41PM IST, ET NOW
Emerging equity markets will start to outperform again: Credit Suisse
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Read more on »united states|India|Emerging equity markets|Currency|Credit Suisse|China
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In an interview with ET Now , Robert Parker , Senior Advisor Member of Investment Committee, Credit Suisse, talks about the global economy and the markets. Excerpts:
What do you think is the likely impact of the $14.3 trillion borrowing limit hike on the world as well as the US economy?
The immediate market reaction is today morning European time was positive in equity markets initially with a minor relief rally. But then as New York came in and particularly as we saw very weak ISM manufacturing data out of the United States, the markets reversed very sharply indeed. So there is a degree of concern in terms of the market reaction to the US budget deal.
Those concerns focus on, No 1 they announced $2.4 trillion budget cut very quickly, the Congressional Budget Office announced but actually it was not 2.4 trillion, it was 2.1 trillion. Second concern is that the cuts which have been announced really start in 2014. So it means that 2012 and 2013, we still have very high budget deficits in America as a percentage of GDP.
But the next concern is that the immediate agreement is actually only for 900 billion cut. Then there is this understanding that a Bipartisan Budget Committee will come up with the cut of 1.5 trillion by the end of November and obviously there is concern as to whether that will be achieved and implemented. Then the final concern which is a real genuine concern is this package sufficient for United States to retrain its AAA rating and if this 1.5 trillion of cuts is not produced at the end of November, then one has to say that in December, there is a serious risk of the US losing its AAA credit rating.
What do you think could be the impact of US losing its AAA rating on fund flow to emerging markets because here in India we have been a bit of a lull over the last couple of months. What do you think could be the impact of that on emerging markets like India?
Clearly with the US possibly losing its AAA credit rating, that obviously will have an impact on the pricing of US assets. And another very fundamental question is where this regional growth will go in the global economy over the next 1 to 2 years. One problem for the American economy is that it is likely unless policy changes very radically that we will have a period of mediocre growth and certainly that has been the case in the first half of this year. And although economies like China and India growth rates are moderating as evidenced by the recent Purchasing Managers Indices, I still think that we will have growth of plus or minus 8% in India, we will have growth in a range of 8% to 9% in China and the corporate earnings growth will be the strongest in Asia relative to other regions.
http://economictimes.indiatimes.com/opinion/interviews/emerging-equity-markets-will-start-to-outperform-again-credit-suisse/articleshow/9456241.cms
2 AUG, 2011, 01.11AM IST, REUTERS
US debt deal: Financial markets may not be drastically impacted if US ratings are downgraded
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NEW YORK: The United States could lose its triple-A credit rating from at least one rating agency this year, raising the question: Who cares?
Strange as it may sound, a downgrade could resound in financial markets more with a whimper than a bang. As debate raged in Washington over raising the debt ceiling and avoiding a default, markets had plenty of time to factor in the thinking of Standard & Poor's, Moody's and Fitch on a potential downgrade.
"Market participants have the same information that ratings agencies do," said Michael Moran, chief economist at Daiwa Securities America in New York. "(That information) should already be reflected in interest rates."
Two ratings agencies, elected by no one, said $4 trillion in deficit-cutting measures would allow them to confirm the US triple-A rating. Lawmakers, who in contrast must answer to American voters, agreed on less than $2.5 trillion in budget cuts, only some of them immediate.
That means S&P could downgrade US ratings in the next few days or weeks. Moody's would likely confirm US ratings, but slap a negative outlook on them, a sign of a possible downgrade in the next 12 to 18 months.
Still, historical experience suggests a downgrade would produce none of the bond-market angst some fear. Japan lost AAA status more that a decade ago and it has some of the lowest interest rates in the developed world.
As it was with Japan, the big issue for markets is the weak US economy, which could slow further due to the spending cuts in the deficit-cutting deal.
This fiscal restraint could curb spending, job growth and inflation -- the biggest drivers of bond yields.
Also, investors see the United States in a much different situation than crisis countries such as Greece. Awash in debt though it is, the United States is still able to pay its bills while Treasury bonds remain liquid and in demand.
The bond market is the ultimate arbiter of sovereign debt worries, and low US yields suggest none of the anxiety that sent Greek yields soaring during that country's fiscal crisis.
Benchmark 10-year yields now stand at 2.74 per cent, which is just 0.7 per centage point from the all-time low and follows weeks of high-tension haggling and fears political paralysis could result in a default.
Still, a US debt rating cut to AA-plus from AAA by Standard & Poor's is "the market's base case at the moment," said Krishna Memani, fixed-income director at OppenheimerFunds.
While bonds have done well, stocks and the dollar suffered during the debt impasse amid fears the political conflict would make it impossible to reach a deal to avoid default.
http://economictimes.indiatimes.com/markets/global-markets/us-debt-deal-financial-markets-may-not-be-drastically-impacted-if-us-ratings-are-downgraded/articleshow/9449047.cms
Clinton wants to improve economic ties in India visit
Published on Tue, Jul 19, 2011 at 08:07 | Source : Reuters
Updated at Tue, Jul 19, 2011 at 19:46
Clinton will meet Indian leaders for a US-India "strategic dialogue" session, regular meetings designed to get officials from both sides working more closely together, on a trip that begins nearly a week after a deadly triple bomb attack on financial capital Mumbai.
She will then fly to Chennai, an emerging hub for US trade and investment, for what American officials bill as a major policy speech on US-India relations both in the region and across the Asia-Pacific.
Clinton's trip will emphasize economic ties between India and the United States, and regionally as a way to build confidence among India and its neighbours, Afghanistan and Pakistan, officials said.
"Priorities include, number one, trying to deepen our economic cooperation, which has been growing substantially year on year, and she'll point out a few ways we think we can take it to the next level," one U.S. official told reporters on Clinton's plane.
Despite the economic focus, which will also include talks with Finance Minister Pranab Mukherjee, the pending US drawdown of forces in Afghanistan and Indian relations with traditional rival Pakistan will both be on the agenda as security fears grow following Wednesday's attacks on Mumbai.
US officials and political analysts say Clinton will urge India not to raise tension, concerned that any reaction by New Delhi could upset an already fragile US relationship with Islamabad.
"This is not about nudging or pushing or cajoling, it's about encouraging and it's also about reinforcing the steps they're already taking," the U.S. official said, adding that Clinton would urge India to open its doors economically to its far less robust neighbour.
"She'll stress that focusing on the economy up front is a way to build confidence... from there, they can work up toward dealing with some of the more sensitive security issues."
It may not be an easy sell -- although analysts say India is increasingly worried over the stability of its neighbour and has its own reasons for moving forward cautiously.
Overcoming suspicions
No one has claimed responsibility for last week's Mumbai blasts, and police have questioned members of a home-grown militant group, taking some of the direct heat off Pakistan.
But both New Delhi and Washington suspect parts of the Pakistani establishment may not be on board with the US fight against Islamic militants. The doubts underscored in May when US forces killed al Qaeda leader Osama bin Laden in a compound in Pakistan without telling the government in advance.
In Washington, the Republican chairwoman of a committee in the House of Representatives proposed stopping economic aid to Pakistan unless the Obama administration can certify that Islamabad is helping the United States uncover whatever support network bin Laden had in Pakistan before he was killed.
The House Foreign Affairs Committee will vote on the proposal by Representative Ileana Ros-Lehtinen on Wednesday. It threatens USD 1.5 billion in non-military aid allocated for Pakistan in 2012.
Washington is already holding back USD 800 million in military aid for Pakistan in response to Islamabad's cutback of US military trainers, limits on visas for U.S. personnel and other bilateral irritants.
Clinton will also brief Prime Minister Manmohan Singh and other officials on US plans to draw down about a third of the 100,000 US forces from Afghanistan during the next year, which has sparked concern in New Delhi of an overly-hasty withdrawal.
Despite shared strategic concerns, which include China's growing assertiveness and traditional friendship with Pakistan, Clinton will also push New Delhi hard to do more to improve the economic relationship.
India remains only the 13th largest trading partner of the United States, behind oil exporter Venezuela, and Clinton is expected to advocate for more US arms purchases after Washington was disappointed when India rejected US bids for an USD 11 billion fighter aircraft contract in April.
She will also raise US concerns that its firms are lagging in gaining access to India's USD 150 billion nuclear energy market, seen as a major potential driver of trade.
US power giants such as General Electric hope to get a foothold after a landmark 2008 nuclear cooperation accord. But progress has been slow and Washington wants India to water down a 2010 law which would force all private nuclear reactor builders to take on uncapped compensation in the event of a nuclear disaster.
The United States also wants India to move on plans to open up potentially lucrative sectors such as insurance and large-scale retail, while the outsourcing of US jobs to cheaper Indian workers has also been a concern.
Also watch the accompanying video for Hillary Clinton's comments.
US is 'parasite' on global economy: Russian Prime Minister Vladimir Putin
LAKE SELIGER, RUSSIA: Russian Prime Minister Vladimir Putin accused the United States on Monday of living beyond its means "like a parasite" on the global economy and said dollar dominance was a threat to the financial markets."They are living beyond their means and shifting a part of the weight of their problems to the world economy," Putin told the pro-Kremlin youth group Nashi while touring its lakeside summer camp some five hours drive north of Moscow.
"They are living like parasites off the global economy and their monopoly of the dollar," Putin said at the open-air meeting with admiring young Russians in what looked like early campaigning before parliamentary and presidential polls.
US President Barack Obama earlier announced a last-ditch deal to cut about $2.4 trillion from the US deficit over a decade, avoid a crushing debt default and stave off the risk that the nation's AAA credit rating would be downgraded.
The deal initially soothed anxieties and led Russian stocks to jump to three-month highs, but jitters remained over the possibility of a credit downgrade. "Thank god," Putin said, "that they had enough common sense and responsibility to make a balanced decision."
But Putin, who has often criticised the United States' foreign exchange policy, noted that Russia holds a large amount of US bonds and treasuries.
"If over there (in America) there is a systemic malfunction, this will affect everyone," Putin told the young Russians. "Countries like Russia and China hold a significant part of their reserves in American securities ... There should be other reserve currencies."
US-Russian ties soured during Putin's 2000-2008 presidency but have warmed significantly since his protege and successor President Dmitry Medvedev responded to Obama's stated desire for a "reset" in bilateral relations.
EARLY CAMPAIGNING?
Casually dressed in khaki trousers and a striped white shirt, Putin flew by helicopter to the tented camp as part of a string of appearances that are being closely watched in the run-up to the elections. He did not say whether he plans a return to the Kremlin or will stand aside for Medvedev, his partner in Russia's leadership tandem, to run for a second term.
But young people crowding round Putin, caught up in the campaigning spirit created by huge portraits of Putin hung from trees, were not shy about saying who they wanted as president. "Russia's next president will be small, bald and look like Putin," 17-year-old Ilya Mzokov joked with reporters. Asked why Medvedev was not paying a visit to the summer camp, he said: "Only serious people come here."
2 AUG, 2011, 11.00AM IST, REUTERS
US debt deal set to pass but what were the costs?
WASHINGTON/SINGAPORE: While the immediate crisis over a threatened default seems to have been averted by the eleventh-hour deal between the White House and Congress, the debt-limit drama has left behind crucial questions about the American political process, the viability of economic policy options and implications for the rest of the world.
The long, tortured debate exposed toxic partisanship and legislative dysfunction in Washington just when judicious efforts at reform were most needed, shaking the faith of international investors and ordinary Americans alike.
The most palpable concern was that gridlock had deprived US policymakers of the monetary and fiscal tools they needed to shore up one of the world's bedrock economies, which some feared was already close to stalling.
"Because of the very public and intense squabbles in D.C., already-anemic economic growth will be weaker, the unemployment crisis will worsen, income and wealth inequality will deteriorate further and, ironically, the fiscal dynamics will be more challenging," said Mohamed El-Erian, co-chief investment officer of the international bond fund giant Pacific Investment Management Co., or PIMCO.
China, Washington's largest foreign creditor, has been particularly blunt about other countries' exposure to Washington's partisan warfare. "The ugliest part of the saga is that the well-being of many other countries is also in the impact zone when the donkey and the elephant fight," China's state-run news agency Xinhua wrote in a commentary, referring to the symbols of the US Democratic and Republican parties.
Reuters posed several key questions to dozens of investors, policymakers, strategists and economists to gauge the implications of what the debt ceiling fight means for America and the world. While their judgment was almost uniformly dismissive to dire, their collective judgment was not entirely bleak: Republicans and Democrats were at least united on the fact that America must get its fiscal house in order.
WHAT DOES IT SAY ABOUT AMERICA'S ABILITY TO REMAIN THE WORLD'S SUPERPOWER?
Virtually everyone agreed that America's fiscal path is unsustainable: With a national debt of more than $14.3 trillion, the US borrows forty cents of every dollar it spends.
Yet there is intense, fundamental disagreement on how to solve the problem, with Tea Party Republicans as passionately opposed to increasing taxes as progressive Democrats are to making deep cuts in the Social Security pension system and other so-called entitlement programs.
In the marginalization of the political center and dismal prospect for expedient reform, experts saw a threat to America's geopolitical strength.
"It's hard to maintain your influence globally when you can't manage your own country," said Barry Bosworth, a veteran fiscal and monetary policy expert at the Brookings Institution.
The former chair of President Barack Obama's Council of Economic Advisers tacitly agreed. "There is no way we can have persistent deficits of the size the Congressional Budget Office is predicting over the next 25 years and hope to remain the world's preeminent economic superpower," said Christina Romer, who left the CEA in September 2010. "If we don't deal with these deficits there is no way we won't eventually default and become a much weaker country."
Many Republicans and some Democrats fear that defense cuts could have the same effect. At least $350 billion of the initial $917 billion in spending cuts over 10 years are to come from defense and other security programs, which now account for more than half of discretionary spending.
The Pentagon budget for fiscal year 2010 was $680 billion, a reminder of the vast size and reach of America's global military power.
Many, including Pentagon experts, worried that another $500 billion of cuts over the next decade, which could be triggered by a failure of the second phase of the compromise plan, would gravely undercut the United States' international influence and its ability to execute a muscular foreign policy.
1 AUG, 2011, 03.59AM IST, REUTERS
Debt crisis: US squanders historic chance to fix fiscal crisis
WASHINGTON: For all the partisan mudslinging in Washington over raising the US debt limit, there was a fundamental consensus: America is on an unsustainable fiscal path and its long-term deficits have to be slashed.
Yet despite that bipartisan realization and the fact that the issue has consumed the US Congress for months, the emerging deal to raise the $14.3 trillion borrowing cap fails to address the root causes of America's real fiscal crisis.
The extraordinary chance America's leaders had to forge a "grand bargain" to rein in the country's exploding debt, with the threat of default a powerful incentive to succeed, has been squandered.
The moment has passed, and as America gets ready for next year's election season, some lawmakers and analysts wonder if there is the political will in Washington to ever confront the country's fiscal woes.
"I do believe we have missed a great moment of opportunity to reach a grand bargain, and I'm not sure whether the incentives will be aligned sufficiently to reach a grand bargain going forward," said Chris Van Hollen, the top Democrat on the House of Representatives Budget Committee.
The emerging deal to raise the debt limit includes a two-step process to cut the debt by about $2.8 trillion over a decade.
"GRAND BARGAIN" NOW DISTANT MEMORY
The first $1 trillion in cuts have been largely agreed by lawmakers. A further $1.8 trillion in savings over a decade would be identified by a special committee appointed by Congress. Automatic measures, or "triggers", would implement the planned cuts if Congress failed to pass them.
The US Treasury says that without a deal to increase America's borrowing capacity, it will begin to run out of money to pay its bills on Tuesday, and that a catastrophic default will follow.
The emerging deal, which if struck will avert the immediate crisis of default, is still a far cry from a much broader, $4 trillion deficit-reduction "grand bargain" President Barack Obama and John Boehner, the top Republican in Congress, appeared so close to clinching just over a week ago.
2 AUG, 2011, 04.06AM IST, ET BUREAU
US debt deal: Tightening spending to set back world economy
MUMBAI: America's decision to avert a sovereign default pushed up stock prices across the world, but stoked fears of an economic slowdown in the days ahead.With the US government planning to cut spending, the world's largest economy - already hit by low consumption, poor investment, and bloated imports - is likely to grow at a slower pace.
For emerging markets like India that ship a chunk of their exports to the US, the impact will depend on how US lawmakers agree to stagger the cut in expenses.
While a slice of the proposed extra borrowings of over $2 trillion may boil over to Asian stock markets, a rise in commodity prices across the globe, fuelled by newly printed dollars, may adversely impact earnings of companies.
"In the short term, there will be some uptick in stocks. But, if commodity prices rise, recovery in terms of margins (of Indian companies) will get deferred. And, if US and global growth suffers, Indian exporters, particularly software firms, may be hit," said Anand Tandon, CEO of JRG Securities, a brokerage.
On Monday, however, the news of a quickly-cobbled deal to avoid a default sparked a relief rally in stocks. The dollar rose 0.8-1% against the Japanese yen and Swiss franc, which have emerged as safe-haven currencies in the last few weeks, while gold - a typical choice of investors in uncertain times - also dropped close to 1% in the London market. A choppy US market opened 94 points, or 1%, up but had slipped into losses at the time of going to press.
Gains on D-Street muted
Most Asian and Europe indices rose about 1-2%, but gains in the Indian market were somewhat muted with the Sensex rising 117.13 points, or 0.64%, to 18,314 after touching a high of 18,440. Nifty gained 34.80 points, or 0.63%, at 5,516.80.
Across the broader market, losers outnumbered gainers 1646:1204 on the BSE with investors fearing interest rates to rise amid inflation. Investors are not convinced about the resilience of the stockmarket rebound, as US credit still risks the prospect of a downgrade by rating agencies.
2 AUG, 2011, 07.37PM IST, BALU,ET BUREAU
Dr C Rangarajan favours strong, balanced growth to rein inflation
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CHENNAI: Dr C Rangarajan, chairman , Prime Minister's economic advisory council, has favoured a strong and balanced growth, which in his opinion will lead to multiple gains including lower inflation and reducing poverty levels. High growth does not warrant a higher level of inflation. We must use all our policy instruments to bring down the current inflation and re-anchor the inflationary expectations to the 4 to 5 % comfort zone", he stressed.
Speaking on " Economic growth and inflation" at a meeting organised by public sector Indian Overseas Bank in Chennai on Tuesday as part of the bank's platinum jubilee celebrations, he said it is prudent to aim at a growth rate of 9%. In the 12th plan period, the economy should be able to grow between 9 and 9.5% with the investment rate touching 38% of GDP.
Pushing the economy beyond that will run into problems. First of all, it will be difficult to achieve the required investment rate of 40%, second, pushing the economy beyond its capacity would result in strong inflationary pressures re-emerging. The deficit in the current account of the balance of payments will also widen", Dr Rangarajan told bankers, economists, top officials and industry representatives gathered on the occasion.
Stating inflation continues to remain an area of concern in the current year, he justified the need to continue policy intervention at three levels. The Government should continue to intervene in the food market to move the large stocks under the public distribution system, the fiscal policy should aim at reducing fiscal deficit as envisaged in the Union Budget and RBI using the monetary policy to adjust the policy ( repo) rates.
Supply side constrains have to be necessarily eased in order to continue with growth along with price stability. Dr Rangarajan also said continued strong growth will help to accelerate the declining the trend in poverty ratio. " Development has many dimensions. It has to be inclusive; it must be poverty reducing and it must be environment- friendly", he said.
IOB CMD, M Narendra said while the benefits of growth take time to reach all sections of all, high inflation hurts all. Stating IOB's total business has touched Rs 2,75,000 crore and number of branches 2200, he said it plans to open 400 more branches this year and 400 next year.
http://economictimes.indiatimes.com/news/economy/indicators/dr-c-rangarajan-favours-strong-balanced-growth-to-rein-inflation/articleshow/9457854.cms
2 AUG, 2011, 04.55PM IST, VINAY PANDEY,ET BUREAU
Govt seeks modes increase in expenditure in first supplementary demand
NEW DELHI: Government on Monday sought Parliament's nod for additional expenditure of Rs 34,724 crore for 2011-12, but reiterated its commitment to stay within the budgeted fiscal deficit.
Finance minister Pranab Mukherjee presented the supplementary demands in Lok Sabha. Finance minister said the extra expenditure will not impose a burden on the finances as "there would be overall savings in other grants."
The government has budgeted a fiscal deficit of 4.6 per cent of GDP in 2011-12, which may be a challenging one given the growth moderation and rise in subsidies.
The additional demands for grants include a provision of Rs 2,300 crore for Rural Development Ministry for meeting expenditure for conducting surveys on BPL.
The additional provision of about Rs 10,612 crore is being sought for providing loans to International Monetary Fund.
Government is also seeking Parliamentary nod for Rs 1,585.7 crore for additional equity investment in the bonus shares issued by ONGC.
http://economictimes.indiatimes.com/news/economy/policy/govt-seeks-modes-increase-in-expenditure-in-first-supplementary-demand/articleshow/9456368.cmsAugust 2, 2011 1:19 PM
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Obama hails passage of debt limit compromise
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(Credit: AP Photo/Pablo Martinez Monsivais)
The bill, he said, was the outcome of a "long and contentious debate" to avoid a man-made economic disaster that he described as "unsettling." He said that while voters chose divided government, "they sure didn't vote for dysfunctional government."
"It shouldn't take the risk of default, the risk of economic catastrophe, to get folks in this town to get together and do their jobs," the president said.
Mr. Obama plans to sign the legislation in a closed-door ceremony Tuesday afternoon. It will effectively increase the nation's borrowing authority through the end of next year and promises more than $2 trillion in deficit reduction over ten years.
The Obama administration had warned that if lawmakers did not act by midnight, the nation would no longer be able to pay many of its obligations - potentially including social security checks, military pay and other payments - and could default on its debt, causing worldwide economic chaos as well as increased borrowing costs for Americans.
The Senate passed the bill 74-26 shortly before Mr. Obama made his remarks, easily surpassing the 60 votes needed to overcome a filibuster. That vote followed Monday night passage in the House, which included a surprise affirmative vote by Democratic Rep. Gabrielle Giffords, who is recovering from an assassination attempt.
Both fiscally-conservative Republicans and liberal Democrats rejected the deal, with the former saying it does not go far enough to address the nation's debt and deficit crisis and the latter complaining it cut too much and did not include revenue increases. Though the deal will reduce the deficit by trillions of dollars, it still leaves the nation facing a projected $22 trillion debt ten years from now - an increase of more than $7 trillion from today. Ratings agencies have said that they could still downgrade the nation's Triple-A credit rating even with the deal.
Mr. Obama had sought a "grand bargain" that would have included more than $4 trillion in deficit reduction and included both revenue increases, cuts to entitlement programs and tax reform. But against a backdrop of Republican opposition to any revenue increases and Democratic opposition to significant cuts to entitlements, closed-door negotiations over the larger deal broke down.
The bill will immediately increase the debt limit by roughly $400 billion immediately and then another $500 billion in the fall. It will also create a 12-person bipartisan congressional committee tasked with coming up with recommendations for $1.5 trillion in further deficit reductions by Thanksgiving. Those reductions could include cuts from defense spending and social safety net programs, as well as changes to the tax code.
If the recommendations are not created or approved by Congress by the end of the year, it will trigger more than $1 trillion in automatic spending cuts unless Congress sends a balanced budget amendment to the Constitution to the states.
Prior to the Senate vote, Senate Minority Leader Mitch McConnell, R-Ky., who played a key role in the negotiations, noted that while the back and forth may not have been pleasant, "it was a debate that Washington very much needed to have."
"The legislation that the Senate is about to vote on is just a first step - but it is a crucial step toward fiscal sanity," he said.
Reid noted in remarks on the Senate floor that that the "American people are not impressed with the no new revenue" in the bill, but that, nevertheless, "the product we have here is one of compromise."
Now that the debt limit fight is over, Democrats say they will now pivot to a focus on jobs and the economy, which they say should be Congress' top priority.
"We've got to do everything in our power to grow this economy and put Americans back to work," Mr. Obama said Tuesday.
http://www.cbsnews.com/8301-503544_162-20086971-503544.html
| Hope of normal session after war of wits | ||
| SANJAY K. JHA | ||
New Delhi, Aug. 1: The Congress and the BJP appear to be locked more in a war of wits than real confrontation, which is a clear signal that Parliament's monsoon session will start normal business after symbolic disruptions for a couple of days. Sensing the public mood, members from both parties have given notices for urgent discussions on two issues — corruption and price rise. While the BJP is itching to send out a message that the Centre had done nothing to curb rising prices and scandals, the Congress wants to show that the government was not fighting shy of confronting these problems. Although the public posturing of both parties suggest intractable differences could paralyse the session for a long time, sources in the government said the two sides were engaged in "constructive negotiations" on how to run the House smoothly. While there was consensus on the need to ensure maximum business, the sources said the government was trying to extract an acceptable deal from the BJP on the nature and mode of debate. The BJP has given notices for discussions under rule 184, which entails voting. While the Congress feels the BJP's trick of forcing a vote to expose the contradictions within the UPA would impede normal functioning, the BJP says the government cannot insist on using only those parliamentary devices that come with adequate safeguards. The government wants the discussions under rule 193, which does not require a vote. The two sides are also squabbling over the language of the motion, on which the debate will take place, as the government does not want to take the full blame for rising prices or corruption. Last year, the BJP failed to force its motion on the government and the one Parliament ultimately adopted merely expressed concern at price rise and called for steps to curb it. On corruption, the government has no problem with a debate but won't accept a motion that goes beyond a general concern to pinpoint ministers' culpability. Today's motion in the Rajya Sabha on corruption, moved by the BJP's Prakash Javadekar, named the Prime Minister and the home minister. The Left has given notice for an adjournment motion in the Lok Sabha on price rise. The government is hoping for an early breakthrough as it has found the Opposition's attitude "flexible and not destructive". It felt that the BJP had not made the Prime Minister's remark about skeletons in the Opposition cupboard a prestige issue. The Congress made light of it, saying: "What's wrong in the PM's remark. If they drag his name repeatedly in the 2G scandal without any evidence, the PM too would hit back." The Congress is not reluctant to debate the issue of corruption as its leaders feel the BJP too is on weak ground. "While the Karnataka issue is very much alive despite B.S. Yeddyurappa's resignation, the NDA's record in telecom is no better," said spokesperson and MP Manish Tiwari. "We will show them the mirror. If we go back, there is enough material to paint them black, from Tehelka to the UTI scam. We want a proper debate to place the facts before the nation." |
*http://www.telegraphindia.com/1110802/jsp/nation/story_14322082.jsp
2 AUG, 2011, 12.45AM IST, ET BUREAU
BJP blames PM for wrecking consensus beteween government and opposition
NEW DELHI: BJP on Monday blamed Prime Minister Manmohan Singh for 'wrecking' the talks between it and the ruling side, for ensuring a smooth conduct of business in the monsoon session of Parliament.The party said Singh's "skeletons-in-the-Opposition-cupboard'' remark had set the tone for confrontation between the two sides.
The monsoon session of Parliament started on a stormy note on Monday, with the Opposition stalling proceedings in the Rajya Sabha. The Lok Sabha was adjourned for the day after obituary references were made.
BJP put the onus directly on the prime minister, arguing that his "unprovoked and ill-advised'' comments had vitiated the atmosphere on the eve of the commencement of the monsoon session and also set the tone for its remaining part.
"Everything was going fine. In the last three days, representatives of the government had been reaching out to us to ensure that the monsoon session went off peacefully, and we had been responding positively. But the prime minister's uncalled for remarks wrecked the cordial atmosphere that had been built during the last few days,'' Opposition Leader Sushma Swaraj told newspersons.
Home Minister P Chidambaram, while speaking to newspersons later in the day, sought to downplay the row triggered by the prime minister's remarks. "I don't want to comment on what the prime minister or the Leader of the Opposition said. There is some room for give and take in Parliament. What is important is that we get on with Parliament and if the Speaker permits a discussion in Parliament, we'll give our reply,'' he said.
BJP, however, trained its guns on the prime minister. Recounting the chain of events, Swaraj said that parliamentary affairs minister PK Bansal and his deputy Rajiv Shukla had met on Friday evening to find out our plans for the monsoon session. "I told them clearly that we did not want to disrupt House proceedings, but wanted discussion on certain important issues. They asked us to give in writing our priority list, which we gave,'' she said.
The next morning, she said, the BJP parliamentary party executive held its meeting to finalise the issues on which the party wanted discussion. "Wiser from the experience gained by us during the winter session, when the Speaker had rejected our notices seeking adjournment of House proceedings to discuss price, we decided to go in for discussions under Rule 184, which is followed by voting, on price rise and corruption, and on the Mumbai blasts, Land Acquisition Bill and farmers' problems and Telangana statehood agitation under Rule 193. A similar strategy was to be adopted in the Rajya Sabha. Our stance was endorsed at the meeting of the NDA floor leaders later in the day,'' she said.
"Pranab Mukherjee called up BJP parliamentary party chairperson LK Advani on Saturday evening, he wanted to meet him and the two Leaders of Opposition. He and Bansal subsequently met Advaniji and me. We told him about the issues which we had identified and the rules under which we wanted discussions. The Leader of the House told us that they would look into resolutions sought to be moved under Rule 184 and, if possible, change their language so that the government could vote with them,'' Swaraj added.
http://economictimes.indiatimes.com/news/politics/nation/bjp-blames-pm-for-wrecking-consensus-beteween-government-and-opposition/articleshow/9448905.cms
2G: Finance Minister Pranab Mukherjee warned Prime Minister Mahmohan Singh on spectrum
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 *Prime Minister Manmohan Singh with Finance Minister Pranab Mukherjee.
RELATEDS Union Finance Minister Pranab Mukherjee had suggested the course of action on telecom licences and spectrum to Prime Minister Manmohan Singh.Documents exclusively in possession of Headlines Today show that Pranab Mukherjee recommended on Dec 26, 2007 that DoT was busy following an older set of norms, which needed to be updated so that spectrum allocation was done in a transparent manner. Mukherjee was then the Union external affairs minister, but more importantly, he headed the group of ministers (GoM) on vacation of spectrum. Mukherjee, on being asked for his views on spectrum allocation by the prime minister, cautioned the government saying that enforcement of stringent norms was crucial. Pranab writes to PM "It's important to take this step in view of large number of court cases. Even though no stay has been granted to the litigants so far on the assurance by the government that policy would be followed in spectrum allocation, it can lead to problems if we don't have a clearly stated policy and norms in this regard," Pranab wrote. What Pranab Mukherjee said in his top secret note was a mirror image of what then solicitor general Ghoolam Vahanwati submitted in his note. An affidavit was filed by the government saying that spectrum would be first allocated to existing operators, then to persons to whom licences were issued in December 2006 and thereafter to persons to whom LoI have been issued for cross over technology. On December 26, 2007 then telecom minister A. Raja responded to the prime minister's letter informing him that after consultation with Pranab Mukherjee and Ghoolam Vahanwati he had been enlightened to take pro-active and pre-emptive action in allocating spectrum. In his note, Pranab Mukherjee wanted DoT's notified norms of March 26 to be speedily updated. In Aug 2007, TRAI suggested revised norms which were more stringent than the earlier ones. In Oct, 2007 Telecom Engineering Centre of DoT recommended even more stringent norms. A third committee set up under AS DoT was taking another look at the norms. No notification has been issued so far. The opposition, meanwhile, continues to bay for the government's blood. BJP spokesperson Prakash Javdekar says, "It just goes to show the complicity of so many people in the 2G issue. That's why we want a comprehensive discussion in Parliament. The court can only look into some aspects. There are several who are not chargesheeted but they played a role. Pranab's letter, Chidambaram's overnight change in stand, the PMO we want to discuss everything." A. Raja conveniently used the March 2006 norms which suited him to dole out spectrum. However, the prime minister didn't pay heed to Mukherjee's vital advice dated Dec 26 on how norms needed to be tightened. In the last para of his secret note, Pranab said: "While under the existing policy, the government may keep on issuing new licenses, the criteria for the grant of licenses may be strengthened and put in public domain at the earliest." Interestingly, the PAC report records that the external affairs minister's note with a 'suggested course of action' was submitted to the PM on Jan 7, 2008 only three days before Raja gave out Letters of Intent circumventing the system. The Solicitor General's note for the external affairs minister on the issue of telecom licenses stated: "TRAI recommended that there should be no cap on the number of service providers. For a service area. Thus government is obliged to scrutinize the pending applications and if the applicants are found eligible to issue licenses on a first come first served basis. Once an applicant becomes a licencee after complying with LoI conditions, the applicant then becomes eligible for spectrum as per WPC guidelines." Ironically, Mukherjee also suggested a more transparent and strengthened methodology for spectrum allocation at the earliest, while the PM ignored these suggestions. Meanwhile, Raja followed SG view in letter and spirit. Pranab Mukherjee told Headlines Today, "Let me clarify the position on GoM on spectrum which was set up under my chairmanship in Feb 2006. The mandate of this GoM was revised on Dec 7, 2006 and the revised terms of reference gave it the mandate to recommend measures for vacation of additional spectrum by large users like defence, space, para military forces in a time bound manner for the growth of mobile telephony. It had nothing to do with spectrum pricing." "The first meeting of GoM was held on Sept 7, 2007, which was followed by second meeting on Feb 6 2009 and the MoU between defence ministry and DoT was signed on the roadmap for vacation of spectrum on May 22, 2009," Mukherjee says. He adds, "Various references are being made to my meeting with A. Raja and then SG Ghoolam Vahanvaty. The fact is that in Nov 2007, PM had directed me for my views on telecom licenses and spectrum. This was in the context of COAI and some GSM operators challenging the criteria for vacation of additional GSM spectrum pending in telecom tribunal TDSAT. SG explained that as per directions of TDSAT, an affidavit had been filed in Nov 2007 indicating the way forward." "I briefly discussed the merits of the case and enquired whether any order had been passed by TDSAT. I was informed that there was no adverse order at that stage. The meeting lasted for about 15 minutes," Mukherjee said. |
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*http://indiatoday.intoday.in/site/story/2g-scam-pranab-mukherjee-warned-mahmohan-singh-on-spectrum/1/146856.html
02/08/2011
Yeddyurappa moves High Court against Lokayukta report
Bangalore: Outgoing Chief Minister B S Yeddyurappa today moved the Karnataka High Court seeking to quash the Lokayukta report on illegal mining and questioned its recommendations to prosecute him under the Prevention of Corruption Act.
Hours before Lokayukta Santosh Hegde demitted office, Yeddyurappa also filed a petition with the anti-corruption watchdog seeking a review of its report, saying the stigma attached to him by his indictment would continue to haunt him and pleaded for an opportunity to prove his innocence.
Yeddyurappa's move two days after he resigned came ahead of the BJP legislature party meeting here tomorrow when his successor would be chosen in a tricky exercise that has brought out the party's unit as a badly divided house.
In his petition in the High Court, Yeddyurappa prayed the court for quashing Chapter 22 of the report, which holds him guilty over the financial transactions between South West Mining Company and Prerana Education Society (PES) -- a trust owned and managed by his family members in Shimoga.
The Lokayukta recommendations relating to this transaction were beyond the scope of reference made by the government for probing illegal mining in the state, he said in the petition which is likely to come up for hearing tomorrow or the day after.
He contended the recommendation to prosecute him was also violative of a Division Bench order which stated that notices should be issued and explanation sought from those coming under the scope of the probe.
Yeddyurappa said he was not given a chance to explain his stand by the Lokayukta.
Yeddyurappa also submitted that neither the South West Mining Company nor Jindal Steels, whose applications seeking mining leases were pending since 2003, have been involved in mining activity in Karnataka.
According to the Lokayukta findings, South West Mining Company had donated Rs 10 crore to a trust (run by Yeddyurappa's family) while Jindal Steels purchased an acre of land (from Yeddyurappa's family members) on Bangalore outskirts for Rs 20 crore, whereas the guidance value fixed by the government was Rs 1.40 crore.
In the petition before the Lokayukta, Yeddyurappa pleaded for reconsidering its recommendation for prosecuting him under the provisions of the Prevention of Corruption Act, saying it was contrary to the Lokayukta Act and "there are certain errors which have crept into the report".
The report had not provided any substantive evidence to prove the charge against him, Yeddyurappa, who quit after putting a show of defiance following a direction by the BJP central leadership, said.
"The recommendations made in this case are liable for reconsideration as it is not part of the reference made by the state government. In fact, the recommendations are beyond the reference made by government," he said.
The government had sought a probe into illegal mining for the period from 2000 to July 19, 2010, the petition presented to the Lokayukta by Yeddyurappa's political secretary B J Puttaswamy said.
Yeddyurappa said had he been served a notice on the issue of Rs 10 crore donation received by the Prerana Education Society, the Lokayukta findings would have been otherwise.
He sought to distance himself from the trust, saying "so far as the donation to the trust (is concerned), I unequivocally make it clear that I am not a party to the trust. I was never involved directly or indirectly in the affairs of the trust. I have no say in the trust".
Source: PTI
02/08/2011
NDA picked Kalmadi as CWG chief, says cornered govt
New Delhi: Stung by the Comptroller and Auditor General's criticism of the Prime Minister's Office, the government today hit back seeking to shift the blame on the NDA government for the appointment of Suresh Kalmadi as Chairman of the Commonwealth Games Organising Committee.
Making a statement in the Lok Sabha first and outside later on the leaked report of the CAG report, Sports Minister Ajay Maken said the previous NDA government had signed the Host City contract, instead of the Delhi government and that was the source of all problems that followed later.
Maken's blame game was triggered by the contents of the leaked CAG report which is said to have faulted the Prime Minister's Office for letting Kalmadi capture the Organising Committee and control of say over the spending of over Rs 2,000 crore during the games.
Suggesting that the current PMO could do nothing regarding the PMO's appointment, he told reporters, "There were two options. Either to scrap the Commonwealth Games or to go with the Host City contract, which was signed by the NDA regime in November, 2004. There was no third option."
Maken said the Games management protocol clearly said the Indian Olympic Association (IOA) shall form the Organising Committee.
"When it (protocol) gave all powers to the IOA to form the OC, then there was no other option. Second, the Host City contract... should have been signed by the city government, Delhi government in this case. It should have been passed by the city Cabinet, Delhi Cabinet in this case," he said and questioned why it was passed by the Union Cabinet.
The minister also questioned why the contract was cleared by the Union Cabinet in the NDA government and signed by then Sports Secretary.
"By the central government signing at that time, they left all doors closed for us. Because, once it was signed by the Union government, it was binding on the Union government which could not have gone back (on it)," Maken said.
He said all Opposition parties "who are making a hue and cry now" were part of the General Assembly of the IOA which elected Suresh Kalmadi as the chairman of the Organising Committee.
At that time, the minister said, the General Assembly of the IOA was constituted by Vijay Kumar Malhotra, Tarlochan Singh, S S Dhinsa, perhaps Chautala.
"So all Opposition parties who are a making hue and cry now, they were part of that... they were members of the General Assembly on November 1, 2004 even before Suresh Kalmadi was appointed as chairman of OC by the Government of India," the Minister said.
"The IOA General Assembly had passed and recommended that Suresh Kalmadi should be appointed the OC chairman by all these people cutting across party lines. So, I think, the BJP or the NDA should first look at their own record. It was decided during their time," he said.
The minister said the NDA government's decision had led to the central government committing to all financial instructural obligations vis-a-vis the Games.
"By one stroke, it took away from the Government of India any residual, amending or discretionary powers that could have been exercised in emergent situations to salving any wrong doings," he said.
Source: PTI
By Mayank Aggarwal/ DNA-Daily News & Analysis, 02/08/2011
Anna calls PM liar, Sibal mad
Gandhian loses his cool, says his fight is against govt, not Parliament
New Delhi: Veteran Gandhian Anna Hazare on Monday lashed out at Prime Minister Manmohan Singh for defending the government's decision to keep the PM out of the Lokpal's ambit.
A charged-up Hazare said it was unfortunate that an honest man like Singh had started telling lies. "Till now, the people and I felt we have an honest and non-corrupt prime minister," he said.
"Our fight is not against Parliament, it is against the government. Even after my letter to him (Singh), if he says this it is unfortunate. The prime minister was a good person. What will happen if he too starts telling lies?"
On Sunday, Singh said it would not be advisable to keep the PM within the Lokpal's ambit. "The government took the decision after considering all factors," he said. Singh had earlier said he supported the decision to have the PM under the Lokpal.
The civil society members in the joint drafting committee were made to believe the government would put its versions of the draft and that of the civil society's before the cabinet. But that did not happen, Hazare said. He questioned the Centre's intentions and said he was ready to go to jail if he was not allowed to demand a strong anti-corruption law.
Rubbishing suggestions that he was trying to blackmail the government, Hazare said, "I am not very happy to go on a fast. The government is forcing me to do so. Why doesn't the government bring a strong Lokpal Bill?" Had the government listened to the voice of its people, scams like the 2G spectrum allocation would not have happened, he said.
He made it clear he has no preference for Jantar Mantar to carry out his fast. "Jantar Mantar is not the issue, the Lokpal is," he said.
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02/08/2011
Protests stall Parliament
New Delhi: Both houses of Parliament were adjourned twice on Tuesday, forcing cancellation of the crucial question hour for the second successive day, as the government and the opposition seemed headed for a stalemate over the nature of debate on rising prices and corruption.
The Rajya Sabha and the Lok Sabha were first adjourned till 12 noon and then till 2 pm as the unrest continued. Trouble began as soon the Rajya Sabha and the Lok Sabha met for the day's proceedings at 11 am. Opposition members rose from their seats, demanding that the question hour be suspended so that debates on price rise and corruption could be taken up on priority basis and under the rule that entails voting.
The government has so far rejected this demand, conceding that it was ready to debate any issue but not under rules that entail voting and make the house recommendations binding on it.
MPs from the Uttar Pradesh's ruling Bahujan Samaj Party (BSP) also protested, demanding the government table in the current session the new land acquisition bill that was drafted last Friday.
Chairman Hamid Ansari immediately adjourned the Rajya Sabha following the ruckus created by opposition MPs. When the house met again at 12, the scenes were no different, forcing K Rahman in the chair to adjourn the house till 2 pm.
In the Lok Sabha, Speaker Meira Kumar made obituary references to pay tributes to two former MPs who died during the inter-session period. However, when she called for questions to be laid, opposition MPs were on their feet, demanding that discussions on graft and inflation be held first. The speaker went ahead with the schedule, prompting noisy protests in the house. She adjourned the house till 12 noon.
Protests returned when the house reassembled. However, Meira Kumar did manage to get some papers tabled in the house, including a copy of an agreement between the Food Corporation of India and the Ministry of Consumer Affairs, Food and Public Distribution for the year 2011-2012.
But the noisy protests gained momentum, forcing her to adjourn the Lok Sabha to meet again at 2 pm. With the Parliament business being stalled for the second day of the month-long session, the government and opposition appear headed for another logjam.
The Bharatiya Janata Party (BJP)-led opposition has already indicated that it will seek answers from the government on rising prices, corruption and terrorist attacks.
Both the BJP-led National Democratic Alliance (NDA) parties and the Left have demanded discussion on these issues under the rule that entails voting.
"Discussion under rules that entail voting will make the government take a committed stand to deal with price rise," Communist Party of India-Marxist (CPI-M) leader Sitaram Yechury said. The Left parties have already given a notice in this regard, he said.
The BJP has also sought answers on the 2G scam from both Prime Minister Manmohan Singh and Home Minister P Chidambaram after jailed former IT and communications minister A Raja dragged them into the scandal, saying he had kept them informed with every decision he had taken in issuing telecom spectrum licences.
Source: IANS
By Lison Joseph/ DNA-Daily News & Analysis , 02/08/2011
Rs 70 cr! That's quite a bundle Mr Mittal
Bharti Airtel board to meet on September 1 to facilitate founder's salary
As mobile phone companies move gingerly to raise tariffs after a wretched three-year-rut, Bharti Airtel, India's biggest, plans to more than double its founder's pay.
On September 1, shareholders will vote on raising Sunil Bharti Mittal's compensation from Rs 27.5 crore now to up to Rs 70 crore a year. Last fiscal, the highest paid Indian Chief Executive was Naveen Jindal of Jindal Steel & Power, who received Rs 39.7 crore.
"The human resource committee (of the board of directors) on July 29, 2011, decided for no increment in the remuneration for Sunil Mittal for the current fiscal," a company statement said.
"The proposal to revise the remuneration... up to a maximum of Rs 70 crore is an enabling provision for the next five years, and should be seen in that light," the company said, meaning that's the maximum salary Mittal will get in any of the next five years.
From 2010 fiscal, Mittal got a 17% raise on his then-pay of Rs 23.5 crore. The current compensation of Rs 27.5 crore breaks up into salary and allowances of Rs 9.58 crore and performance-linked incentives of Rs 17.87 crore.
In contrast, Mukesh Ambani, Chairman and Managing Director of Reliance Industries, India's largest private sector company, took home a pay cheque of Rs 15 crore in the last two years.
Interestingly, the salary of Airtel's Joint Managing Director Manoj Kohli fell to Rs 4.1 crore in the last fiscal (2010-11, ended March 31, 2011) from Rs 4.52 crore in 2009-10. Mittal is ranked 110 among the world's richest and ninth richest in India by the Forbes magazine.
Salary earners in India on an average earned an increment of around 13% this year, the highest in the Asia-Pacific region according to Aon Hewitt, a global human resources consultancy.
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The Impact of the President's Trip to India and East Asia
Posted on 11 February 2011 by AfricaBusiness.com
Remarks
Geoffrey Pyatt
Principal Deputy Assistant Secretary, Bureau of South and Central Asian Affairs
U.S.-India-Singapore Policy Forum
The Regent Singapore
February 10, 2011
Remarks as prepared
I'd like to thank the U.S. Embassy, Indian High Commission and both the Indian and American Chambers of Commerce for putting on this important panel discussion and asking me to speak today. I'd also like to thank Ambassador Pillai of the Institute of South Asia Studies along with Ambassador Ali and Professor Bajpai for their participation here as well. It is great to be back in Singapore. As Secretary Clinton noted last December, "few countries punch as far above their weight as Singapore, and the United States continues to look forward to working together to support economic growth and integration [across Asia]." My visit today is emblematic of that wider U.S.- Singapore partnership.
I first began my experience in India in 1992, as a junior political officer based in New Delhi. Two decades of experience watching India's progress teaches you to be patient with the ups and downs of decision making in Delhi – but viewed in this decades-long context, there's no question regarding the country's upward trajectory, and that's a trend line that's powerfully in the interests of the United States.
We have witnessed a positive and transformational change over these two decades, most dramatically evident in the Indian economy. With cutting edge companies like Bharti and Infosys, the Indian economy has undergone a defining change. The days of the license Raj are long past, replaced now by an Indian economy that is directly linked to global markets around the world and vital to our own economic prosperity and competitiveness.
POTUS VISIT
President Obama's November trip to India turned out to be one of the most successful trips ever taken by an American president to South Asia. I'd like to highlight a few of the accomplishments that showcase our broad agenda and the new dimensions of our global strategic partnership.
President Obama set his stamp on the U.S.-India agenda with his declaration that our relations constitute an "indispensible partnership" for the 21st century. As President Obama said in his November 8 speech to the Indian Parliament, "For the first time ever, our governments are working together across the whole range of common challenges we face." Indeed, he went on, "The United States not only welcomes India as a rising power, we fervently support it, and we have worked to help make it a reality."
The President's accomplishments around his visit illustrate how we are taking the U.S. relationship with India into new and uncharted territory:
Headlines went to our endorsement of a reformed UNSC that includes India as a permanent member
But there was also significant progress on defense sales and our security partnership:
finalizing the $4.1 billion sale for ten C-17 Globemaster heavy lift aircraft, a transaction that builds on
the 2008 purchase of six C-130J transport aircraft by the Indian Air Force, future potential for large scale cooperation in this area. The first C-130J just arrived in India last week. Both acquisitions demonstrate India's resolve to build a military capacity that meets its expanding strategic horizons.
Recent weeks have also seen intense discussion of India's tender for a new Medium Multi Role Combat Aircraft (MMRCA): Two American companies are competing for this $11 billion tender to provide 126 aircraft to the Indian Air Force. Such a deal would revolutionize our military relationship and highlights our willingness to share with India the most advanced technologies.
Secretary Locke is in India this week at Aero India and underscored the importance of high technology trade to our knowledge based economic partnership.
In the area of non-proliferation, we concluded an important MOU on global nuclear security issues, under the auspices of India's Global Centre for Nuclear Energy Partnership
US support for India's full membership in the four multilateral export control regimes (Nuclear Suppliers Group, Missile Technology Control Regime, Australia Group, and Wassenaar Arrangement)
Reflecting our confidence in India's non-proliferation credentials, we removed India's space agency (ISRO) and its major Defense Research Organization (DRDO) from the Commerce Entities List, with positive implications for space and defense cooperation
Completed the governmental understandings required for implementation the U.S.-India civil-nuclear cooperation agreement and welcomed India's intention to ratify the Convention on Supplementary Compensation this year. This last step is a critical piece of the 7 year U.S.-led effort to bring India into the mainstream of the international market for civil nuclear technology.
We also advanced several other joint initiatives that illustrate how our partnership is advancing in almost every area of government endeavor.
Launched U.S.-India Open Government Dialogue
Clean energy: robust private sector synergies, along with gov-to-gov collaboration like the bilateral Partnership to Advance Clean Energy or PACE and a new MOU on shale gas.
Agreed to convene a higher education summit in June
Human security: work together to develop, test, and replicate transformative technologies – "an Evergreen Revolution."
New trilateral cooperation to advance economic development in regions of shared interests such as Afghanistan and Africa. Reflects both India's rise as a more much consequential actor in international politics and the ways in which that development helps to advance U.S. interests.
THE PROMISE OF AN INTEGRATED ASIA
India-Asia
So what does a global strategic partnership between the United States and India mean for Singapore, Southeast Asia, and the Asian continent writ large?
One area of U.S.-India cooperation in which we see great potential is furthering India's engagement with East Asia; working together to strengthen the bonds that tie our nations – the world's largest and oldest democracies – with the economic and social dynamism that exists from Seoul to Jakarta, and from Singapore to Manila.
To echo what Assistant Secretary of State for East Asian and Pacific Affairs Kurt Campbell said recently, "we think that India's role in the Asian-Pacific region stands to be one of the most important new developments over the course of the next decade."
We've moved from a transatlantic century to a transpacific century in which the rise of Asia has already started to define the 21st century. As the fulcrum of geopolitics moves to Asia, India plays a critical role in U.S. strategy. India, of course, has long been an Asian power in its own right – and the signs of India's cultural influence can be seen throughout the region. As Under Secretary of State for Political Affairs William Burns stated in an address last year, "It is natural for India to "look East," where its soft power — long visible everywhere from the temples of Angkor Wat to the food courts of Singapore to the crowds flocking to see the best of Bollywood — is increasingly complemented by its economic power."
We welcome the fact that other large Asia-Pacific democracies – Indonesia, Japan, Australia, and South Korea – are also engaging more closely with New Delhi and cooperating more systematically on security issues. Likewise, it is no coincidence that the President began his trip to four Asian democracies with a three-day stay in India.
Engaging the region has been a priority for New Delhi, which launched a "Look East" policy in the early 90's. But this engagement has acquired new velocity thanks to India's economic rise. Like President Obama, Prime Minister Singh made his own Asia Pacific trip last year, visiting Japan, Vietnam and Malaysia in October. India has played a positive role in regional multilateral bodies, such as the East Asia Summit and ASEAN, with which it concluded a free trade agreement in 2009. It is especially notable that India has developed close economic and security relationships with Australia, Japan, Korea, and significantly Singapore, which holds regular military exercises in India.
But beyond these stalwart neighbors, other Asian nations have also garnered attention from New Delhi of late.
After years of underwhelming trade statistics, India has now begun to engage the Philippines as a key Pacific partner. Philippine Airlines recently announced a non-stop flight to Delhi beginning in March, after a 16-year hiatus in direct air service between the two nations. Reflecting its burgeoning Business Process Outsourcing (BPO) sector, the Philippines has attracted a strong presence from the top 20 Indian BPO firms.
Indian-Indonesian ties also continue to improve, with economic relations as their mainstay. Following a year in which India hosted summits with a all five of the UNSC P5, it is significant that the chief guest for last month's Republic Day celebration was the President of Indonesia. This visit highlighted the two countries' strong economic relationship, while increasing nascent political and cultural ties and holding the promise of a major increase in investment, especially in India's infrastructure sector.
We strongly welcome this recent progress in East Asian and Southeast Asian bilateral relations with India, and hope New Delhi will further build on these steps, adopting a "Be East" policy that seeks to expand its market and security integration across the region and enhance its role in Asian multilateral fora. For example, a "Be East" policy might entail India seeking an increased role in the East Asia Summit (EAS), and developing further political relations with East Asia that match India's vibrant trade and investment growth in the region.
The United States, I should mention, is interested in working with India and other members of the East Asia Summit to make it the premier forum for Asia-Pacific leaders to discuss pressing security and strategic issues. And it's worth remembering that President Obama has announced that he plans to attend the 2011 East Asian Summit in Indonesia, providing an occasion for the U.S. and India to deepen our dialogue about security and economic architectures in Asia.
Coming back to Singapore and seeing how much this region has benefited under the ASEAN umbrella prompts me to take a comparative glance at the South Asian Association for Regional Cooperation (SAARC). India was a cofounder of SAARC (with Bangladesh) in 1985. SAARC has increased India's regional trade, and provides New Delhi with a platform for discussion and technical agreements, but the organization has yet to reach its full potential. India championed the South Asian Free Trade Area (SAFTA), which we see as an important opening to foster greater trade flows among SAARC members and enhance trans-national collaboration on goods tradable with other countries, including the United States. The observer roles of China, Japan, Korea, Australia and the U.S. have helped expand SAARC's brand across the Pacific, but we see much more that SAARC could do.
Later this evening, I fly to Bangladesh—a country that helps to bridge South and South East Asia. Regional cooperation, specifically greater strategic partnership with India, is a key objective of the Government of Bangladesh – one that my government strongly endorses. On issues ranging from counter-terrorism to food security to academic exchange, India and Bangladesh share common goals and can reap mutual benefits for millions in South Asia. Owing to its geographic position, Bangladesh also seeks to develop trade links to Southeast and East Asia. Bangladesh was recently chosen to host the headquarters of BIMSTEC (the Bay of Bengal Initiative for Multi-sectoral Technical and Economic Cooperation). We welcome this initiative.
Today, for the first time, almost all the countries on India's eastern periphery – Sri Lanka, Bhutan, Bangladesh, and Nepal – have democratically elected governments in place, stabilizing South Asia and helping India to think more ambitiously about its role in other Asian forums like ASEAN, ARF and the EAS that are further away. In a Washington D.C. speech last September, Indian National Security Advisor Menon enunciated India's approach to this region, stating that an "open, balanced, and inclusive security architecture in Asia would be a goal" – such an architecture would benefit both the United States and India.
Although the region's vast geography will always play an important role in economic and security cooperation in Asia, it would be wrong to think of India as merely an Indian Ocean power. It's worth remembering that the southern part of India's Andaman and Nicobar Islands lie closer to Ho Chi Minh City and equal distance from Guangzhou than they do from New Delhi. India in this sense sits at the gateway to the Pacific – the Straits of Malacca. I again quote India's National Security Advisor, who, on the eve of the President's trip stated: "India and the USA have viewed each other across the Eurasian landmass and the Atlantic Ocean. We get a different perspective if we look across the Pacific, across a space that we share and that is vital to the security and prosperity of our two countries." India is a Pacific nation.
India-Pakistan Relations
In the United States' engagement with the countries of South Asia, one of our overarching objectives is to facilitate new linkages and opportunities for ALL the nations in the region. Reinvigorating trade and commerce between India and Pakistan, for instance, can provide extensive benefits to both countries and the vibrant societies that seek to flourish within them.
Increased economic openness across South Asia, including between India and Pakistan, will generate new economic opportunities for one of the world's youngest and most vibrant populations. At the moment, South Asia is one of the least economically integrated regions in the world. While accounting for nearly 23 percent of the world's total population, the region's share of global GDP is less than 3 percent. In terms of trade linkages, SAARC stands in sharp contrast to regional forums in East Asia.
The pace of economic integration in the Asia Pacific region over the last two decades was unprecedented and serves as an example for other regions. It should, and I believe it can, be replicated in South Asia.
Just as the private sector did in ASEAN, trade associations such as the Confederation of Indian Industry (CII) and the Federation of Indian Chambers of Commerce and Industry (FICCI) can play a significant role in improving trade relations between India and Pakistan.
Recently, FICCI set up two "Made in Pakistan" business and product exhibits in India, which were well-received. FICCI now plans to organize similar "Made in India" exhibitions in Pakistan for which it is closely working with the Federation of Pakistan Chambers of Commerce and Industry.
Clearly, there is pent up demand for trade between Indian and Pakistan, as demonstrated by the volume of trade that transits third countries to avoid restrictions or endures the cumbersome offloading and reloading that occurs at the land border. Some analysts estimate that trade between India and Pakistan could be ten times what it is currently if both Government's work together to relax economic restrictions on cross-border trade.
To provide context, official bilateral trade between India and Pakistan reached $2.75 billion in 2009 from $215 million in 2001, and those numbers will only grow as India's consumer class balloons.
Clearly, the potential for creating new regional synergies is there. With this in mind, I'd like to close with a quote that addresses both the desire and the potential for closer India/Pakistan relations: As Indian Prime Minister Manmohan Singh said in 2007, "I earnestly hope that relations between our two countries become so friendly and we generate such an atmosphere of trust between each other that the two nations would be able to agree on a treaty of peace, security and friendship. I dream of a day, while retaining our respective identities, one can have breakfast in Amritsar, lunch in Lahore and dinner in Kabul. That is how my forefathers lived. That is how I want our grandchildren to live."
The United States shares this hopeful vision for the future of business and people-to-people ties in South Asia. Indeed, I would argue that India's emergence as an Asian power – which President Obama celebrated in his visit to Delhi – will only benefit from faster progress in social and economic integration in South Asia. Both are trends that are strongly in the interests of the United States.
With that, I'd like to invite any questions for the panel.
Source: STATE.GOV
India outpaces China
Winning the growth World Cup
Apr 15th 2011, 17:44 by S.C. | HONG KONG
DID India grow faster than China last year without anyone so much as noticing? Many pundits, including this newspaper, have speculated about when India's growth might outpace China's. (The debate even spawned a meta-debate in India about whether the debate was worth having.) So it would be ironic if the moment had already come and gone, without any fuss, fanfare or felicitation.
China grew by 10.3% last year, a punishing pace to beat. India, according to the advance estimate by its Central Statistics Office (CSO), grew by 8.6%. Fast, but not fast enough. But today a colleague pointed me to the IMF's latest World Economic Outlook (Table 1.1), released earlier this week. It says that India grew by 10.4% in 2010. How can that be?
India has two idiosyncrasies in the way it reports its GDP figures. First, it reports growth for the fiscal year, not the calendar year. So the 8.6% estimate refers to the 12 months ending on March 31. That in itself makes little difference. But the second idiosyncrasy is more important. India typically reports its GDP "at factor cost". That means it adds up all the income earned in the course of producing the country's goods and services. Other countries, including China, typically report their GDP "by expenditure", adding up all the spending on domestically produced goodies. Since every purchase is a sale, expenditure should equate to income: every rupee spent by one person is a rupee earned by someone else. But a couple of things get in the way: taxes and subsidies.
A sales tax adds to the amount you have to spend on a good. This boosts measures of GDP by expenditure, relative to income-based measures. A subsidy has the opposite effect.*
If these taxes and subsidies remained steady as a percentage of output, they would not affect the growth rate of GDP, even if they do affect its level. But in India net indirect taxes rose from 7.5% of output in 2009 to 9.2% in 2010, boosting the growth rate of GDP by expenditure for that year.** That was enough to lift India's growth by this measure to 10.36% in 2010. That's fully 0.06 percentage points faster than China. Jai Hind!
* A numerical example might help to illustrate the difference. In the first three months of 2010, India's GDP at factor cost amounted to 12,051 billion rupees. But the buyers of that output paid an additional 1,888 biilion in indirect taxes, adding to the expenditure measure of GDP. They also benefited from 544 billion in subsidies, subtracting from the expenditure measure. The net result was that India's GDP by expenditure in January-March 2010 was 13,395 billion (=12,051+1,888-544).
** All the figures required to reach this conclusion were available from February 28, when the CSO released its estimates of GDP (at factor cost and by expenditure) for the third quarter of last fiscal year, otherwise known as the fourth quarter of 2010.
-- http://www.economist.com/blogs/freeexchange/2011/04/india_outpaces_china
| 162 ESCTER 08 E bis - The Rise of the Indian Economy: Transatlantic and Global Implications |
| Co-Rapporteurs: Petras AUSTREVICIUS (Lithuania) / John BOOZMAN (United States) |
| TABLE OF CONTENTS I. INTRODUCTION II. BACKGROUND - FROM MILLENNIAL POVERTY TO GLOBAL DYNAMO III. KEY MACRO ECONOMIC TRENDS IV. PERSISTENT PROBLEMS IN THE STATE MARKET RELATIONSHIP V. INDIA AS A DEMOCRATIC AND DEVELOPMENTAL MODEL – AN ALTERNATIVE TO THE CHINESE MODEL VI. THE ENERGY AND ENVIRIONMENTAL DIMENSION OF INDIA'S DEVELOPMENT VII. THE GEO-POLITICAL DIMENSION VIII. CONCLUSIONS BIBLIOGRAPHY
I. INTRODUCTION 1. In 2005, for the first time in over 100 years, emerging economies accounted for more than half of the world's GDP in purchasing power parity terms. This is hardly an inconsequential milestone; indeed, economic shifts of this scale can eventually entail transformation in the security landscape as well. The subtext here is that Europe and North America's relative global economic power is waning and this, in turn, will have myriad implications for the way the international system is structured and maintained. 2. Change on this scale, however, also brings opportunity for the West. It suggests that there may be emerging engines of growth that could lighten the burden of global economic management. This is already apparent in the Far East where China's growth is generating tremendous economic opportunities for its regional trading partners, while keeping a lid on global prices, at least in manufactured goods. India increasingly shows signs that it too may soon play this role. Global economic leadership is hardly a new phenomenon for either of these ancient cultures. One economic historian has suggested that over the 18 centuries prior to 1820, India and China collectively generated 80% of the world's GDP. By 1950 that share had fallen precipitously, but it has begun to rise over the last 15 years. The Chinese economy grew at 11.4% in 2007 (EIU) and the Indian economy at 9.4% (Economy Watch). If current trends continue in these two giant economies and in other rapidly emerging economies, the developing world will account for two-thirds of global output within 20 years ("The New Titans," The Economist). One important question that immediately arises is whether these countries are preparing themselves for global stewardship. 3. This relative shift in economic power implies that current OECD countries will eventually be operating in a global order in which they will need to heed the concerns of those rising powers. Countries like India, China and Brazil are not only growing at a far greater pace than developed countries; they are doing so by deepening their integration in global commercial and financial markets. Their relative weight in the system has accordingly risen, and this was very evident in the Doha Round. It is precisely for such reasons that this subcommittee has produced three reports on developments in Asia over the past three years and why this year's report is focusing on India, a country which is playing an ever more important role in the international system and, importantly, in South-West Asia where NATO troops are engaged in a high stakes anti-insurgency campaign.
4. For much of the last century, India's economy was characterized, among other things, by a very slow growth rate of less than 0.8% per annum - a rate of change that directly correlated to the country's population growth. In other words, for decades, India made no strides in advancing per capita income. India's millennial underdevelopment, the turmoil that accompanied the end of colonial rule, and the policy choices it made after independence were all elements of the story. 5. Independence had promised a new direction for the country. Gandhi himself offered an alternative development model for India, perhaps best encapsulated by the notion of a spinning wheel in every home. Gandhi's idea was that India should industrialise in a manner that utilized its vast labour force, rather than employ expensive labour-saving machinery (a similar notion to Hekscher-Ohlin specialization according to relative factor endowments). Gandhi allied this to an inclusive vision of 'Hindustani' spirituality and traditional values. For their part, Nehru and his political allies set out to build a democracy informed, in part, by Fabian socialist ideas. In keeping with the predominant development paradigm of the day, Nehru argued that the state should be the primary agent of national economic life. The nationalist myth that India had been ruined by more than a century of direct UK rule inspired his post-liberation strategy of self-sufficiency. This, in turn, was informed by export pessimism, which led logically to import substitution and state-driven development strategies. These ideas helped structure and rule the Indian economy. The state itself established myriad micro-economic and financial controls while ensuring that a publically employed technocracy had the appropriate training to preside over the country's industrialization, modernization and development processes. India developed an excellent university system, and subsequently produced many world-class scientists and economists. Its management record was less impressive, although the project imbued the nation with a sense of mission that certainly reinforced the fragile new state. 6. Nehru himself strongly subscribed to the notion of planning, and saw in the Soviet Five Year Plan model, for example, a means to galvanize his own country's development. An elaborate licensing system was later established that regulated investment and production, plant capacity, output prices, the quantity of capital, and sectors or industries that were to be reserved for small producers (Varshney). While India's political elite welcomed private industry, they created space for it within a highly regulated framework. In the Indian order of things, private industry was subordinated to large state industries which Nehru saw as the critical agents of national development. Indian governments also subscribed to the then fashionable "infant industry" theory of development, which postulated that industrialization, modernization and ultimately economic and social development would only be possible through trade protection. Trade barriers would theoretically provide domestic manufacturing firms with the breathing space to take off. 7. Indian economists today generally acknowledge that Nehru's system was quite onerous over time, particularly as trade barriers were reinforced, rather than eradicated. The notion that a small, technocratic elite could develop a huge, diverse and impoverished country by allocating resources from the centre proved misguided. It failed to recognize that no central authority could possibly possess the requisite information to micromanage the economy of such a vast country, particularly when such intervention was fundamentally distorting relative prices and market behaviour. What ultimately emerged was a thoroughly Byzantine regulatory order that ultimately came to be known as the "permit-license-quota raj" (Yergin and Stanislaw). 8. Tariff barriers may have been even more harmful to the Indian economy than domestic regulation. Although Indian protectionism accorded domestic industries guaranteed markets, they did nothing to ensure that those firms were efficient because the market was so artificially segmented and controlled. Deprived of domestic and international competition, India's firms became notoriously inefficient. This system thus denied India many of the efficiency gains that competition and trade routinely accord its practitioners. Moreover, the country essentially missed out on the post-war global explosion of wealth-creating international commerce. India's industrial base became ever more bloated and complacent. State-owned monopolies and oligopolies set prices and confronted few incentives to respond to market opportunities. At the same time, state regulation of the private sector resulted in some of the developing world's strictest price, production and investment controls. This effectively undermined the private sector's capacity to respond to market opportunities. Any company worth more than US$20 million, for example, had to submit all major investment decisions to the state for prior approval, and the gears of that state apparatus ground very slowly indeed. 9. By the 1980s Indian borrowing had soared, and many state-owned firms were effectively bankrupt and lacked the capital and incentives to invest and innovate. Indeed, it was far easier to live off state subsidies, which ensured that the system became ever more entangled in political patronage. The public sector had grown relentlessly over the first 40 years of India's independence as Nehru's policies were essentially continued by his successors. Indira Gandhi, Nehru's daughter, who ruled the country from 1966 to 1977 and from 1980 until her assassination in 1984, even aspired to transform India into a socialist republic. She briefly suspended Indian democracy, further entrenched the patronage capacities of the governing party and centralized the central state's power over the federal states (Mohan, The Washington Quarterly, Summer 2007). 10. The situation only began to change under the government of Rajiv Gandhi, who was elected on a platform of economic reform. Rajiv managed to implement a modest level of deregulation and tax reform, despite enormous political resistance within his party to these liberal innovations. But Rajiv's government was short-lived, and he resigned in 1989. His successor, Narasimha Rao, an old style Congress Party stalwart with little inclination to continue the reform process, inherited such a profound fiscal and balance of payments crisis that he had little choice but to continue the unpopular reforms and fiscal retrenchment introduced by Rajiv. By 1991 the central government deficit stood at 8% of GDP, and the treasury was virtually empty (Yergin and Stanislaw). Confronted with looming financial catastrophe, Rao tapped Manmohan Singh, an Oxford-educated economist with strong liberal credentials, to be his finance minister, Harvard-trained Palaniappan Chidambaram became commerce minister, and these two top technocrats became chief architects of India's most radical macro- and micro-economic reforms. Today Singh is India's prime minister, Chidambaram its finance minister and, along with Montek Singh Ahluwalia, the deputy chairman of the planning commission, they form what the Indian press has called India's "Economic Dream Team" (Roy). 11. It is perhaps no coincidence that India's reform effort began in earnest, just as Soviet style central planning in Eastern Europe was in its death throes. These reforms were undertaken by some of the same people who had been charged with leading the planned economy. Their reforms were adopted in such a manner as to minimize some of the shocks to India's fragile economy, and their presence within the state offered a degree of reassurance to many of the sceptics in and out of government (NATO PA, 126 ESCTER 08 E). 12. Singh and Chidambaram very quickly devalued the rupee, slashed commercial subsidies, reduced tariff and non-tariff barriers, and eliminated a raft of archaic and utterly counterproductive regulations, which had long prevented managers from developing their businesses. The impact of these changes set the country on a path from which no succeeding government has fundamentally deviated. Indeed, the nationalist BJP (Bharatiya Janata Party) government, which ruled between 1999 and 2004, embraced the reform effort and even accelerated it in some areas. Trade and foreign investment restrictions were further eliminated in that period, resulting in a rapid expansion of trade, soaring foreign investment and the emergence of an important high technology and service industry. India had finally become a real protagonist in the global economy, and this has made all the difference in terms of its development path. 13. The net effect of these reforms has been to give far greater decision-making power to entrepreneurs and managers and to begin to disengage the state, at least partially, from the management process. Ever less hamstrung by the permit raj, an Indian entrepreneurial class has swiftly emerged from the ranks of its highly educated technocracy. After decades of second-class citizenship, India's private sector now constitutes the leading edge of national growth. Many firms are expanding internationally and some are becoming global brands. More than 100 Indian companies now boast a market capitalization of over US$1 billion and the country's stock market has boomed in recent years. The banking sector is also in far better shape than it was a decade ago, although the state has not moved to privatise state-owned banks. Generally, however, the private sector is driving growth and, in contrast to China, it attracts 81% of all bank lending in the country (NATO PA, 126 ESCTER 08 E). The ratio of bad loans, not surprisingly, is far lower in India than in China. Prior to the current global financial crisis, such loans constituted only 2% of India's outstanding loans, a sharp contrast to the situation in China where that figure approached 20% (Gurcharan). 14. Prime Minister Manmohan Singh was expected to put economic reform at the centre of his government agenda in 2004, even though many touted the return of Congress as a rejection of liberalization. Indeed, Singh is somewhat a prisoner of his own party and the governing coalition, which continues to defend some of the more interventionist practices and structures that long strangled Indian growth. Many of the Congress party's electorate are poor and have not seen substantial benefits from liberalization. Labour market protections are among the most sacred vestiges of the party's legacy and have ranked among the most difficult to change. Job creation schemes are still common, although they do little to add to the country's productivity, its long-term development, or even to net job creation. They are nonetheless defended as having an antipoverty function. The liberal critique is that they tend to crowd out the more dynamic private sector which, under the right circumstances, would generate more jobs than government ever could. Government job programmes, nevertheless, are symbolically important in a society in which certain sectors of society and certain regions are benefiting far more than others from liberal reform. It must be noted here that 90% of Indian workers are employed in the informal sector (OECD briefing).
15. It is also important to recognize that India has had a modern industrial sector for a relatively long time, and its first factories were built in the 1850s. When it achieved independence, India was the world's seventh largest industrial country. This should put India's recent success into some perspective. Economic achievement is not new to India, but its growth has rapidly accelerated, making it a globally consequential actor. 16. The country's middle class now numbers around 250 million people, and millions of others are pulling themselves out of poverty. India's once explosive population growth has now slowed significantly from 2.2% a year to 1.7%, which is helping to boost per capita incomes. These rose from US$1,178 in 1980 to US$3,051 in 2006 in purchasing power parity terms (Gurcharan). The economic and demographic shifts also give families more opportunity to invest in the education of their children, another vital source of long-term economic development. According to the journalist Das Gurcharan, 30-40% of India's growth can be attributed to more efficient use of production factors. 17. India's economy grew at 6% per annum between 1980 and 2002 and at roughly 8.6% a year over the last four years. In the fiscal year to 31 March 2007 it had jumped to 9.4% (Range). These figures place it among the world's most rapidly growing countries over the last 25 years. With investment rising as a proportion of GDP to nearly 30%, India is also laying foundations for continued expansion, although the pace of growth will depend on many factors including the state of the world economy, the evolution of the current financial crisis, and the degree to which Indian governments are willing to advance reform. 18. India's exports have risen from US$100 million in 1990-1991 to an estimated US$100 billion in 2007 or roughly 30% of GDP (Varshney). Until very recently there had been signs of overheating, with demand consistently outstripping supply, firms operating above optimal capacity, budget and trade deficits rising, and inflation approaching 7%. Despite the growth of exports, current account deficits have mounted in recent years, as has the public debt to GDP ratio ("India on fire," The Economist). A significant credit boom had also triggered a rise in equity and housing prices, but this trend has slowed significantly due to the global credit crunch. India has also been highly dependent on short-term capital inflows in recent years, and this may leave it, like many emerging countries, vulnerable to rising interest rates and a possible "flight to quality" in today's jittery conditions. Restrictions on longer-term direct investment capital are one reason that India has come to rely on short-term capital inflows. 19. As suggested above, India is hardly immune to the burgeoning global financial crisis and, indeed, its growing integration into the world economy makes it more vulnerable to external developments than it was when it operated in a more autarkic system. Not surprisingly, growth has been slowing in recent months. The Economist Intelligence Unit has revised downward its previous forecast of 7.7% growth for the 2008/9 fiscal year to 7.5% due to inflation and rising fuel and food prices and general market turbulence (Times of India, 25 August 2008). The dollar's slide has further lowered profit expectations as it undermines export competitiveness. Indian companies have also increasingly turned toward the domestic market to generate new earnings sources. Tata's introduction of the 1-lakh car in January 2008 can be seen in this light (Yee). That said, India's most dynamic firms continue to maintain an outward-looking strategy and Tata itself has recently acquired Land Rover and Jaguar from Ford (Bellman and Range).
20. The legacy of India's particular development path is apparent in the state apparatus, which remains sprawling and inefficient. That structure retains strong powers of intervention that hamstring business and limit the job creation potential of India's economy. The anomaly of India's high technology growth path, which is fairly capital intensive, also means that growth is producing less employment than one would expect. Indeed, neoclassical economic theory and particularly the Heckscher-Ohlin theory, predicts that countries will specialize in and export products which require inputs that they have in greatest abundance. In India's case, labour is obviously its most abundant factor of production. Yet, India is generating enormous wealth in high technology and service industries, which are well served by a relatively small but extraordinarily well-trained segment of India's labour force. Given its high training, that particular segment of the labour force can be considered a capital intensive production factor. Economists see this as somewhat paradoxical, and the fact that India has not undergone a labour-intensive manufacturing revolution is clearly one explanation for its high unemployment. Only 11.3% of the Indian workforce is employed in the formal sector of which 3% in the formal private sector. 21. Although many aspects of the old permit raj no longer exist, a range of regulations and controls continue to limit the flexibility of Indian industry. This could be one reason why India's recent growth is technology rather than labour driven. For many years, the Indian government has limited the entry of firms in a number of sectors and left the market to select "small scale industries." Thus, the state has effectively blocked the emergence of large competitive firms that would help these industries compete globally. Retail markets have also been effectively protected from more dynamic domestic and foreign competitors. The persistence of these types of regulations, which are strongly defended by beneficiaries and their political representatives, constitute a daunting barrier to growth and development. 22. India is experimenting with liberalization via Special Economic Zones (SEZ), which enjoy certain tax holidays and other benefits not enjoyed by investors in India at large. These programmes are controversial in economic terms because they distort relative prices and, in social terms, because they can marginalize communities not associated with SEZ production by denying them access to potential tax revenue and by displacing small landowners. There is little integration between SEZs and the rest of the Indian economy, and there are fears that SEZ concessions reduce government revenue and provide opportunities for corruption. 23. India's development challenges remain formidable. Roughly a quarter of its population lives below the national poverty line, although there are significant variations by region (Dutz and Dahlman). In the UN's 2007 Human Development Index, which compares 178 countries' capacity to meet their citizens' basic needs by measuring life expectancy, adult literacy, school enrolment and GDP per capita, India ranked only 128th of the 178 countries assessed. It is estimated that the country will need to maintain an 8% growth rate over the next decade to genuinely raise the quality of life of all Indians and to shift development beyond the wealthiest regions, which have already benefited from significant growth. Despite rapid growth over the last 15 years, the rate of poverty alleviation in India has barely exceeded 1% a year. This too is something of an anomaly, as growth is generally the most important engine of poverty alleviation (Perkovich). 24. India's educational system itself is a study in contrast. Its technology training schools are producing globally competitive graduates who are driving the growing information, biotechnology and space technology boom in the country. At the same time though, illiteracy rates in the countryside remain extraordinarily high because of insufficient state funding for primary education. The problem is particularly acute for young girls, the education of whom is critical for development. 25. India's budgetary pressures are part of the problem here. The state shoulders an imposing debtfinancing burden and also makes significant outlays on its military, while financing an array of market subsidies (Range). These expenditures compete with rural and educational spending. As suggested above, there are powerful domestic lobbies defending current spending priorities, and one of the country's primary challenges is to build consensus around a cluster of new and more socially targeted spending priorities. 26. Since India achieved independence, agriculture has been a particularly high priority for economic policy makers. Past famines strongly conditioned India's post-war agriculture policy which was particularly focused on food security. The so-called "Green Revolution" sought to achieve for India a degree of food self-sufficiency through an array of technological and organizational means, including the development of genetically superior seeds, double cropping, the introduction of artificial fertilizers, expanding arable lands, and new irrigation systems. The programme also involved a series of legislative initiatives to ensure that commercial interests would never again hoard food for reasons of profit. The programme, partly underwritten by the World Bank, dramatically increased India's output and yields, helping to establish the country as one of the world's largest food producers by the late 1970s (http://www.indiaonestop.com/Greenrevolution.htm). There were, however, important criticisms of the Green Revolution, including the potential reduction of biodiversity; the increase in income inequality in the countryside; job loss linked to the introduction of labour-saving mechanisation; a growing income gap between well-irrigated, cash-crop areas, and drier and neglected areas; and the increased use of pesticides. In any case, India's farming sector remains inefficient and, in some respects, a barrier to modernization. Sixty percent of Indians earn a living in farming, but agriculture only generates 22% of Indian GNP. 27. Much of India enjoys abundant land, rich soil, water and a favourable growing climate, which is why so many Indians are able to make their living in farming. Agriculture employs at least 50% of the Indian workforce (two-thirds according to a recent House of Commons estimate) but generates only 17% of GDP (House of Commons Library Research Paper). Indian farmers earn only 20 to 30% of the final retail price of fruits and vegetables, which is well below the equivalent earnings for Western farmers. This is partly due to government agriculture and food policies. Some argue that the sector needs to be modernized further and that there ought to be a higher priority accorded to encouraging agribusiness, private capital investment and innovation in rural regions. But distribution controls would first have to be lifted, as would controls preventing the forging of direct links between farmers and retailers. Larger farms could help bolster India's agricultural export potential, but so too would an effort to diffuse know-how and available technology into the countryside to make it more productive. One way for India to galvanize development might be to draw workers out of farming and into manufacturing and services, but this has obvious social risks. One problem is that manufacturing has not increased sufficiently to have a sizeable impact on the overall structure of employment. The World Bank accordingly suggests that India needs to concentrate more of its innovation efforts on labour absorbing industrialization (Dutz). 28. Agricultural interests have also conditioned India's negotiating strategy in WTO trade talks. India sometimes played a bridging role in the current talks, serving as one of the leaders of the G33 bloc of developing countries, while operating in the G4 group along with Brazil, the United States and the EU. This elite group worked to forge a top down settlement on some of the outstanding issues in the talks. India is obviously also a key player in its own right, bringing to the table its own strong national interests in the four key areas of talks: agricultural trade, nonagricultural market access (NAMA), service trade, and rules governing anti-dumping actions and countervailing duties. Its assent would have been critical to any final deal, but it was also a key protagonist in the failure of those talks. 29. India has pushed hard for greater access to Western agriculture markets but has also sought the preservation of Special Safeguards Mechanisms to protect its own farmers from rapid liberalization. The governing coalition is committed to improving prospects for the rural poor. India's average bound tariff (maximum rate of tariff allowed by the WTO) for agricultural imports is 114%, compared to 12% for the United States and a world average of 62%. Some product tariffs are even higher. Indian officials continue to object to Western agricultural support systems. Commerce and Industry Minister Kamal Nath recently suggested that "Significant and effective reduction of trade distorting subsidies of the developed countries is an issue on which there can be no compromise because they impact adversely upon the livelihood of millions of our poor farmers". The government had little political room to compromise on these issues. 30. India is also increasingly concerned about soaring global food prices (Kerves). In recent months, it imposed some export controls on rice in an effort to insulate consumers from rising world food prices. The US charged that New Delhi's policy would harm its SouthAsian neighbours, further drive up global prices and rattle international markets. These controls will be reviewed this November and global prices have begun to slide. India seeks greater market access to developed economies but wants to retain the flexibility to pursue strategic rather than laissez-faire trade policies. India has opposed TRIPS (Agreement on Trade Related Aspects of Intellectual Property Rights), labour standards and environmental standards in the WTO and argues that these are simply protectionist measures imposed by the developed world. India has also strongly opposed US cotton subsidies as these drive down the price of Indianproduced cotton, which is historically an important cash-crop. 31. In services, India has sought greater market access but also has its own areas that it wants to protect. Here, its position is generally close to that of the EU and the United States. In NAMA it wants a reduction of certain Western non-tariff barriers while strenuously resisting demands from the EU and the United States that it begin to dismantle some of its more formidable protectionist barriers to manufactured goods trade. TRIPS is particularly controversial since Intellectual Property (IP) can seem like disguised protectionism from an Indian perspective. India has a large generic pharmaceutical industry, which supplies drugs to many developing countries. 32. India is also pushing for changes in anti-dumping and countervailing duties. It has used its formidable diplomatic position in Geneva to resist making concessions in agriculture and NAMA without receiving what it wants on rules and services. According to the chief Indian negotiator in Geneva, Rahul Khullar, "In agriculture negotiations, our interests are defensive... We will end up giving up some protection without gaining much. In NAMA, the tariffs in the developed world are already down so there is not much to gain. And in exchange there should be gains for all. For us, the gains lie in increased market openings in the developed countries for the Indian service professionals and the rationalization of rules" (Misra).
33. The rise of East Asia has helped recast both the theory of economic development and the policy prescriptions for states intent on galvanising the development process. The lessons have not escaped India's leaders. During a visit to South Korea in 1989, Manmohan Singh was shocked to learn how a country that in 1945 stood roughly at India's level of development had within 40 years seen its per capita income soar to a level ten times higher than that of India (Yergin and Stanislaw). Now that India is reaping the benefits of its own economic liberalization and market opening, it is likely, in turn, to become a model for other developing countries caught in the poverty trap. Since the end of the Cold War, India has consciously linked its development path to its democratic ideals. In 1999, it became one of the ten founding members of the Community of Democracies initiative. Prime Minister Singh said soon after assuming his office: "If there is an idea of India by which India should be defined, it is the idea of an inclusive, open, multi-cultural, multi-ethnic, multilingual society… We have an obligation to history and mankind to show that pluralism works… Liberal democracy is the natural order of political organization in today's world. All alternative systems, authoritarian and majoritarian in varying degrees, are an aberration" (Mohan, Washington Quarterly, Summer 2007). 34. India is a relatively old democracy in the developing world, and its people have enjoyed universal suffrage since 1951. At its inception, many predicted that this huge democracy could never survive but, in fact, it has flourished. Amartya Sen has argued that India's democratic traditions are far older than Europe's and have their own unique character. Its structures facilitate negotiation and open expression of views among diverse stakeholders in national politics. These deeply embedded Indian democratic values imbue the country's unique political culture with a high degree of integrity and consistency (Sen, 2006). In democratic terms, India ticks all the right boxes. It has a stable parliamentary system, it holds regular, free and fair elections, voter turn-out is high, there is a healthy alternation of power, state powers are significant and the press is vibrant and free. At the same time, however, decision-making is very slow, and reform has not been advanced as quickly as many had hoped. Indeed, one analytical problem for those looking at economic policy in India is to recognize that it is a federal state and indeed highly decentralized. State parliaments exercise significant powers, and this can lead to serious tensions with central authorities that result in a certain degree of policy incoherence (NATO PA, 126 ESCTER 08 E). A more just distribution of wealth remains a central priority for many Indian people, and this complicates the reform process and sometimes turns democratic deliberation into a struggle for spoils. All of this must be mediated in a democratic fashion. 35. India's recently political evolution further complicates the narrative. The Congress party has seen its share of the vote decline in recent years and it now needs coalition partners in order to govern. At the state level, a number of caste-based and regional parties have emerged. The second largest party in India today is the Indian People's Party (BJB) which has strong Hindu and nationalist overtones. In some regions, the governing Congress party has almost no presence. Power has also passed from the prime minister to myriad other institutions within and outside of the state, and the coalition today includes both members of the Communist and the Majoritarian Society Party (BSP) parties. There are some concerns today about the governability of the country, and the way in which mounting diffusion of power is further complicating decision-making. 36. India's democratic values not only distinguish it ideologically from its regional rivals, China and Pakistan, they also underscore a common basis of understanding with the West. India, however, is still reluctant to break fully with its historic non-alignment and is not rushing into join new alliances that would mark a radical break with its traditional international posture. It has become something of a truism in the West to suggest that market reforms go hand in hand with democratic reforms. In Europe this correlation seems to have been confirmed in Central and Eastern Europe, and the link has doubtless been strengthened by the signals that both the European Union and NATO have sent out to aspirants for membership. Yet, the connection between democratisation and economic liberalization is hardly an automatic one. This is perhaps most evident in China, where the Communist Party continues to exercise total hegemony over political life, even as it has granted market forces space to operate autonomously. Russia is another interesting case in which democratization coincided with the introduction of a kind of savage freeforall market, and yet each seemed to discredit the other in the eyes of many Russians. India, however, offers an important alternative to the Chinese and Russian models. 37. Most Western countries and the so-called Asian Tigers established universal suffrage only after industrialization. This particular line of development limited political resistance to dramatic social and economic change emanating from those society groups slated to suffer over the short to medium term as a direct result of these changes (Stiglitz). India, by contrast, is managing this upheaval democratically. India's capacity to build democratic consensus perhaps explains the sometimes glacial pace of reform. Interestingly, India's overall wealth disparity is lower than China's and its Gini index, which measures income inequality on a scale of 0-100, stands at 33 as compared with 45 for China. This suggests that India's redistributive policies, which do slow growth, may also moderate increases in income disparity and thereby foster a modicum of consensus in a society in which the rulers are democratically accountable. India's market reform thus represents a unique compromise between market advocates and those most concerned that policies do not neglect the poor. The democratic process makes it possible to find common ground. 38. Rapidly growing democratic societies must respond to political pressures to correct widening wealth gaps that often accompany economic take-off. India's political elite has worked to contain this wealth gap, but balancing equity with dynamism is hardly an easy task. A 2004 National Election Study showed that many of India's poorer people believe that reform has essentially benefited the rich. "Economic reforms are viewed by the poor masses as a revolution primarily for everyone but them. Some economists suggest that a more passionate embrace of neo-liberalism combined with good governance would hold out at least part of the long-term solution to India's poverty, but the poor and their representatives appear to have plenty of reservations about economic reforms - and they have real clout in India's democracy" (Varshney). 39. This is precisely why the governing party has sought to balance growth with equity by defending selected elements of the old economic interventionist order. Politically, it is very difficult to inflict short-term pain upon vulnerable groups in order to lay the groundwork for gains that will only be generalised over the long run. In essence, political and economic cycles are not operating in a synchronized fashion, and this paradox is acutely felt within India's ruling establishment which appears reluctant to move quickly on further labour market reform, deregulation and privatisation. This may be the cost of democratically rooted economic reform in India, but it could also be a source of strength if it ultimately manages to build a broader consensus about markets and their role in generalizing prosperity. 40. India is highly diverse and has generally done a remarkable job in integrating various ethnic communities into the mainstream of national political and economic life. But the record is not perfect and there are real tensions. The recent rise of a radical brand of Hindu nationalism represents perhaps "the greatest threat to secular constitutional vision of the liberal state" (Perkovich). A widening wealth gap between India's Muslim and Hindu population is an ongoing source of some worry, but there are others as well ("Don't blame it on the scriptures"). The outbreak of severe violence in Gujarat in 2002, in which as many as 2,000 Muslims were killed after 58 Hindu campaigners were burned on a train, is the kind of event that, in other circumstances, could well trigger broader instability. This is why India's leaders cannot allow sectarian politics to derail largely successful efforts to foster inter-ethnic dialogue. India's democratic institutions provide a powerful vehicle for fostering such dialogue and encouraging compromise. 41. One cannot ignore this democratic factor when comparing India and China. The political architecture of the two countries shapes the structures of their economies and the manner in which economic policy is conducted. In a genuine democracy, neither the central state nor state governments are positioned to impose reform from above without consulting their voters and, indeed, generating some degree of consensus among them. In as highly heterogeneous a society as India, this can be a painfully slow process and one characterized by myriad setbacks and compromises. India's democratic deliberations are conducted through highly articulated political structures – democratic parties, civil society organizations, the media, and locally elected officials, many of whom, crucially, are women. This process helps define problems and sets the country on a course to solve them. This speaks volumes about India's stability. Indeed, it is this unique brand of democracy, perhaps more than any other factor, that has held together this highly diverse and very poor country for so long. India's challenge today is to build parallel economic institutions more fitting for a modern democratic and globally integrated society while preserving a vibrant democratic dialogue. The challenge is serious because the state remains highly inefficient and partly wedded to archaic ways of organizing economic life. Indeed, the status quo also has powerful defenders. 42. India's income growth is reflected in rising consumption, which in 2005 accounted for some 64% of GDP. This is significantly higher than the 58% figure for Europe and 42% for China (Gurcharan). Domestic demand driven growth could help insulate India somewhat from global downturns, and it suggests that what some see as the East Asian exportdriven development paradigm may not offer the only path to greater prosperity. India may represent a more politically safe path to modernization because it has combined global integration with a relatively smaller domestic wealth gap. Of course, there are other explanations for this. India's domestic market is huge, and so it is in a better position, than say, a country like Singapore, to focus more of its economic energy on meeting the demands of its own consumers (NATO PA, 126 ESCTER 08 E). 43. Private entrepreneurs have played a central role in India's rapid development, while stateowned companies and foreign firms have been the engines of China's export-led growth. China's lending institutions continue to favour state-owned companies, while private firms receive only 10% of recorded available credit. The figure in India is 80%. But these numbers might be less revealing than they suggest, given the Chinese propensity to engage in self-financing or family networks to raise investment capital. It is worth noting as well that while privately held Indian firms account for much of India's foreign trade, in China most exports are generated by nonChinese firms. This partly reflects ongoing restrictions on foreign firms operating in India, but it also reveals much about Indian entrepreneurialism (Perkovich). 44. China's low labour costs, as well as its organizational prowess, have been instrumental to its export success, and it uses its factors of production more efficiently than does India. China has become one of the world's leading manufacturing and assembling centres and is drawing roughly ten million labourers from the countryside into the cities each year (OECD). India, by contrast, is generating value added growth in service and technology exports. It is also creating many manufacturing jobs, but that sector is far less efficient and pervasive than in China. Studies suggest that India's engineers are more highly trained than those of China, and that its pool of qualified graduates is nearly twice as large as China's (Foreign Policy, January 2006). While nearly 50% of Indian women are illiterate, only one in seven of China's females suffer the same fate ("India Overheats"). This is a major bottleneck to India's development and one reason why economists are so quick to point to rural education as essential to India's long-term development. 45. As suggested above, the number of jobs available in India's knowledge and service-based industries is relatively small compared to India's huge pool of labour reserves. The software sector, for example, employs less than 0.5% of India's workers while producing 5% of its GDP (Varshney). India's highly capable technology workers, many of whom have earned advanced degrees in the West, have been central protagonists in India's story of rapid change. Foreign technology and service companies have swiftly recognized not only the cost advantages that India offers, but also the exceptionally high quality of the country's scientific engineering and service workers. Today, some 125 of the world's 500 largest companies have research and development centres operating in India (Gurcharan). China, by contrast, has pulled itself up by first mastering the lower end of the product cycle, although it is moving rapidly into more sophisticated production, due in part, to its organizational capacities and its ever more skilled labour force.
46. With its huge population and rapidly expanding economy, India is now the world's sixth largest energy consumer. In order to sustain a growth rate of 6% over the next 20 years, it will have to increase energy consumption by roughly 5% per year. Whereas today it imports 70% of all the oil it consumes, it will import 90% by 2020 given current trends. The country has consequently become an important player on global energy markets, and its rising demand is helping to condition global energy prices. India already confronts energy supply bottlenecks and will need to increase energy production capacity rapidly. Electricity production in India is relatively expensive, and power supplies are often unreliable. India, like China, is pressed to unearth secure sources of energy needed to power its rapid growth and has gone on a buying spree to help ensure continued supplies. It is focusing much of its effort in Central Asia and Iran and has, for example, sought to participate in the development of oil fields in Kazakhstan. 47. Although partly designed as an anti-poverty policy, extensive Indian government fuel subsidies have also had the effect of underwriting over-consumption of energy. This makes it difficult for economic actors to adapt to price signals, including the steep rise of oil and gas in recent years. This has generated pressure on the balance of payments, although India holds some US$300 billion in reserves. The government has ostensibly used subsidies to affect a gradual but more stable adaptation to higher fuel price. The real reason for the policy is that the public is not willing to accept rapid energy price rises. These subsidies, however, are extraordinarily expensive and economically sub-optimal. The government recently reduced the subsidy by nearly 10%, an action that provoked a strong political backlash both from the Left, and the BJP (Leahy and Yee). 48. Domestically, the reduction of subsidies this past June meant that prices at the pump rose by 5 rupees a litre, and 3 rupees a litre for diesel ("India, Malaysia cut subsidies, increase gas prices"). A high tax rate on gasoline actually prevents the benefits of these subsidies from reaching the consumer. In fact gasoline in India is more expensive than in the United States, while diesel is sold at artificially low prices. State-owned oil companies are still making losses that cost the government an estimated 2-3% of GDP ("Crude measures"). The government line is that the subsidies protect India's poor from the ravages of the world economy, but evidence suggests that the main beneficiaries are wealthy and middle-class owners of cars. The subsidies favour mechanisation over job-creating labour-intensive industry. The distortion of diesel and kerosene prices relative to gasoline also encourages environmentally unsound fuel mixing. Rationalising fuel prices would do much to make Indian industry more transparent and raise government revenue for spending on poverty alleviation, but there is a strong emotional attachment to fuel subsidies as a symbol of the state's commitment to its people. 49. India's natural gas pricing system operates according to a different structure than petroleum. Worldwide petrol prices vary according the market price of crude oil, and the Indian government adjusts its subsidies to maintain a fixed domestic price of oil. There is, however, no benchmark world price for natural gas, and the price is usually determined regionally and negotiated between supplier and consumer. India traditionally subsidizes its regional gas price according to its Administrated Pricing Mechanism (APM), and most of India's gas is produced domestically. However in recent years demand for natural gas in India has outstripped the supply available under the APM. In 2000 the Indian government introduced the New Exploration and Licensing Policy (NELP), which encouraged private investment in new gas projects with the promise that the market would determine prices (Nagdive and Patel). As production increases with the tapping of new gas fields in the Krishna-Godavari and Mahanadi basins, the percentage of prices determined by the APM is declining. India still reserves this subsidized price for core sectors such as power and fertilizer, which consume some 70% of the natural gas supply, but in May 2005 the government announced a 12% hike in the subsidized price for these sectors in a move designed to raise government revenue and effect a general transition to the NELP and market-based pricing ("Natural gas prices up 12 percent for power, fertiliser units"). 50. Inflation and soaring fuel prices since late 2007 have made existing APM prices increasingly unsustainable, but the government faces strong opposition to its attempts to restructure prices, as cheap fuel is the rallying point for Leftist parties in India concerned about the cost of living for the poor. A 25% rise in the APM price of cooking gas in May sparked protests across India and contributed to a growing tension in the UPA-Left alliance that culminated in the restructuring of Lok Sabha politics after the 22nd July trust vote on the American nuclear deal (Patil). 51. India is also focused on securing access to new sources of energy and has invested in large dam projects such as the Sardar Sarovar in Narmada Valley, which is controversial due to the resulting displacement of the indigenous Adivasi people. It is also negotiating with Central Asia to tap into large reserves there, although any gas pipelines would have to run through Afghanistan. This dialogue has been facilitated by its observer status in the SCO (Shanghai Cooperation Organization). 52. India's rapid economic growth poses a new set of environment challenges and is also shaping the international environmental agenda including the issue of climate change. Rising energy demands are inextricably linked to industrialization as well as to population growth, but that energy use is having environmental and climatic effects that strike particularly hard at certain regions and certain classes of people. India is thus challenged to balance economic and protecting a fragile environment. The Indian government has stoutly resisted any linkages between environmental and trade policy, and it has been involved in various cases in which it perceived environmental sees such efforts as a form of veiled protectionism practiced by the world's richest countries. 53. Environmental degradation nonetheless poses a serious challenge to India's long-term economic and development prospects. Deforestation in the Himalayas provides one of many examples of the dilemmas national and local leaders confront on this front. Timber production and agriculture in India's highlands have directly contributed to flooding in the lowland plains. This flooding imposes more human development cost in terms of lost crops, lost lives and property damage than is gained by exploiting the Himalayan forests, but the complex nature of the problem and the government's focus on the short-term benefits of resource extraction to fuel economic growth prevent effective action from being taken (Thakur Raghu Nath Singh). Some analysts have described the impact of economic growth on India's environment in terms of a Kuznets curve, in which very low and very high levels of development allow for healthy environmental conditions, while the period of transition between the two, which India is currently experiencing, invariably involves severe environmental degradation. This pattern has is also evident in terms of air quality, although in other environment areas, the trend is less clear (Narayanan and Palanivel). Water quality, for example, depends on specific local factors. In Kerala poor water quality and destruction of Mangrove forests appears to be a consequence of low-technology methods of retting coconut fibres. Here the introduction of a basic mechanical process may well lead to improved water quality through this delicate transition phase of India's development (Kumaran). 54. India has long opposed the imposition of environmental regulation through WTO negotiations. It has led a coalition of developing countries to resist rich countries' efforts to make environmental standards a central element of trade standards. US and EU proposals to reduce tariffs on climate-friendly goods were challenged as an obvious effort to secure preferential market access for US and EU goods, while proposals to ban fishing subsidies to protect fish stocks were seen as a threat to the livelihoods of poor Indian fishermen (Lynn). For their part a number of developed countries lament the fact that India has not signed the Kyoto Protocol. India defends its position here on the basis that its per capita emissions are in fact one quarter of the world average, and its specific emissions from food production are 4.5% that of developed countries such as the USA ("India: Addressing energy security and climate change", October 2007).
55. Energy security concerns in India are also conditioning its security posture. It is deepening military ties in the region, has established a small military presence in Tajikistan and signed an agreement for a liquefied natural gas plant and pipeline with Iran. The dialogue with Iran has directly spilled over into security cooperation with that country, including joint naval exercise as well as training and maintenance agreements. This could prove an irritant in relations with some Western powers and has already sparked a complaint from some members of the US Congress (The Hindu, 6 May 2007). India's curious reluctance to assume a more critical stance toward the military regime of Burma, another source of Western dissatisfaction, is driven both by its rivalry with China for influence in that country, as well is its desire to gain access to some of its ten trillion cubic feet of natural gas, and potential offshore oil reserves (Lee). India is effectively playing catch up with China in the energy race. Its leaders have also strongly resisted Western efforts to adopt stricter greenhouse gas emissions standards. They argue that a developing country like India cannot afford to comply with strict benchmarks. Not surprisingly, India has worked hard to keep environmental standards out of multilateral trade talks despite the potentially devastating impact global warming could have on certain regions of the country. 56. Half of the world's oil passes through the Indian Ocean Region, and India is playing a growing role in ensuring security on those waters. This is generally welcomed in the West. One reason why Washington is establishing nuclear trade relations with India is that it sees nuclear energy development there as a way to minimize the potentially important impact of Indian economic growth on ever tighter world oil and gas markets (Carter). India's transportation sector, however, will remain highly dependent on oil imports, while "dirty" coal plants will continue to generate most of India's electricity for years to come. It is highly unlikely that nuclear energy will significantly reduce India's growing appetite for hydrocarbons or its contribution to global warming. If India does not expand its civilian nuclear programme, it would probably need to import and burn an additional Euro 1.6 billion of coal per annum by 2050 (DAWN Editorial 27 July 2008). 57. A changing global order and rapid Indian growth have fostered conditions for India to redefine its place in the region and in the world. No longer mired in economic stasis, India comes to the diplomatic table buoyed by its ever more formidable economic presence. This alone endows it with a kind of weight that demands other great powers to pay it close attention. That much of this wealth is being generated in the world economy is consequential. India now holds a greater stake in the global trading and financial systems. India's foreign policy has consequently undergone a profound transformation since 1991 that has more or less paralleled its economic transition. India's relations with the United States and Europe were not well developed in the post-war period, partly due to its inward looking development strategy, its socialist economic organization, its special relationship with Russia, its own history as a colonized nation, and its leading role in the nonaligned movement. India's relations with China and Pakistan were also tense and, at times, overtly hostile. 58. Yet, Indian relations with the United States, Pakistan, China and Russia have evolved substantially over the last decade. The collapse of the Soviet Union, the end of Cold War rivalry, and the apparent failure of Soviet-style economic planning inspired Indian leaders to revamp the country's international posture. India, or at least certain influential groups in India, began to buy into some of the economic principles for which the West stood, and this, almost by default, pointed a way toward improved relations with the United States in particular, but also with Europe. 59. India clearly has welcomed the international community's efforts to ease tensions in its immediate neighbourhood. Pakistan's domestic turmoil and its historic rivalry with India, particularly over Kashmir, the rise of religious extremism in the region, Afghanistan's ongoing crisis, civil war in Sri Lanka, and tensions in Nepal are all flash points with varying implications for Indian security. Yet, India is increasingly making use of a plethora of bilateral and multilateral channels to ease tension and is far better positioned than it was during the Cold War to work towards this end with other great powers including the United States and China. 60. For those countries with forces in NATO, it is important to recognize that Afghanistan poses an important challenge to India as well. India has become something of a counterweight to Pakistan in Afghanistan. It has provided some US$750 million to support reconstruction efforts there and has deployed 400 soldiers from the Indo-Tibetan Border Police (ITBT) to protect the 34,000 Indian nationals working on reconstruction in the area (Afghanistan News.Net, and "The Economic Times, 15 July 2008). 61. India was the only major power to support the Soviet invasion of Afghanistan in the 1980s, and this positioned Pakistan to bring Afghanistan under its wing in the wake of that war. India now sees Afghanistan as a gateway to Central Asian energy resources, which it desperately needs to fuel its fast-growing economy. Two competing pipeline projects to India from Turkmenistan and Iran would ultimately have to pass through Afghan territory, so that country's stability is now recognized as vital to India's long-term energy security. The Indian Army's Border Roads Organisation (BRO) is a leading agency in the reconstruction effort and is building a major highway linking Afghanistan to Iran. 62. India, however, has suffered several setbacks. Pakistan opposes the presence of Indian troops in Afghanistan, believing that they are assisting Pashtun and Balchi insurgents in Pakistan. For its part, India has linked the July 2008 bombing of the Indian Embassy in Kabul to "a regional intelligence agency", an allusion to Pakistan's Inter-Services Intelligence (ISI). Indian troops have also been in the line of fire, and four ITBP soldiers were killed between January and April 2008. 63. In Asia, India has sought to raise its profile and better defend its national interests against potential rivals. As suggested above, a significant share of the world's oil passes through the Indian Ocean region, and 75% of India's trade is conducted over blue water. India is thus dedicated to resisting a Chinese gambit for regional naval supremacy, including its efforts to upgrade the Gwadar port in Pakistan. India has conducted joint anti-piracy patrols in the Straits of Malacca with the US Navy and has participated in exercises in the Bay of Bengal with the United States, Japan, Australia and Singapore (Ramachandran). Military cooperation with Japan is deepening, and the two powers recently agreed to enhance their naval and economic collaboration. India is also working with the Seychelles and Vietnam on anti-piracy deployments. It has a bilateral defence cooperation pact with Vietnam and has also forged security agreements with Indon, , , esia, the Philippines, Singapore and Thailand to protect the sea-lanes, counter piracy, and interdict narcotics trafficking (Mohan, Foreign Affairs). 64. India's relations with the United States have evolved significantly in recent years. The end of the Cold War was a catalyst for this change, but so too were the 11th September attacks and America's renewed focus on counter-terrorism. This is a matter of central concern to Indian authorities in light of India's huge Muslim population, ethno-religious insurgency in Kashmir and terrorist operations in India, including the attack on parliament in 2001 (V.R. Raghavan and Ganguly). In Washington, India came to be seen as a force for regional stability, a fellow democracy, and a bulwark against the kind of terrorism that might pose an existential threat to India itself. India could help the United States "confront the challenges that a threatening Iran, a turbulent Pakistan and an unpredictable China may pose in the future" (Carter). This sea change in the relationship was sealed when the two powers signed a nuclear pact in July 2005, in which Washington would tacitly recognize India's new status as a nuclear power - a reversal of the long held view in Washington that to do so risked undermining the global nonproliferation regime by effectively rewarding non-compliance. India, in turn, agreed to a firm moratorium on nuclear tests while adopting a "no first use" policy (V.R. Raghavan). Washington has essentially traded nuclear recognition for a strategic partnership. India has cautiously welcomed this, although its own foreign policy priorities do not always jibe easily with those of the United States. 65. The Indian government recently survived a vote on the US-Indian nuclear deal, but this has been highly polarizing. There are strong political pressures in both India and the US to conclude the deal before the November elections in USA and the 2009 elections in India. The 45-nation Nuclear Suppliers Group recently approved the deal this September after India formally pledged not to share sensitive nuclear technology or material, to continue its moratorium on testing nuclear weapons while separating nuclear facilities for civilian and military use and opening its nuclear facilities for inspection. India, in turn, will gain access to US civil nuclear technology. The Senate approved the deal this autumn, although there were many sceptics in Congress who feared that it would trigger a nuclear arms race on the sub-continent, particularly given the highly uncertain situation in Pakistan (Markey and Tauscher). 66. American engagement with India is also shaped by concerns about Pakistan. Were Pakistan to fall prey to mass upheaval, its own nuclear stockpiles would be at risk. In that case, the United States would want to work with friends in the region to prevent or deter nuclear catastrophe. This rationale has never been publicly acknowledged due to the delicate balancing game in which the United States, India and Pakistan are all engaged, but the contours of this kind of logic are nonetheless apparent (Carter). 67. Change in the US-Indian relationship was already apparent in 1999. At a time when the United States was officially dedicated to rolling back India's nuclear weapons programme, President Bill Clinton supported India's position during its limited war with Pakistan, provoked by the infiltration of Pakistani soldiers and Kashmiri militants into positions on the Indian side of the line of control. This demonstrated that the United States would no longer reflexively side with Islamabad in its various disputes with India. The Bush administration also demonstrated sympathy for a range of New Delhi's strategic concerns. From this more balanced position, and out of concern that two new nuclear powers had the potential to engage in a catastrophic conflict, the Bush administration has worked to ease tensions in that contested region. This overture has been appreciated in New Delhi and has enhanced the US position as a possible broker between Pakistan and India. By extension, it potentially accords the United States a degree of leverage with Pakistan that it previously lacked. That said, the political crisis in Pakistan and the deteriorating situation in Afghanistan clouds the regional outlook. Pakistan's coalition civilian government has little power over the army and the security services. India has blamed elements within the Pakistani state for terrorist attacks both on the Indian Embassy at Kabul and in Ahmedabad. 68. As suggested above, the Bush administration has eliminated many of the sanctions imposed on India after its nuclear tests, established a framework for technology sharing and civil nuclear cooperation, supported India's efforts to quell its own terrorist threat, and thus pointed the way to an unprecedented degree of cooperation between the two countries. India, in turn, has supported US positions on global warming and the International Criminal Court, provided support for US operations in Afghanistan through its naval presence in the Straits of Malacca, offered development aid of some US$650 million to that country, and backed some US positions vis-à-vis Iran in the United Nations (Mohan, Foreign Affairs). Washington has welcomed India's role in Afghanistan, and suggests that India holds out a democratic and developmental model to that troubled country. The United States would also like to intensify cooperation across a range of security matters including disaster relief, peacekeeping, post conflict operations, and even in missions not mandated by the United Nations (Carter). 69. India's relatively newfound appreciation for the United States is also reflected in public opinion polls. A recent 47-nation survey, conducted by the Pew Foundation, suggested that 59% of the Indian public hold a positive view of the United States - a more pro-American public in Europe can only be found in Poland (The Pew Global Attitudes Project, 27 June 2007 http://pewglobal.org/reports/pdf/256.pdf). India's closer ties to the United States may ultimately herald a break with India's long held attachment to the notion of autonomy. As it integrates into the world economy, and as its stake in global order accordingly rises, national autonomy is not a sufficient posture to defend Indian interests. This is not to say that India has already fallen into the US or Western orbit. Its interests are too unique, its own identity too strong and its rising power too significant. But it is very well prepared to identify common interests with key international actors and has the means to advance these. From India's perspective, the United States represents an important partner for achieving some of these ends. 70. Realist analysts would see in the parallel rise of India and China a formula for ever deeper rivalry and potential conflict, particularly given outstanding border disputes between these two Asian goliaths and China's nuclear cooperation with Pakistan. But the situation is more nuanced, and both countries have worked to create some space for accommodation. In 2005 the two regional powers agreed a set of principles that could lead to a final settlement of old border disputes based on political compromises rather than historical claims as such. They then announced the formation of a "strategic partnership", the upshot of which has been a more positive Chinese approach to India's outstanding problems with her neighbours - a posture that has advanced conflict resolution efforts. Economic ties are also deepening. A trade route has recently opened up across the Himalayas, and tensions in Siachen and on the North-East border are much reduced. Trade between the two countries has soared from US$200 million in 1979 to US$20 billion in 2005. Given current trends, China could soon be India's largest trading partner, ahead of the United States and the EU; but frictions remain between these two rapidly evolving powers (Mohan, Foreign Affairs). 71. Indian-Japanese relations are also on the mend, having effectively bottomed out after Indian nuclear tests in 1997. Japan is ever more concerned about the implications of China's rise, and sees in India a fellow democracy that can serve as a counterweight to China in Asian regional affairs. Japan has promoted an ASEAN Plus Six process to bring democratic India as well as Australia and New Zealand into the regional game (NATO PA Secretariat Report, ESC Visit to Tokyo and Osaka). India has also replaced China as the largest recipient of Japanese foreign aid. The relationship, moreover, is not simply a strategic one, as commercial and financial ties between the two are also expanding. 72. India's relations with the European Union have been more limited and, in the words of some analysts, "uninspiring" (Shada Islam). The EU's foreign policy profile in the region is partly hindered by its lack of a military presence there. The Lisbon Treaty should give it a bit more weight, and this could upgrade bilateral relations. The EU has recognized that India's size, growth, strategic weight and democratic character demand that it be accorded at least the same kind of attention that it extends to China. Moreover, that the US-India relationship has improved so substantially invariably raises the stakes for Brussels in what one might characterize as a friendly rivalry for global influence. 73. India's interest in the EU is also noticeably intensifying. As an emerging global player and a rapidly growing international trader, India needs stronger ties to this important bloc of developed nations. India sees Europe not only as a market for its goods and a source of investment capital, but increasingly as an investment target in its own right. The Indian steel giant Mittal, to take an example, has been buying specialty steel facilities in Europe, a move that has surprised some Europeans and made others exceedingly nervous. The EU's growing foreign policy and security profile, particularly in the area of peacekeeping is also of importance to India, which itself is playing an important role in that field. The potential for a peacekeeping partnership is real. India is also interested in moving further up the technology ladder, and sees Europe as an important partner in this effort. It participates in the Galileo project, has signed a Science and Technology Agreement with the Union and consults the EU on a range of issues including terrorism, migration, and visa policy. 74. There is an array of international challenges in which India and the European Union have similar stakes, if not necessarily common views. Trade is certainly one of these. EU-India negotiations on the establishment of a bilateral free trade agreement are focused on tariff as well as non-tariff barriers, trade in services, and investment. EU negotiators recognize that India has lowered tariffs substantially, but argue that non-tariff barriers continue to complicate the trading relationship. The EU is also displeased with India's resistance to adopting more stringent commitments on greenhouse gas emissions, while India, in turn, complains of the EU propensity to impose anti-dumping duties on a range of its competitively priced products. 75. Europe's multinational firms are also increasingly engaged in India, attracted both to its rapidly expanding domestic market and growing, though still restricted, opportunities for high yield direct investment. In 2006 EU imports from India were valued at 22.4 billion euros while exports totalled 24 billion euros. This makes the Union one of India's largest trade and investment partners (Islam). In 2005 European investors poured 2.2 billion euros into India, despite ongoing restrictions on foreign investors. India's energy, telecommunication and transport sectors have been particularly attractive to European investors. 76. From the EU's perspective, India's development challenges should remain the focus of the relationship. Helping India achieve the Millennium Development goals in health and education represents a key EU development goal for India. It has earmarked 470 million euros in aid to India between 2007 and 2013 and hopes to foster deeper energy cooperation, as well as collective efforts on climate change and other environmental matters. 77. Given the growing list of common concerns, India and the EU inaugurated regularized summit meetings in Lisbon in 2000 and are also meeting at many levels in fora that engage business representatives and civil society. In November 2004, EU and Indian leaders agreed to create what they call a "strategic partnership" and deepen cooperation across a range of issues including maritime transport, energy and space technology. This is a category of relationship that the EU reserves for world players like the United States and China which are judged to be in a position to assist in the construction of an effective multilateral order. In June 2007, negotiations were launched to forge an EU-India Free Trade Agreement. Exploratory talks have been agreed to revamp the EU-India Partnership and Cooperation Agreement. 78. A number of European countries took hard line positions after India tested nuclear weapons in 1998, although France and Britain adopted more accommodating position. Both have subsequently deepened economic ties with India. That said, many European governments were not pleased by the US-Indian nuclear deal in which Washington agreed to supply nuclear fuel and technology to a country that has not signed non-proliferation treaties and has tested nuclear weapons (Islam). 79. Despite this progress, and the ever longer list of agreements between the EU and India, the relationship is proving difficult to develop, partly as a result of different geo-strategic and geoeconomic perceptions. India wants to redefine its international profile to align it with its growing global weight. It sees its relations with the EU and the United States within that broader strategic framework. But it is also very much concerned with matters in its own backyard. Here there have been some tensions with the EU. European leaders, for example, have been disappointed with India's very cautious approach to the regime in Burma, which the EU, like the United States, has condemned for grave human rights violations. 80. The United Kingdom enjoys a rather special relationship with India forged by historicalcolonial links and immigration patterns. Indeed, there are 1.3 million ethnic Indians living in the UK, and they are among the most successful immigrant groups to that country. British Indians are highly integrated and have injected a spirit of multiculturalism into British society. The great number of Indians studying in the UK has further cemented the bilateral relationship, as has growing Indian investment there. The Indian company Tata alone employs some 30,000 people in the UK, while ethnic Indians generate some 4% to the British GDP. The UK parliamentary group on UK-Indian relations has some 200 members which, in itself, is an indication of the importance of the relationship. A strategic partnership has been formed between the two countries, which includes provisions for economic development, trade, scientific and technological exchange and a dialogue on finance. The two countries share many common goals and the British see India as a key player in all of its foreign policy priorities including anti-terrorism, international institutions and conflict management. While India has resisted adopting Western standards on climate change and has allied itself with the Bush Administration's position on the Kyoto Protocol, the British are working to engage it in a dialogue on the climate challenge (NATO PA, 126 ESCTER 08 E). 81. Finally, India's role as an outsourcing service centre has generated much political heat in the West. Thousands of jobs from the West have been outsourced to large Indian players like Tata Consultancy Services. India's rise seems to threaten certain white collar rather than traditional manufacturing workers. This raises alarm bells in developed countries. The conventional wisdom has long been that in the emerging global division of labour, traditional manufacturing may well move offshore to exploit lower costs, but this would only hasten the move to higher wage service based economies in the West. The case of India throws a monkey wrench into this logic. Offshoring service jobs has been made possible by a perfect storm consisting of the communications revolution, widespread internet use, global financial integration, the prevalence of English in India and the millions of highly trained workers its educational system has produced. While originally this type of off-shoring was understood to be focused on businesses like call centres, India has moved into an ever higher level of sophistication including software design, medical transcription, claims processing, data entry, radiology diagnosis, statistical analysis, actuarial work, tax preparation, map digitisation, and legal research. This trend could have an impact on white collar workers in the West. During the 1990s more than 97% of new US jobs were in services (Dosani and Kenney). In 2003 83% of US non-farm employment was in the service sector and only 11% were in manufacturing. This suggests that off-shoring, at least theoretically, threatens jobs in new wave rather than old wave industries. This is why alarm bells have rung in some circles. 82. Managing successful off-shoring strategies, however, has become a critical means of generating profits among Western corporations and entrepreneurs, and India has had a powerful impact on the service value chains that companies are forging across the world. The number of service jobs being relocated is increasingly rapidly and is partly linked to evolving technologies. Some have estimated that as many as 15 million American jobs might eventually be off-shored (Bardhan and Kroll), although that figure seems high and does not include the many American jobs that might be created as a result of the growth off-shoring affords. Moreover, India is bumping against supply limits. Wages and the rupee are rising, and skilled labour is running short. Obviously developments here will be worth monitoring, but to date, India's role in global service markets has been an important source of growth in the West, as well as in India itself.
83. India has embarked upon a series of economic and diplomatic changes since the end of the Cold War that promise far more articulated relations with the West. What it has accomplished over the last 15 years is stunning; yet, its leaders will readily admit that it still has far to go. It is a country of tremendous potential, which continues to confront serious development challenges. Like China, it is brimming with paradox. Unlike China, it has built democratic structures for itself to help resolve these difficulties. This alone leaves many analysts optimistic about its future evolution. But some restraint of expectations, particularly about the course of relations with the West, is essential. India is breaking the habit of inwardness, state-centric economic development and nonalignment, and it is doing so democratically and one step at a time. It has become a global model of how free markets and democracy can pay off, even in countries long mired in statism and abject poverty. However, it is not willing to embark on revolutionary changes in its internal structure or in its international posture. 84. The West's interests in India are myriad and complex. India represents a potentially huge market with an ever-expanding middle class. Its highly trained workers are extraordinarily attractive to Western investors, who are enamoured with their skill levels, their work ethic, their relative costs and their command of English which greatly facilitates communication in the global economy. That this large country is also a democracy holds up the potential to foster very friendly ties. 85. India is also an increasingly important geopolitical player. It has nuclear weapons, a large army, and a strong interest in regional and global stability. Its own region is one of great potential, but also of perilous instability. Afghanistan is a borderline failed state. Pakistan confronts dangerous domestic political turmoil which is exacerbated by extremist religious movements and revanchist claims on Kashmir. Turmoil in Pakistan has regional and not simply national implications, and India is challenged to pursue policies that inject calm into this dangerous rivalry. At the same time, India's relations with China have improved dramatically and Sino-Indian trade reached US$38.7 billion in 2007 (Tucker and Leahy). Both are exercising restraint and working to improve relations at this juncture. But there will invariably be a rivalry for regional and even global influence between these large, rapidly developing, and politically very different countries. Western concerns about China, Pakistan and Iran make India an important, if cautious, partner for both the EU and the United States. India's caution, however, is perfectly justified, and the West must accommodate these sensitivities, particularly in light of India's traditional habits of non-alignment. 86. Insofar as possible, both the United States and Europe should do what they can to help India and Pakistan find workable solutions to what has long seemed an intractable rivalry in Kashmir. The problems are indeed profound and have been a persistent source of regional tension. For myriad reasons, and perhaps most importantly because India and Pakistan are now declared nuclear powers, these tensions must be contained. Indeed, there are signs that the nuclear standoff has injected greater caution into both countries' security calculations. That said, India is clearly the ascendant power in the region, both economically and militarily, and confronts far less internal instability than does Pakistan. It is that internal instability that has all sides worried. This is one reason why India has opened up to more multilateral approaches in the region. Were Pakistan to become internally destabilised, the problems arising out of that scenario could become overwhelming for India alone and would indeed have global implications (Mohan, Washington Quarterly, Winter 2004-05). 87. India's willingness to conduct a very visible economic diplomacy in Afghanistan should be welcomed, and the hope is that this will not somehow be conflated into the Indian-Pakistan rivalry. Pakistan's role in Afghanistan has not been uniformly positive given the close relations between elements of its secret services and the Taliban, and it is very heartening to see another regional actor, and particularly the region's greatest multi-religious democracy, playing such a positive role in that beleaguered country. India is highly conscious of the dangers of radical sectarianism, and its role in contributing to stability by fostering development in Afghanistan should accordingly be welcomed. 88. As in China, economic growth offers the most viable means of reducing poverty in India. The OECD has suggested that India can achieve rates of growth approaching 11%, but it would need to adopt greater trade and investment openness and further domestic reforms to do so. There are, however, political barriers to further deregulation, and concerns that opening the country to more investment capital would make it more vulnerable to sudden shifts in investor sentiment (Range). With so many people living on the edge of catastrophic poverty, India's caution is understandable. 89. The World Bank suggests that India's rural workers stand to benefit enormously from improved education and pro-poor innovation efforts designed to move India's technology boom beyond today's technology enclaves. Doing so would increase productivity among the poorest strata of Indian society. This opens up a potentially effective organizing theme for Western donors to India, and it could point to areas where Western investors might also make a difference. A greater focus on women's unique development challenges would add heft to Western aid programmes. 90. Like China, India has very quickly become a global economic player as well as a country facing massive development challenges. This requires a subtle shift in Western engagement with India. Development assistance will remain an essential element of these relations, particularly given that millions of Indians still live below the poverty line. But the country now has an ever more modern information and services sector and could achieve a breakout in other industries if it is able to advance the reform process. Progress in trade liberalization could help the Indians open up their industrial sector to greater domestic and external competition, but the price to the West will likely be more concessions on agricultural subsidies. 91. The narrative of India's development offers critical lessons that could ultimately reinforce several core Western values, including the value of markets and good governance in development and the need for democratic participation in critical, political economic and social decision-making. Indeed, it demonstrates that democracy and rapid economic development can coexist. There are indeed many advantages to fostering democratic institutions. Above all, they help build consensus around national and local development strategies, and they do not require the state to divert enormous resources into suppressing social and political dissent. India's leadership, however, is hardly compact, and there are important religious, caste, ideological, class and regional tensions in this huge and highly heterogeneous country that will inevitably continue to render the reform process slow and sometimes tortuous. 92. Finally, India's growth, like China's, is part of an epic shift in global economic weight that will affect the global distribution of jobs, investment, energy markets, the condition of the global environment and perhaps ultimately the military power balance. In this new world, openness and flexibility will be the keys to success, and this is as much true for Europe and North America as it is for emerging countries like India. BIBLIOGRAPHY "An economic introduction to India", House of Commons Library research Paper 07/40, 2 May 2007. "China's nuclear exports and assistance to Pakistan," James Martin Center for Non-Proliferation Studies,"http://cns.miis.edu/research/india/china/npakpos.htm Ashton Carter, "Seeing the Big Picture," Foreign Affairs July/August 2006 Vol. 85, Issue 4. "Crude measures," The Economist, 29 May 2008. Deo Bardhan and Cynthia Kroll, The New Wave of Outsourcing, University of California, Berkeley: Fischer Center for Real Estate and Urban Economics. Eric Bellman and Jackie Range, "India's acquisition strategy: buy and learn", Wall Street Journal, 25 March 2008. "Doha Round of Trade Negotiations: India's Current Negotiating Strategy," http://www.cuts-international.org/pdf/India_CPP.pdf "Don't blame it on the scriptures," The Economist, 30 November 2006. Rafiq Dosani and Martin Kenney, "The next wave of globalization: Exploring the Relocation of Service Provision to India," Working Paper 156, Berkeley Roundtable on the International Economy, 13 September 2004. Mark A. Dutz and Carl Dahlman, "The Indian context and enabling environment," The World Bank,http://siteresources.worldbank.org/SOUTHASIAEXT/Resources/223546-1181699473021/3876782-1191373775504/indiainnovationchapter1.pdf "EIU lowers India GDP growth to 7.5%", Times of India, 25 August 2008. Government of India, "India: Addressing energy security and climate change", October 2007. Das Gurcharan, "The India Model," Foreign Affairs July/August 2006 Vol. 85, Issue 4. "India at 60," South Asia Monitor, CSIS, Number 108, 5 July 2007. "India in Afghanistan: a presence under pressure", Open Democracy, 11 June 2008. "India, Malaysia cut subsidies, increase gas prices, The Wall Street Journal Digital Network, 4 June, 2008. "India on fire," The Economist, 1 February 2007. "India outsmarts China," Foreign Policy, January/February 2006. "India Overheats," The Economist, 1 February 2007. Shada Islam, "EU and India: Progress, ambitions, realities," European Policy Centre, Policy Brief, November 2007. "India's N-deal with US", DAWN editorial 27 July 2008. Rose Kerves, "India and the Doha Round of WTO Negotiations",http://www.truthabouttrade.org/content/view/11020/51/ Joe Leahy and Amy Yee, "Backlash as India increases fuel prices", Financial Times, 5 June 2008. Graham Lee, "India and China compete for Burma's Resources," World Politics Review, August 2006,http://www.worldpoliticsreview.com/article.aspx?id=129 "Macroeconomic and Monetary Developments: Third Quarter Review 2007-08," Reserve Bank of India, Mumbai, 29 January 2008. Edward Markey and Ellen Tauscher, "Don't loosen Nuclear Rules for India, "The New York Times, 20 August 2008. "More ITBP troops for missions in Afghanistan." The Economic Times, 15 July 2008. Sachin Nagdive and Hitendra Patel, "The practical insight to gas pricing in India", Hydrocarbon Asia, September/October 2007. NATO PA Secretariat Report, ESC Visit to Tokyo and Osaka, Mission Report, 11-15 June 2007,http://www.nato-pa.int/Default.asp?SHORTCUT=1259 Udit Misra, "India doesn't want post-dated cheques on Services and Rules," Live Mint—The Wall Street Journal, February 7, 2008. http://www.livemint.com/2008/02/06232954/India-doesn8217t-want-post.html Pramit Mitra, "India at the Crossroads: Battling the HIV/AIDS Pandemic," The Washington Quarterly, Autumn 2004-05. C. Raja Mohan, "An Impossible Ally?" Foreign Affairs July/August 2006 Vol. 85, Issue 4. C. Raja Mohan, "Balancing Interests and Values: India's Struggle with Democracy Promotion," The Washington Quarterly, Summer 2007. C. Raja Mohan, "What if Pakistan Fails? India Isn't Worried…Yet," The Washington Quarterly, Winter 2004-05. NATO PA Secretariat Report, ESC Visit to Tokyo and Osaka, 11-15 June 2007, http://www.nato-pa.int/Default.asp?SH ORTCUT=1259 "Natural gas prices up 12 percent for power, fertiliser units", Times of India, 28 May 2005. OECD Briefing to the NATO PA Economics and Security Committee, February 2008. Harry Patil, "A 30% rise in cooking gas, 25% rise in gasoline ready to send shock waves through the Indian middle class economy", India Daily, May 26 2008. The People's Commission on Environment and Development India, George Perkovich, "Is India a Major Power?" The Washington Quarterly, Winter 2003-04. The Pew Global Attitudes Project, 27 June 2007 http://pewglobal.org/reports/pdf/256.pdf V.R. Raghavan, "The Double-Edged Effect in South Asia," The Washington Quarterly, Autumn 2004. Suda Ramachandran, "India promotes good will naval exercises", Asia Times, 14 August 2007. Jackie Range, "India focuses on taming inflation," The Wall Street Journal, 30 January 2008. Subroto Roy "The Dreamteam: A Critique," The Statesman, 6-8 January 2006.http://independentindian.com/2006/01/08/the-dream-team-a-critique/ Arundhati Roy, The Algebra of Infinite Justice, Flamingo, 2002. Amartya Sen, Poverty and Famines: An Essay on Entitlement and Deprivation, Oxford University Press, 1983. Amartya Sen, The Argumentative Indian: writings on Indian history, culture and identity, Penguin,2006. Thakur Raghu Nath Singh, "Degradation of Himalayan forests", The People's Commission on Environment and Development India, Joseph E. Stiglitz, Globalization and its Discontents, W. W. Norton & Company, 2002. Sundeep Tucker and Joe Leahy, "Sino-India trade wave captures banks' attention", Financial Times, 4 August 2008. "The World Economy: Surprise," The Economist, 14 September 2006. Ashutosh Varshney, "India's Democratic Challenge," Foreign Affairs, March/April 2007, Vol. 86 Issue 2. 2007/2008 UN Human Development Index Ratings, http://hdr.undp.org/en/statistics/ "US Congressman attack India's relations with Iran," The Hindu, 6 May 2007,http://www.hindu.com/2007/05/06/stories/2007050604280800.htm "What was the Green Revolution," http://www.indiaonestop.com/Greenrevolution.htm WTO, "India etc versus US: 'shrimp-turtle'", Amy Yee, "Engaging India: mystifying malfunctions", Financial Times, 9 January 2008. Daniel Yergin and Joseph Stanislaw, The Commanding Heights: The Battle between Government and the Marketplace that is remaking the Modern World, Simon & Schuster, 1998. Under Economic Reforms: An Indian Case Study", UNU/IAS Working Paper No. 106, October 2003. |
India vs the US: A Visual Comparison
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Since its shift from socialist economic policies in the early Nineties to a free-market economy, India has experienced a massive economic boom and foreign trade is a key part of its economic policy. India is in many ways a nation of paradoxes. It is simultaneously one of the worlds fastest growing economies and the nation with the largest concentration of people living below the poverty line. India's history, geography, religious and ethnic makeup, and culture are vastly different to the US and yet the two countries maintain a close relationship. Our infographic is designed to provide an at-a-glance view of the most important economic dimensions of the US and India and a few less important but fun ones too. Hence the lack of scale or numbers. In order to help compare and contrast the economic differences, we have simplified the data from the CIA World Factbook and Nationmaster.com . For the exact numbers in any category, check here and here.
For more personal finance visualizations see: WallStats.com
For more personal finance visualizations see: WallStats.com
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How America Benefits From Economic Engagement With India By Vinod K. Jain, Ph.D. Robert H. Smith School of Business University of Maryland Kamlesh Jain, Ph.D. India-US World Affairs Institute, Inc. Washington, D.C. Released in Washington D.C. on June 15, 2010 by Congressman James McDermott at the East-West Center-FICCI-School of Advanced International Studies Seminar on U.S.-India Economic Relations: The Road Ahead Released in Mumbai on July 31, 2010 by the Honorable Kapil Sibal Union Minister for Human Resource Development at the Indo-American Society's Indo-US Summit on Higher Education Silver Spring, Maryland www.india-us.orgii © 2010 by India-US World Affairs Institute, Inc. ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in any retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the publisher. Permission requests should be addressed to the President of India-US World Affairs Institute, Prof. Vinod Jain, at vjain@india-us.org. Disclaimer: While the publisher and the authors have used their best efforts in preparing this publication, they make no representations or warranties with respect to the accuracy or completeness of the contents of this report. The advice and strategies implied herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher, nor the authors, nor the sponsors/partners shall be liable for any loss of profit or any other commercial damages. The opinions expressed in this report are those of the authors and not of any of the study's sponsors.iii Contents Foreword vii Foreword viii Executive Summary ix India Inc. Goes Abroad ....................................................................................................................... ix India's Greenfield Investments in the United States ............................................................................ x India's Mergers and Acquisitions in the United States ........................................................................ x U.S. Exports to India .......................................................................................................................... xii Immigrant Entrepreneurs, Professionals and Students from India ..................................................... xii The State Department, Open Investment, and American Jobs xiii Section 1. Introduction 1 Foreign Companies in America.......................................................................................................... 2 U.S. Exports ....................................................................................................................................... 3 The Impact of Immigrant Entrepreneurs, Professionals, and International Students ......................... 4 About the Report .................................................................................................................................. 4 Case Study: Tata in America................................................................................................................ 5 Section 2. Greenfield Investments by Indian Companies in the U.S. 10 Main Findings .................................................................................................................................. 11 Notes ................................................................................................................................................ 16 Case Study: Essar Steel Makes the Impossible Possible in Minnesota ............................................ 16 Section 3. Mergers & Acquisitions by Indian Companies in the U.S. 18 Main Findings .................................................................................................................................. 18 Indian Companies' M&As in the United States ............................................................................ 18 Jobs Created/Saved through Mergers and Acquisitions ................................................................ 21 Penetration of Indian Investments in U.S. States .......................................................................... 22 Case Study: Jain Irrigation Systems Ltd. ........................................................................................... 23 Case Study: HCL Technologies ......................................................................................................... 26 Case Study: Ranbaxy Laboratories Ltd.............................................................................................. 28iv Case Study: FirstsourceSolutions ....................................................................................................... 29 Case Study: Rolta ............................................................................................................................... 29 Case Study: Polaris Software ............................................................................................................. 31 Case Study: Indegene Life Systems Pvt. Ltd. .................................................................................... 31 Case Study: Infotech Enterprises Group ............................................................................................ 32 Section 4. A Splendid Exchange 33 U.S. Merchandise Exports to India..................................................................................................... 34 Exports and Jobs................................................................................................................................. 37 The Importance of India as an Export Market to Different States...................................................... 39 Section 5. Immigrant Entrepreneurs, Professionals, and Students from India 40 Who are the Indian Americans ........................................................................................................... 40 Immigrant Entrepreneurs from India.................................................................................................. 40 Indian American Professionals........................................................................................................... 44 Appendix: Methodology 47 Acknowledgements 49 About the Authors 50 India-US World Affairs Institute, Inc. 51 Federation of Indian Chambers of Commerce & Industry 51 Robert H. Smith School of Business, University of Maryland 51 Endnotes 55v Tables Table 1-1: Number of Tata Employees by State ....................................................................................... 6 Table 2-1: The Top Fifteen U.S. States Receiving Greenfield Investments from India, 2004-2009 ...... 13 Table 2-2: The Top 15 Indian Companies/Groups that Created the Most Jobs ...................................... 15 Table 3-1: Top Ten U.S. States with Acquisitions from Indian Companies ........................................... 20 Table 3-2: Top 10 Job Creating Companies............................................................................................ 22 Table 3-3: Acquisitions by Jain Americas ($M) ..................................................................................... 24 Table 3-4: Additional Sources of Impact ($M) ....................................................................................... 25 Table 4-1: U.S.-India Merchandise Trade, 2004, 2008 and 2009 ........................................................... 34 Table 4-2: U.S. Merchandise Exports to India by Industry, 2004, 2008, and 2009 ................................ 35 Table 4-3: Compounded Growth Rates of U.S. Exports to Selected ...................................................... 36 Table 4-4: No. of U.S. Jobs Linked to U.S. Merchandise Exports to India ............................................ 37 Table 4-5: The Top 25 States – Numbers of Jobs Linked to Manufactured............................................ 38 Table 4-6: Share of India in Total State Merchandise Exports, 2009 ..................................................... 39 Table 5-1: Select Immigrant-Entrepreneurs from India .......................................................................... 43 Table 5-2: The Number of AAPI Members by State and by Specialty................................................... 45 Figures Figure 1-1: Governor Tim Pawlenty at the groundbreaking ceremony of Essar Steel on September 19, 2008 .......................................................................................................................................................... 2 Figure 2-1: The Top Ten U.S. Sectors Receiving Greenfield Investments from India ........................... 11 Figure 2-2: Project Trend Analysis ......................................................................................................... 12 Figure 2-3: Investment Analysis ............................................................................................................. 14 Figure 2-4: Jobs Analysis........................................................................................................................ 14 Figure 3-1: The Top Ten U.S. Sectors with Acquisitions from Indian Companies ................................ 19 Figure 3-2: Acquisition Trend Analysis.................................................................................................. 20 Figure 3-3: Acquisition Value Analysis.................................................................................................. 21 Figure 3-4: Jain Americas NuCedar Mills Plant in Chicopee, MA......................................................... 24 Figure 3-5: Rolta Headquarters in the U.S.............................................................................................. 30 Figure 5-1: Engineering and Technology Companies Founded by Immigrants from India.................... 42 Figure 5-2: Industries in Which Immigrants from India Founded Companies ....................................... 42vi vii Foreword While popular perception has it that the companies of India Inc. are taking jobs away from Americans and adding little value to the U.S. economy, nothing could be further from the truth. As the authors of this study demonstrate, Indian companies have been investing steadily in the U.S. for decades, and with the rise of India Inc. the magnitude and impact of such investments have increased. Using India's most successful and venerated company, the Tata Group, as a case study, this report shows how Indian firms are contributing to U.S. economic growth through investment and job creation in America, through mergers and acquisitions of U.S. companies, and through exports of U.S. products and services. Firms and individuals from India also make a powerful impact on other aspects of U.S. culture and society. Students from India are responsible for a significant portion of the billions of dollars spent annually by foreign students in the United States. Tata and other Indian firms have made significant contributions to U.S. museums and other cultural organizations, to educational institutions, and to other non-profit activities, including post-Katrina relief efforts. The India-US World Affairs Institute is pleased to have partnered with the Robert H. Smith School of Business, University of Maryland, and with the Federation of Indian Chambers of Commerce & Industry to prepare this report. Its findings, we hope, will foster greater appreciation of the growing importance of India to the U.S., and will remind us how increasingly intertwined are the economies of these two great countries. Timothy D. Matlack Chairman India-US World Affairs Institute, Inc.viii Foreword For too long, the relationship between developed and developing nations had been a one-way street. For decades, vehicles like America's PL 480 program (Public Law 480) provided much needed food aid to developing countries as a means to combat world hunger and malnutrition, and develop export markets for U.S. agricultural commodities and products. In the 1980s and 1990s, development aid by countries was partially replaced by foreign direct and institutional investments by companies. Multinationals from developed countries also began to disseminate technology to junior partners in developing countries, with the idea of using such technology to produce and sell products there. In the 2000s, we are seeing a dramatic paradigm shift, whereby developing countries are now giving birth to multinationals of their own, and these multinationals are making acquisitions and other investments in developed countries at an accelerating pace. Multinationals from developed countries that went to developing countries to produce and sell products are now leveraging the intellectual capital there to perform research & development and other high value-added work in the developing countries. This study challenges the received wisdom, the old paradigm, of international economic engagement between developed and developing nations, using the United States and India as a case in point. The study shows how major multinationals from India are now making significant acquisitions and greenfield investments, and creating jobs, in the United States. Some of the Indian companies to which work was being outsourced in the earlier era are now insourcing such jobs within the United States itself, using American workers to perform valueadded work. The challenge in this changed scenario is to find a balance between the interests of developed and developing nations, and between the interests of their respective multinationals. The Federation of Indian Chambers of Commerce & Industry is pleased to partner with the India-US World Affairs Institute and the Robert H. School of Business, University of Maryland, in this important study. It's my hope that the study will prove to be a lightning rod for greater economic engagement between India and United States and for strengthening our common interests. Dr. Amit Mitra Secretary General Federation of Indian Chambers of Commerce & Industry (FICCI)ix Executive Summary The continual globalization of the American economy evokes widely disparate viewpoints within the United States – from a threat to the American way of life to globalization as a panacea for anything and everything. Clearly, neither view presents an accurate account of reality. This study investigates one specific aspect of globalization of the American economy, namely, the United States-India business relationship. It provides, for the first time, a comprehensive analysis of America's economic engagement with India for the period 2004 to 2009. The analysis covers India's foreign direct investments into the United States and U.S. exports to India, as well as an assessment of their impacts on the American economy. Also included in the study are the economic impacts Indian Americans are having in the United States. It presents a case for even stronger business ties between the United States and India. Such a relationship will benefit the United States (and India) especially with regard to jobs, the Number One policy issue in Washington and the Number One livelihood issue on Main Street America today. The study is more up-to-date and more comprehensive about U.S.-India economic engagement than practically any other study published so far. It is based on a variety of secondary information, including information from world-class sources such as the Financial Times, Thompson SDC Database, and the U.S. Department of Commerce, among others. We also conducted our own research and interviews with several Indian companies in the United States to further explore areas of the study. A summary of the study's key findings is presented below. India Inc. Goes Abroad Indian companies have been investing abroad for decades, though the pace of foreign investments has accelerated significantly since 1991, and especially in the 2000s. This development is a result of several factors, including Indian companies' ability to arbitrage their cost advantages, access to a large talent pool, success at home – in a huge domestic market with cut-throat competition, reasonably well-developed institutions (compared to many other emerging markets), business acumen arising from an entrepreneurial tradition, business sophistication, financial market sophistication, production efficiency, a long exposure to Western and Japanese multinationals and their management practices, and Government of India's progressive relaxation of foreign investment rules. While in the 1960s/1970s/1980s, Indian multinationals were investing in other developing countries, the trend in the last decade has been to go "up market" and they now also invest in highly developed economies like the United States. This portends a reversal of roles whereby developing countries like India are now making investments in developed countries, not just the other way around. x India's Greenfield Investments in the United States 1. During 2004-2009, 90 Indian companies made 127 greenfield investments worth $5.5 billion, and created 16,576 jobs in the United States. The top three destination states for greenfield investments were Minnesota, Virginia, and Texas, in that order. However, the top three states in terms of jobs created were Ohio, Texas, and California. 2. The five U.S. industrial sectors that received the most greenfield investment were Metals; Software & IT Services; Leisure & Entertainment; industrial machinery, equipment & tools; and financial services, accounting for almost 80% of total greenfield investment in the United States. It is noteworthy that the software and IT services sector received less than 15% of total investment, and the bulk of investments went into mining, manufacturing, and other industries. 3. Ten Indian companies made more than 70% of the total $5.5 billion dollars of greenfield investments in the United States: - Essar Steel (Minnesota): $1,600 million - JSW Steel (N/A): $1,000 million - Tata Consultancy Services (California, Michigan, New York, Ohio): $273.4 million - Welspun Group (Arkansas; Texas): $246 million - Reliance Adlabs (Illinois): $161 million - Indage Group (Virginia): $160.5 million - HCL Group (New Jersey): $148.7 million - Flag Telecom, Reliance (N/A): $124.1 million - Tata Communications (Virginia): $102.7 million - PSL (Mississippi): $100 million India's Mergers and Acquisitions in the United States 1. During 2004-2009, 239 Indian companies made 372 acquisitions in the United States. We were able to obtain the deal value for only 267 of these transactions. The total value of the 267 acquisitions was $21 billion, or $78.7 million per acquisition. 2. Of these 267 acquisitions, we were able to obtain the numbers of jobs created/saved for only 85 transactions, which came to over 40,000 jobs. (The total number of jobs created or saved by all 372 transactions must be much higher). 3. Five states that attracted the most M&A investments from Indian companies accounted for 75% of total deal value: Georgia, New Jersey, Michigan, California, and Texas.xi 4. The five leading U.S. sectors receiving M&A investments from India were: Manufacturing; IT & IT Enabled Services; Biotech, Chemicals & Pharmaceuticals; Automotive; and Telecom – for a total of 83% of total deal value. The bulk of M&A investments by India Inc. in the United States were in manufacturing and other industrial sectors, rather than in services for which India is well known. The value of U.S. acquisitions by Indian companies fell in 2008 and then again in 2009 even more steeply, a result of the worldwide recession. It is however interesting to note that greenfield investments rose through 2008, achieving their highest level that year, and then registered a decline in 2009, though the decline was not as steep as for acquisitions. This is possibly because making a greenfield investment is a longer-term decision, while acquisitions are often opportunistic and accomplished relatively more quickly. U.S. Exports to India 1. The United States-India goods trade tripled during 2004-2008. American merchandise exports to India during the same period grew at a compounded annual growth rate of over 30 percent. As a result of the global recession, U.S. exports to India declined slightly in 2009. 2. For the period 2004-2009, U.S. exports to India grew by a total of 269 percent, while India's exports to the United States grew by 136 percent. U.S. exports to India have grown faster than exports to practically all other countries in the world. 3. U.S. manufactured exports to India were linked to 96,000 manufacturing and nonmanufacturing jobs in the U.S. in 2009. Ten states (California, Washington, Texas, Illinois, New York, Utah, Pennsylvania, South Carolina, Florida, and Georgia) accounted for only 62 percent of all U.S. jobs linked to exports to India in 2009, indicating that the benefits of exporting to India are wide spread throughout the nation. These numbers do not include agricultural, mining, and services exports, which will have their own implications for jobs in the United States. For instance, in 2007 the United States exported services worth $9.4 billion to India, compared to the goods worth $15 billion that are the focus of our study. Immigrant Entrepreneurs, Professionals and Students from India The 2.57 million Indian Americans in the United States contribute to the U.S. economy and society in numerous ways. It's hard to measure their economic impact with any precision. Here are some pointers in that direction. 1. A 2007 joint Duke University-UC Berkeley study found that Indian immigrant entrepreneurs had founded more engineering and technology companies during 1995-2005 than immigrants from Britain, China, Japan, and Taiwan combined. xii 2. A 2007 study by the National Venture Capital Association (NVCA) found that India was the most common place of birth for foreign-born founders of venture capital-backed public companies, followed by Britain, China, Iran, and France. 3. The list of major companies whose founders or co-founders are of Indian heritage include Akamai (1,750 employees), Bose Corporation (8,000 employees), iGate (6,910 employees), Kanbay International (6,900 employees), Sun Microsystems (29,000 employees), and Syntel (13,600 employees). Dozens of such companies in the United States have created tens of thousands of jobs. 4. There are currently almost 10,000 Indian American owners of hotels/motels in the United States, who together own over 21,000 hotels with 1.8 million guest rooms and property valued at $129 billion. They employ 578,600 workers. 5. There are about 50,000 physicians (and 15,000 medical students) of Indian heritage in the United States, serving in cities, rural, and peripheral areas throughout the country. They continue to make major contributions to their communities, to healthcare, and to the medical profession in the United States. 6. Education is one of America's finest exports. The foreign students who come for higher studies to the United States not only bring talent, but also contribute to the U.S. economy via tuition and living and other expenses. The expenses incurred by foreign students in the United States are treated as "deemed exports," with implications for thousands of jobs linked to such exports. India has had the largest number of foreign students in the U.S. among all countries of origin for eight years in a row. In 2008, there were 94,563 students from India whose net contribution to the U.S. economy was $2.39 billion. All in all, the study shows how America benefits from economic engagement with India and with people of Indian origin. It has highlighted only the economic and employment benefits of such engagement to the United States, which of course are the biggest issues facing the United States today. However, the non-economic benefits of engaging with India are equally significant – cultural, social, regional security, and political advantages to name just a few.xiii The State Department, Open Investment, and American Jobs Obama Administration's Official Position on Inward FDI and U.S. Exports Fact Sheet BUREAU OF ECONOMIC, ENERGY AND BUSINESS AFFAIRS Washington, DC October 6, 2009 Foreign direct investment (FDI) is an important source of economic growth and job creation in the United States and around the globe. It is vital to U.S. prosperity. In the past decade, the stock of U.S. direct investment abroad has more than tripled (increasing from $1 trillion in 1998 to $3.2 trillion in 2008). The stock of FDI in the United States totaled $2.3 trillion (about 15.8% of U.S. GDP in 2008). • In 2006, FDI directly or indirectly contributed to 9.3% of U.S. GDP ($1.25 trillion). o Inbound FDI totaled $237.1 billion (1.8% of GDP). Mergers and acquisitions of existing U.S. firms accounted for the vast majority (90%) of new FDI outlays in 2006. o U.S. companies earned $322.6 billion from overseas direct investments and remitted $101.7 billion (0.8%) of GDP) to U.S. parent firms in the form of dividends. o 19.5% of U.S. exports ($200 billion, 1.5% of GDP) were shipped to foreign subsidiaries of U.S. firms. o Nearly 20% of U.S. exports ($204billion, 1.6% of GDP) were shipped from U.S. affiliates of foreign firms. o U.S. affiliates of foreign firms spent $395.8 billion (3.1% of GDP) compensating U.S. employees and $37.8 billion (0.3% of GDP) on research and development. Foreign affiliates also reinvested $69 billion (0.5% of GDP of their earnings in the U.S. economy. • U.S. exports support millions of American jobs. About 19.9% of all jobs in America's manufacturing sector depend on exports. • In 2006, U.S. affiliates of foreign companies employed 5.3 million Americans.xiv The United States has a significant stake, as both the world's largest source and recipient of foreign direct investment, in working with our economic partners both multilaterally and bilaterally to implement policies that facilitate global investment flows. The State Department encourages nondiscriminatory, open, and market-oriented environments for U.S. investment abroad through a wide range of bilateral and multilateral initiatives, including the Organization for Economic Cooperation and Development (OECD) Freedom of Investment project, the G-8 Heiligendamm process, the UN Conference on Trade and Development (UNCTAD), and the Asia-Pacific Economic Cooperation forum (APEC). State and the Office of the United States Trade Representative share negotiation of bilateral investment treaties (BITs) that establish rules that protect the rights of American investors abroad and provide market access for future American investment. The State Department also works closely with the Commerce Department's Invest in America program, which promotes foreign direct investment to the United States. An open investment climate helps ensure that American citizens continue to reap the benefits associated with inward investment. Through its role as a member of the Committee on Foreign Investment in the United States (CFIUS), the inter-agency panel which reviews the national security implications of certain cross-border mergers and acquisitions (M&As), the State Department and other CFIUS agencies seek to ensure protection of U.S. national security interests while maintaining an open environment for international investment. In 2008, CFIUS concluded action on more than 150 transactions, reflecting over $200 billion in inward U.S. investment. Source: U.S. Department of State and U.S. Department of Commerce http://www.state.gov/e/eeb/rls/fs/2009/130371.htm1 Section 1. Introduction "Foreign companies are a boon to the American marketplace for the jobs they create, the capital they infuse, the skills they teach, and the opportunities they afford managers, workers, and the executives alike. But that's not all. By spurring competition, fostering innovation, introducing new technologies, and creating newer, better, and even cheaper products, foreign companies are also exerting a powerful and positive impact not only on the careers of employees and managers, but also on the American marketplace as a whole." - Micheline Maynard, The Selling of the American Economy: How Foreign Companies are Remaking the American Dream, Broadway Books, 2009 Tata, the quintessential Indian conglomerate, came to the United States in 1939 and set up a permanent office in New York City in 1945. Now, more than 70 years later, thirteen Tata companies have a presence in the United States, and over 15,500 Tata employees in almost 100 locations in 43 states are contributing to the U.S. economy and society. Tata has brought to the United States billions of dollars in capital, created or saved thousands of jobs directly, and many thousands more indirectly. It has ushered in new business models and management expertise, invested in research and development, lowered the cost of products for American consumers and of inputs for American companies, and much else. In addition, some Tata companies in the U.S. export to other countries which links directly to American jobs. And, as the case study later in this section shows, Tata systematically contributes to the communities where it does business. Though Indian companies, both small and large, have been coming and contributing to the United States economy for decades, the pace of India Inc.'s American entry and contributions has significantly increased in the last few years. This is the subject matter for this report. We present information on hundreds of Indian companies that are now in the United States and how they are contributing to the U.S. economy. A second aspect of this report relates to exports from different U.S. states to India, which correlates positively with jobs in those states. Finally, the study highlights contributions by immigrants and non-immigrants (e.g., students) of Indian ethnicity to the United States economy and society. This definitive study of the United States' economic engagement with India presents a comprehensive analysis of investments from India into the United States and exports from the U.S. to India – for six years, 2004-2009. It is based on a variety of published information, information available from world-class sources such as the Financial Times, Thompson SDC Database, and the U.S. Department of Commerce, among others, as well as our own research including interviews with a few Indian companies investing in the United States. 2 Foreign Companies in America Foreign companies have always played a pivotal role in business and life in America. According to the latest available survey from the U.S. Department of Commerce, U.S. affiliates of foreign-owned companies employed more than five million American workers in 2006. "That is 4.6 percent of the private workforce, up from 3.4 percent twenty years ago… Two million workers are employed by manufacturing affiliates – more than one in eight U.S. factory workers... In 2006, 325,000 Americans worked for foreign affiliates in the motor vehicles and parts sector alone, 278,000 in chemicals, and 180,000 in nonmetallic mineral products such as cement." i Foreign companies often locate their operations and employment in non-metro areas – areas that tend to have higher unemployment levels (and lower cost of doing business). And, Indian companies, more often than not, are investing to create and sustain manufacturing capabilities in the United States, rather than in services for which they are well known. Essar Steel Limited of India, for instance, acquired Minnesota Steel LLC in 2007 and is investing $1.6 billion to construct a new vertically integrated steel mill in Minnesota's Iron Range. It will be the first facility in North America to include iron ore mining, ore processing, direct reduction, and steelmaking capabilities at a single site. ii At the groundbreaking ceremony on September 19, 2008, Madhu Vuppuluri, President of Essar North America, said, "Together with Minnesota Steel and Algoma Steel, we are optimistic abou creating a new and vibrant steel manufacturing capability in North America." American affiliates of foreign-owned enterprises tend to be more innovative than domestic companies, and in 2006, they spent $34 billion on R&D, accounting for 14 percent of all R&D performed by U.S. businesses. They also accounted for 19 percent of all U.S. exports. Both these percentages are significantly higher than the percentage of American workers (4.6 percent) who work for foreign companies in the United States. It's no wonder that foreign Figure 1-1: Governor Tim Pawlenty at the groundbreaking ceremony of Essar Steel on September 19, 2008 (MPR Photo/Bob Kelleher) Excerpt from Minnesota Governor Tim Pawlenty's speech at the groundbreaking ceremony: "What we're doing today, in the midst of a lot of economic turmoil, is celebrating a very substantial success for this region, and for our state, and really for the whole country."3 companies' U.S. affiliates pay much higher salaries (average of $63,400 per year) to their workers than the U.S. average of $48,200 per year. iii Three-fourths of the foreign-affiliate R&D is concentrated in manufacturing, particularly in chemicals, motor vehicles, and pharmaceuticals. This is especially notable since many American companies are relocating their manufacturing – and R&D – to other countries. When foreign-owned companies make investments in the United States, the media typically focuses the investment dollars they bring in and the numbers of jobs they create or retain (save). However, the role they play in the American economy far exceeds the initial investment or the jobs created. Investing in a foreign market is generally not a one-time occurrence; it often leads to repeat investments in the host market over the next few years and contributes to state and federal taxation revenues. Jain Irrigation Systems of India, for example, acquired Aquarius Brands of Fresno, CA, in February 2007 for $1.80 million. Subsequently, they invested an additional $13.35 million in Fresno and Winterhaven, FL, and paid $574,000 in payroll taxes for 2008. Furthermore, Aquarius Brands (now Jain Irrigation) invested $3.88 million in R&D and had exports of $15 million in 2008. iv U.S. Exports It's a truism that exports from a country are a result of real jobs in the country, and export growth leads to job and economic growth in the exporting country. When President Barack Obama left for his four-nation tour of Asia on November 12, 2009, his administration officials stressed the importance of Asia to U.S. economic growth. "Right now, 1.6 million jobs in the United States are associated with exports to Asia," said Jeffrey Bader, National Security Council senior director for East Asian Affairs. Asia is "the fastest-growing region in the world," with 7 percent growth expected in the next year. "It already takes about a quarter of our exports, and those exports are expected to increase as the region grows… And, so, we see a lot of jobs being created through our engagement in Asia." v President Obama's stated goal is to double U.S. exports over the next five years and create two million new jobs in the United States. This will likely be achieved through exports to emerging markets more than to America's traditional big trade partners. Among emerging markets, India offers the best prospects for significantly increasing U.S. exports and creating jobs. United States merchandise exports to India have grown rapidly in the last six years, and tripled from 2004 to 2008. Over this period of time, United States exports to India had the highest growth (200 percent) compared to U.S. exports to practically any other country, including developed countries and other large developing countries (e.g., Brazil, China, and Russia). Tens of thousands of American jobs are linked to exports to India and the count is rising with the trend of increasing exports to India.4 The Impact of Immigrant Entrepreneurs, Professionals, and International Students Immigrants have always contributed handsomely to the U.S. economy through job and wealth creation. The same is true of immigrant entrepreneurs, professionals, and students from India. This report highlights the contributions made by such individuals in the United States. It includes Indian immigrants like Vinod Khosla who, as co-founder of Sun Microsystems, created tens of thousands of high-technology, high-paying jobs in the United States, and continues to do so in his current role as a venture capitalist. And, it includes the contributions of over 10,000 Indian American hotel owners. Also included in this report are other professionals, like doctors, engineers, scientists, technologists, and educators, who are contributing to the U.S. economy in numerous ways. In particular, we highlight the roles played by Indian Institutes of Technology (IIT) graduates and members of the American Association of Physicians from India. Another rarely considered export is the export of education services from the United States. Education is one of America's finest exports and is a trillion dollar industry. The foreign students who come to the U.S. for higher studies not only bring talent, but also contribute to the U.S. economy via tuition, living, and other expenses. According to the Institute of International Education's publication, Open Doors 2009, the net contribution of foreign students and their families to the U.S. economy in 2008 was over $15.5 billion. Money spent by foreign students and their families in the United States is treated as "deemed exports" from the U.S., which, again, is linked to tens of thousands of American jobs. India has traditionally had the largest numbers of foreign students studying in the United States. vi About the Report This report is the outcome of a project undertaken by the India-US World Affairs Institute, in association with the Robert H. Smith School of Business, University of Maryland, and the Federation of Indian Chambers of Commerce & Industry (FICCI). Unlike many previous publications on this theme, which focused only on Indian companies' acquisitions in the U.S., this study presents the first comprehensive look at how America benefits from economic engagement with India in multiple spheres. In addition to mergers and acquisitions by Indian companies, the report includes their greenfield investments in the U.S., exports from the U.S. to India, and the impact of Indian American entrepreneurs and other Indian professionals on the U.S. economy. Project scope did not include the impact of many other ways in which Indian companies are contributing to the United States, such as licensing of U.S. technologies and brands, and acquisitions by Indian companies of U.S. companies' exclusively-foreign operations. Hence, this study does not include the impact of such Indian companies' investments in the U.S. on job creation/retention, for example, • Purchase of India rights for the Dobutrex brand by Nicholas Piramal India Limited from Eli Lilly & Co. in 2004.5 • Purchase of a 50% stake in Omimex de Colombia (with operations in Colombia) by ONGC of India for $425M from the Texas-based Omimex Resources Inc. in 2006. The remainder of the report is organized into the following key sections: Section 2. Greenfield investments by Indian companies in the U.S. Section 3. Mergers and acquisitions by Indian companies in the U.S. Section 4. U.S. exports to India Section 5. Impact of immigrant entrepreneurs, professionals, and students from India in America. Many sections also include one or more case studies that focus on specific companies and their contributions in the United States. These sections are followed by appendices containing a Methodology section, acknowledgements, and information on report authors, the India-US World Affairs Institute, FICCI, and Robert H. Smith School of Business, University of Maryland. Case Study: Tata in America The Tata Group, established in 1868, is India's largest and most respected business group with current revenues in excess of $70 billion. The Group has about 90 companies and employs 350,000 people in 80 countries, and its products and services are available in over 120 countries. Tata's businesses include luxury hotels, consumer goods, mining, steel manufacturing, telecommunications, trucks and cars, electric power, credit cards, chemicals, engineering, and IT services and business process outsourcing. Tata is the largest Indiaheadquartered multinational business group in the United States, operating 13 companies with over 15,500 staff in 43 states and the District of Columbia. Tata is contributing to the American economy and society in numerous ways including by reversing the outsourcing trend – bringing jobs back to the United States via insourcing. Tata's core values of integrity, understanding, excellence, unity, and responsibility are institutionalized within the Group and are fundamental enablers of Tata's global success. Tata is well-known for its unique model of returning wealth to the communities in which it operates. In fact, 66 percent of the holding company Tata Sons' equity capital is owned by philanthropic trusts. In an article about the founder, Jamsetji Tata, Harvard Business School historian N.S.B. Gras wrote, "he saw clearly that the business man was in effect but a trustee of wealth (of the people)." vii According to R. Gopalakrishnan, an executive director of Tata Sons Ltd. and a director of several Tata companies, "In a free enterprise, the community is not just another stakeholder in business, but is in fact, the very purpose of its existence." viii Tata first came to the U.S. in 1939 and established a New York branch of the Tata Iron and Steel Company in 1945. The Tata Group now operates a variety of businesses in nearly 100 locations across the United States. Tata grew via both acquisitions and organically, and now 6 owns global brands such as Tetley Tea, Eight O'Clock coffee, Jaguar Land Rover automobiles, Corus Steel, Ritz Carlton (now Taj) Boston, and the Pierre Hotel in New York. ix Table 1-1: Number of Tata Employees by State The 26 States with More Than 100 Tata Employees Each State No. of Employees State No. of Employees New Jersey 1,686 Georgia 384 California 1,647 Indiana 384 New York 1,549 Washington 365 Ohio 1,173 Arizona 329 Texas 1,008 Minnesota 321 Illinois 956 Virginia 267 North Carolina 867 Maryland 216 Florida 599 Colorado 193 Michigan 598 Rhode Island 183 Wyoming 485 Kentucky 168 Connecticut 470 District of Columbia 166 Massachusetts 453 Wisconsin 150 Pennsylvania 409 Delaware 111 Source: Tata Sons Limited, November 2009 In the United States, Tata operates in six business sectors, namely, information systems and communications, engineering, materials, services, consumer products, and chemicals. Table 1.1 shows the 26 U.S. states with the largest numbers of Tata employees currently. Over the last five years, the Tata Group has invested more than $3 billion in the United States. Annually, Tata reinvests over half a billion dollars in the U.S. economy through research & development programs, capital expenditures, employee salaries, travel, taxes, etc. Continuing its long tradition of giving back to local communities, Tata supports local and national causes as well as university collaborations. Recent examples include: • In 2009, Tata Business Support Services (TBSS) and Tata Sons donated 1,500 new books to the 750 students of East Milton Elementary School in Florida under the auspices of Tata's national CSR (corporate social responsibility) partnership with First Book®. • In 2008, Tata created a $50 million endowment at Cornell University to advance the research and study of agriculture and nutrition in India.7 • In 2008, Tata Sons established a student internship program with the University of California, Berkeley that sends students to India to work within local communities on Tata-sponsored community development projects. • In 2008, three Tata companies jointly committed to a three-year gift to the Foundation of Appalachian Ohio. In addition to providing access to education throughout the 32 Appalachian Ohio counties, the Tata gift will enable eight elementary schools to welcome a traveling science program into their schools. • In 2007 and 2008, thirty Harvard University undergraduate and graduate students were presented with Tata study grants to pursue academic projects in India and neighboring countries. • Tata employees support both the Toys for Tots and Adopt-a-Soldier programs in the Washington D.C. area. • Tata companies sponsored the opening of a Mughal Art exhibition at the Smithsonian Institution in Washington DC and funded website digitization of the Indian miniature paintings collection at the Boston Museum of the Fine Arts. Tata's U.S. strategy is a combination of greenfield investments and mergers and acquisitions (M&As) with successful U.S. brands where both companies benefit by sharing best practices and blending their respective strengths. In some cases, the acquired companies were ailing and the acquisition enabled recovery that led to not only the retention but also the creation of new American jobs. The following examples illustrate the diverse ways in which Tata companies are contributing to the U.S. economy. Tata Consultancy Services (TCS) is a 143,000-employee IT services, business solutions, and outsourcing company that operates in 42 countries. In 1979 TCS was the first Indian technology firm to set up operations in New York City. Today, TCS America provides consulting services to 49 of the Fortune 100 companies. It has 23 offices in the U.S. and employs more than 12,000 staff in 43 states, constituting 80% of the Tata workforce in the United States. Since 2004, TCS America has made greenfield investments of about $135 million in Ohio, Michigan, California, and New York establishing world-class facilities to house IT consultants who provide enterprise systems implementation, networking, and other information technology consulting services, as well as business process outsourcing (BPO) and traditional management consulting services. Like most Tata companies, TCS takes community service seriously. Notably TCS America now donates 50 cents of every dollar of American profits to charities like the March of Dimes, the American Cancer Society, and to community organizations in the cities where it operates. 8 In March 2008, TCS opened its first North American domestic delivery center, TCS Seven Hills Park, in Cincinnati, Ohio, with space for 1,000 consultants. On November 5, 2009, at an event attended by Ohio's Governor, Ted Strickland, TCS announced that it had already scaled up to 300 associates. Governor Strickland commented, "Fostering job creation is vital to a strong economic recovery for Ohio. Companies like Tata Consultancy Services are tapping into our highly talented workforce and world-class educational institutions to grow their business while providing high skilled jobs for Ohioans. This is the type of investment and long term commitment that will ensure Ohio's place as an economic leader." One example of its humanitarian work is that TCS matched its employees' individual contributions of $50,000 toward relief efforts after Hurricane Katrina. TCS also provided significant and timely pro bono assistance in Louisiana, Mississippi, and Texas. Within days of the hurricane, TCS, working jointly with the Mississippi Department of Employment Security, designed, developed and deployed Mississippi's self service Disaster Unemployment Assistance System for the residents of Mississippi. The system enabled residents to file for unemployment and other emergency funds in that time of crisis. California-based Good Earth Teas offers a wide range of herbal, fruit-flavored, medicinal and specialty green and black teas sold across the nation in grocery, gourmet, and natural food stores. Tata purchased Good Earth in 2005 for $31 million to complement its acquisition of the British tea giant, Tetley in 2000. After the acquisition, Good Earth Teas started managing all Tata U.S. tea business under Tetley Tea. The collaboration has worked well – Good Earth had expertise in producing in-demand products in the U.S. and Tata brought expertise in building efficiencies and expanding distribution globally. The tea continues to be blended and packed in Santa Cruz, California. Since joining the Tata Group, Good Earth Teas has expanded its distribution into new segments with its new Organic range, new retail channels, and new markets like the U.K. and Canada. The increased volume of tea production and management has led to growth in the company's employee base to 70 employees in California, New Jersey, and Georgia. Good Earth is a green company which packages its tea in 100% recycled materials. The company also works closely with American Forests, one of America's oldest conservation organizations. Through their ongoing partnership and grant program, Good Earth has helped American Forests plant over 20,000 trees. Planting these trees will remove 6,667 tons of CO2 "Indeed, to a degree, the process through which the U.S. exported jobs is now being inverted. In November, Ted Strickland, the governor of Ohio, one of the states hit hardest by globalization, showed up at a corporate campus in Milford, a suburb of Cincinnati, to celebrate the fact that Tata Consultancy Services, the Indian outsourcing giant, now employs 300 workers at its North America Domestic Delivery Center. The outsourcer has become an insourcer. Perhaps we're not seeing deglobalization, but rather reglobalization." The Vogue for Local by Daniel Gross, Newsweek International, 21 December 20099 from the atmosphere over a 50-year span, the equivalent of removing 900 automobiles from U.S. highways. The Boston Ritz Carlton overlooking Boston Commons has hosted generations of blue blood weddings, debutante balls, christening ceremonies, and mother-daughter afternoon teas. Tata's hotel group acquired the Boston Ritz for $170 million in 2007 and has since renamed it the Taj. Despite initial local concerns about the acquisition of a historic American property by an Indian company, the Taj is flourishing. The company made special efforts to retain staff and preserve the original character of the landmark while improving it by adding luxurious amenities like butlers who could run baths or stoke the existing wood-burning fireplaces in guest rooms. The Taj employs 286 staff in Massachusetts and donates to the Emerald Necklace Conservancy, a nonprofit group that helps maintain the Boston Commons. In addition to the Taj, Tata's hotel group has invested $67 million to acquire two other wellknown hotels with cultural significance to their respective cities – the Campton Place Hotel in San Francisco and the Pierre Hotel in New York.10 Section 2. Greenfield Investments by Indian Companies in the United States "It's all so simple, Anjin-san. Just change your concept of the world." - James Clavell, Shōgun, Dell, 1975 While Indian companies have been investing abroad since the 1970s, the pace of their foreign direct investments increased after the 1991 economic reforms when the Indian economy began opening up to global competition. In the earlier era, Indian companies typically invested in other developing countries, often using vehicles like minority joint ventures, a requirement of the Government of India at the time. However, since the 1990s, and especially in the 2000s, some two-thirds of India Inc.'s foreign direct investments (FDI) have gone "up-market" – to highly developed countries, such as the United States and the United Kingdom. Indian companies have gone abroad using majority joint ventures and wholly-owned subsidiaries, via acquisitions and greenfield investments. x India Inc.'s investments in developed countries result from several factors, including Indian companies' ability to arbitrage their cost advantages; India's human capital, both technical and managerial; a huge domestic market with cut-throat competition in many industries; welldeveloped institutions (compared to many other emerging markets), such as capital markets and the rule of law; business acumen resulting from entrepreneurial traditions; business sophistication; financial market sophistication; xi Indian companies' investments in the United States were also facilitated by the low valuations, bankruptcy auctions, and distress sales of American companies in the last 2-3 years that created many acquisition opportunities in the U.S. According to IMaCS VIRTUS Global Partners, more than half of Indian companies' acquisitions in the United States were because of such reasons. production efficiency; and a long exposure Western and Japanese multinationals and management practices. Government of India's progressive relaxation of foreign exchange controls, which now allows Indian companies to invest up to 300 percent of their adjusted net worth without prior approval, also enabled them to enter into larger deals. xii All of this is, to a large extent, a reversal of roles. Traditionally, it was the multinationals from developed countries that made FDI into developing countries, though the bulk of FDI from developed countries went into other developed countries. Now, in the 2000s, we are seeing an increasing amount of FDI from developing countries to developed countries. The UNCTAD's World Investment Report for 2006 focused on the rise of FDI by transnational corporations (TNCs) from developing and transition economies. According to the report, "New sources of FDI are emerging among developing and transition economies. This phenomenon has been particularly marked in the past ten years, and a growing number of TNCs from these economies are emerging as major regional – or sometimes even global – players. The new 11 links these TNCs are forging with the rest of the world will have far-reaching repercussions in shaping the global economic landscape of the coming decades." xiii This section focuses on Indian companies' greenfield investments in the United States, a topic unexplored by similar studies in the past. (Indian companies' mergers and acquisitions in the United States are discussed in the next section). While foreign acquisitions of American companies save or create American jobs, greenfield investments exclusively create jobs in America. A greenfield investment involves, by definition, establishing a new operation, which leads to new job creation. The data included in this report provide a comprehensive picture of Indian companies' greenfield investments in the United States, over a six-year period, 2004-2009. The bulk of this analysis is based on greenfield investment and related job-creation data obtained from fDi Intelligence, xiv a subsidiary of the Financial Times of U.K., which captures such data for most countries. It is the exclusive source of FDI project data for the UNCTAD World Investment Report and the Economist Intelligence Unit. xv Main Findings (See also the Methodology appendix for more details). This section discusses greenfield investments over the last six years and provides insights into these investments by location, sector, and company as well as trends for investments, jobs, and projects over time. Figure 2-1: The Top Ten U.S. Sectors Receiving Greenfield Investments from India, 2004-2009 Source: fDi Intelligence, Financial Times Ltd., U.K.12 Between January 2004 and December 2009, 90 Indian companies invested almost $5.5 billion through 127 greenfield projects in the United States. Figure 2-1 highlights the major industry sectors in which Indian companies have invested. Five sectors, Metals, Software & IT Services, Leisure & Entertainment, Industrial Machinery, Equipment & Tools, and Financial Services, comprise about 80 percent of all greenfield investment in the United States. A significant portion of the investment in the metals sector came from a greenfield investment of $1.6 billion for an integrated steel project on IronRange in Minnesota. (See also the Essar Steel case study later in this section). Figure 2-2, shows the number of greenfield projects undertaken by Indian companies in the United States over the last six years. The six-year annual trend of projects is fairly constant – an average of 21 projects initiated each year. Figure 2-2: Project Trend Analysis Source: fDi Intelligence, Financial Times Ltd. The next table, Table 2-1, displays the Top 15 States that received the largest greenfield investments from India. The table also shows the number of jobs created by these investments. Minnesota, Virginia, and Texas account for more than 40 percent of all greenfield investments in the United States. In terms of job creation, five states (Ohio, Texas, California, Illinois, and New Jersey), account for about 45 percent of all jobs created by Indian companies' greenfield investments. 13 Table 2-1: The Top Fifteen U.S. States Receiving Greenfield Investments from India, 2004-2009 State Rank Recipient State Total Amount of FDI ($M) Number of Investments Number of Jobs Created 1 Minnesota 1,600.0 1 700 2 Virginia 326.2 6 633 3 Texas 307.5 14 1,799 4 New Jersey 302.6 11 806 5 Ohio 283.8 4 2,329 6 Illinois 243.8 6 1,035 7 California 234.6 19 1,435 8 Arkansas 180.0 2 550 9 New York 174.9 13 523 10 Maryland 101.0 2 308 11 Mississippi 100.0 1 275 12 Georgia 64.8 6 702 13 Florida 32.3 4 150 14 Kentucky 32.0 1 106 15 Louisiana 29.9 2 141 Total (Incl. State Not Specified) 5,495.9 127 16,576 Source: fDi Intelligence, Financial Times Ltd., U.K. Figure 2-3 shows that Indian companies invested almost $5.5 billion in 127 greenfield projects over the last six years. On average, this equates to $916 million per year, or $43.3 million per greenfield project. Despite the onset of worldwide recession in 2007, the annual total value of greenfield investments continued to rise through 2008, though investments have declined significantly in 2009. During the same period, the average value of greenfield investments per project has dropped significantly from $113.3 million per project in 2007, to $78.1 million per project in 2008, and to $33.0 million per project in 2009 – reflecting the impact of recession on Indian companies' investments. 14 Figure 2-3: Investment Analysis $312 $167 $540 $1,699 $1,953 $825 2004 2005 2006 2007 2008 2009 Total Investment: $5,496M Source: Investment data based on both actual and estimated values, provided by fDi Intelligence, Financial Times Ltd., U.K. Figure 2-4 shows that 16,576 jobs were created by Greenfield investments over the last six years. That equates to 2,763 jobs per year. On average, 131 jobs were created per investment project. However, there was a big variation in the number of jobs created per project from year to year. In 2007, greenfield investments in the United States created 306 jobs per project; in 2008, 115 jobs per project; and in 2009, 192 jobs per project. Figure 2-4: Jobs Analysis Source: Jobs data based on both actual and estimated values, provided by fDi Intelligence, Financial Times Ltd., U.K.15 Finally, Table 2-2 highlights the 15 Indian companies that have created the most jobs in the United States based on their greenfield investments. The table shows that more than 60% of all jobs were created by 10 of the 90 Indian companies that made greenfield investments in the United States over the last six years. Table 2-2: The Top 15 Indian Companies/Groups that Created the Most Jobs in the United States Company 2004 2005 2006 2007 2008 2009 Total Tata Group 175 1,000 82 1,228 2,485 Jindal Organization 1,895 1,895 Essar Group 700 1,000 1,700 Wipro 200 777 977 Welspun Group 143 550 693 Infosys Technologies 500 153 653 Reliance ADA 616 616 HCL Group 500 110 610 ICICI Bank 68 340 408 Classic Diamonds India 391 391 Mahindra & Mahindra 357 357 PSL 275 275 Bank of Baroda 204 68 272 Indage Group 252 252 Infotech Enterprises 242 242 Other Companies 829 326 1,420 421 1,035 719 4,750 Total 1,776 568 1,954 4,593 2,878 4,807 16,576 Source: Jobs data, based on both actual and estimated values, provided by fDi Intelligence, Financial Times Ltd., U.K.16 Notes The data on jobs created show actual/estimated numbers of direct jobs created by individual companies in the year of greenfield investment, based on data provided by fDi Markets, a unit of the Financial Times of U.K. However, when a company sets up a manufacturing plant, say, in Ohio in 2006, it may taken them two, three, or more years for the new plant to be fully operational and have the full employee strength. The data shown here refer to only the entry investments in the United States. Companies typically make additional investments over time, with funds received from the parent company, capital raised in the U.S. or elsewhere, or reinvested profits. These subsequent investments are not shown in this report, though we do include such investments in the case studies presented here. Also not included are indirect jobs created by Indian companies through their investments in the United States. Case Study: Essar Steel Makes the Impossible Possible in Minnesota Essar Steel of India is setting up a vertically integrated steel plant on the Mesabi iron range in northeast Minnesota. To be completed by 2012, the project will cost $1.6 billion and the plant will have an annual capacity of 2.5 million tons of steel per annum when completed. It will be the first facility in North America to include iron ore mining, ore processing, direct reduction, and steelmaking on a single site. The projected permanent employee strength is 700, and up to 2,000 workers are being employed during the construction phase, 2008-2012. Essar Steel Minnesota will use the latest and most environmentally sensitive technology and processes, utilizing natural gas and electricity to produce steel. Having all processes on one site will allow the company to minimize product movement and maximize energy savings. This, combined with the captive iron ore resource, will result in Essar Steel Minnesota being a low cost steel producer in North America. The project broke ground on September 19, 2008, when state and local officials, including Minnesota Governor Tim Pawlenty, joined senior Essar executives for the groundbreaking ceremony at the project site near Nashwauk. (Read Governor Pawlenty's remarks on p2). Minnesota Senator Tom Saxhuag xvi remarked on the merits of the project: "Essar Steel Minnesota is an excellent example of the kind of economic development we want and need on the IronRange. The project not only will mine iron ore, it also will make steel – generating value-added benefits and creating high-tech jobs for our people. This is an example of how various institutions and hard-working people can get together to do a project that some thought was impossible."17 The Mayor of Nashwauk, Bill Hendricks, added, "Everybody in Nashwauk is so excited that this day has finally come. We know that it is a historic event and we couldn't be happier. We realize that this project will be a huge boost to the economy for NE Minnesota. We look forward to this joyous day of celebration." Essar Steel Minnesota is part of Essar Steel, a global producer of steel with a footprint covering India, Canada, United States, Middle East, and Asia. It is a fully integrated flat carbon steel manufacturer from iron ore to ready-to-market products. At the groundbreaking ceremony, Essar Group Chairman Shashi Ruia, said: "We are excited about starting this project. Today's groundbreaking is another step towards our goal of building a large presence in the steel sector in the Americas. We thank Governor Pawlenty and the local administration for lending their support to our IronRange project. Essar remains committed to North America with investments of over USD 4 billion in the region and currently employs more than 8,000 people here."18 Section 3. Mergers & Acquisitions by Indian Companies in the United States "Not all emerging multinationals have the luxury of time to build a brand as Korea's Samsung and Chile's Concha y Toro have done. Chinese [and Indian] firms, in particular, appear anxious to prove themselves in the global marketplace even as foreign brands have begun to poach customers in their home market." - Antoine van Agtmael, The Emerging Markets Century: How a New Breed of World-Class Companies is Overtaking the World, Free Press, 2007 It took Samsung two decades to achieve global brand leadership from scratch – painstakingly and expensively. However, many emerging market firms with global aspirations find such a route to success too long and too risky. In an era of accelerating globalization and technological change, they simply do not have the luxury of time to build their businesses and brands in foreign markets. One approach that has found favor with emerging market multinationals, flushed with cash from their huge domestic markets, is mergers and acquisitions – acquiring talent, technologies, markets, and brands outright. xvii Merger & acquisition (M&A) has been a popular entry strategy for a large number of Indian firms in the six year period of this study. Our study of Indian firms' M&As is based on data on individual M&A transactions available from several published sources (FICCI and Ernst & Young studies, Virtus Global, and Economic Times), unpublished data received from Professor Jaya Prakash Pradhan of the Sardar Patel Institute of Economic & Social Research, Thompson SDC Database, our own research, and some company interviews. For details, please see the Methodology section. Main Findings This section summarizes M&A investment data over the last six years and offers insights into these investments by location, sector, and company as well as trends for investments, jobs, and projects over time. Please note that some information was unavailable and is, therefore, not included in our report. 239 Indian companies made 372 acquisitions in the U.S. during the period 2004 to 2009. Information on the deal value was available for only 267 of the 372 acquisitions completed during the last six years. Further, job creation/retention data were available for only 85 of the 372 acquisitions. Indian Companies' M&As in the United States Between January 2004 and December 2009, 239 Indian companies invested about $21 billion through 267 acquisitions in the United States. The value of these acquisitions was about four times the value of greenfield investments ($5 billion) made by Indian companies in the United States. Figure 3-1 highlights the major U.S. sectors in which Indian companies made acquisitions. 19 Figure 3-1: The Top Ten U.S. Sectors with Acquisitions from Indian Companies, 2004-2009 Source: Various sources; see Methodology More than 80 percent of the $21 billion in M&A investments were in five sectors, Manufacturing; IT and ITeS (IT enabled Services); Biotechnology, Chemicals, and Pharmaceuticals; Automotive; and Telecom. It's noteworthy that manufacturing attracted the most investments by Indian companies, about twice as much as IT and ITeS for which Indian companies are well known. Table 3-1 shows the Top Ten U.S. states in which these 267 acquisitions took place. In terms of value of investment, 75 percent of these transactions were in five states, Georgia, New Jersey, Michigan, California, and Texas. However, in terms of the number of investments, the top five recipient states were California, New York, New Jersey, Illinois, and Michigan (which tied with Texas for the fifth place). The average value per acquisition was $78.7 million. 20 Table 3-1: Top Ten U.S. States with Acquisitions from Indian Companies, 2004-2009 State Rank State Total Acquisition Value ($M) Number of Acquisitions Value Per Acquisition ($M) 1 Georgia $6,283.5 9 $698.2 2 New Jersey $2,874.8 33 $87.1 3 Michigan $2,581.1 13 $198.6 4 California $2,375.0 55 $43.2 5 Texas $1,539.9 13 $118.5 6 Louisiana $650.3 3 $216.8 7 New York $641.3 23 $27.9 8 Maryland $563.9 8 $70.5 9 Illinois $486.5 17 $28.6 10 Connecticut $353.0 4 $88.3 Total (Incl. State Not Specified) $21,004.6 267 $78.7 Source: Various sources; see Methodology Figure 3-2, shows the trend of acquisitions by year. On average, over the last six years, Indian companies acquired 45 companies a year in the United States. Figure 3-2: Acquisition Trend Analysis Source: Various sources; see Methodology21 The number of acquisitions per year continued to increase from year-to-year until 2007. There was a 14% drop in the number of acquisitions in 2008, and an even more significant 75% drop between 2008 and 2009, as a result of the worldwide recession in those years. In Figure 3-3, one can observe a similar trend for the deal value of the 267 acquisitions which averaged $3.5 billion a year. Here, deal value of acquisitions continued to increase from yearto-year until 2007, after which there was a major decrease in the average deal value (45% fall in 2008 and a further 94% fall in 2009). On average, each acquisition cost $78.7 million. Figure 3-3: Acquisition Value Analysis $755 $766 $2,328 $10,846 $5,934 $376 2004 2005 2006 2007 2008 2009 Total Acquisitions: $21,005M Source: Various sources; see Methodology Jobs Created/Saved through Mergers and Acquisitions As mentioned before, job creation/saving data was only available for 85 of 372 acquisitions completed over the last six years. Overall, these 85 acquisitions helped create or retain over 40,000 jobs in the United States. Therefore, we can infer that the actual number of workers employed by the 239 Indian companies that made 372 acquisitions in the U.S. during this time period will be much larger. (Based on 2002 statistics available from the Bureau of Economic Analysis, U.S. affiliates of Indian companies employed 1,600 U.S. workers in 2002 and the number increased by 37.5% to 2,200 in 2003. Assuming the same rate of growth, the estimated number of U.S. workers by June 2009 should be 14,868. However, in 2009, the Tata Group alone had over 15,500 employees in 43 states and the District of Columbia.) Table 3-2 provides information on the ten companies that have helped create/save about 30,000 jobs. The data addresses jobs created or saved during the last six years and does not include the number of employees the acquiring companies already had in their existing or greenfield operations in the United States.22 Table 3-2: The Top 10 Indian Companies/Groups that Created/Saved the Most Jobs in the United States through M&A, 2004-2009 Acquirer M&A Target No. of Jobs Created/Saved Cbay Medquist 7,500 Firstsource Solutions Several Companies 5,338 Aegis BPO PeopleSupport 4,025 Hindalco Novelis* 3,200 Tata Companies Several Companies 2,822 HOV Services BPO Lason 2,636 3i Infotech Regulus, Innovative Business Solutions 1,875 Wipro Infocrossing, Quantech Global 892 Sanmar Matrix Metal Inc 877 Intelenet Global Upstream 750 Total 29,915 *U.S. and Canada Source: Various sources Penetration of Indian Investments in U.S. States During the period January 2004 to December 2009, Indian companies made the highest number of acquisitions in California – 55 in all – or over 20% of the 267 acquisitions for which we have data on the amounts invested. The next three states in order of number of acquisitions are: New Jersey, New York, and Illinois. Investments in these four states account for 48% of the total number of acquisitions made by Indian companies during this period of time. In terms of amount of money invested, five states received 75% of the total investments made by Indian companies' 267 acquisitions. These states are Georgia, New Jersey, Michigan, California, and Texas, in that order. Over 30 Indian companies made acquisitions in at least 3 U.S. states each. The Tata Group has the greatest penetration in states, with presence in 43 states and the District of Columbia and over 15,500 employees. MedAssist, a Firstsource Solutions company, has a national presence with 37 regional offices in 19 states and over 4,500 employees. They support approximately 1,000 clients including some of the most respected healthcare providers in the nation. 23 A few other Indian companies with large U.S. presence are: • Gitanjali Gems: Gitanjali Gems has a 97 percent stake in Samuels Jewelers Inc., which owns 97 retail stores in 18 states. And, Gitanjali's acquisition of Rogers Jewelers, which runs a chain of 46 retail stores in 11 states, further extended its U.S. presence. • KC Management Group: KC Management Group, a CORE Projects & Technologies Ltd. company, currently provides services to school systems in ten states: California, Illinois, Minnesota, Florida, Georgia, South Carolina, Tennessee, Texas, Massachusetts, and Ohio. • Styx Infosoft Pvt Ltd acquired a 49 percent stake in Citizens Financial Mortgage Inc., which has 290 employees in 45 branches spread across 16 states in the United States. Case Study: Jain Irrigation Systems Ltd. Established in 1987, Jain Irrigation Systems Ltd is a 5,082-employee environmentally conscious Indian company with operations in 110 countries. The company's mission statement reads, "Leave this world better than you found it." Its products aim to conserve nature's precious resources through substitution or value addition. There is, of course, more to Jain Irrigation than irrigation. In addition to Drip and Sprinkler Irrigation Systems and Components the company manufactures PVC, Polyethylene & Polypropylene Piping Systems and Plastic Sheets. Other business lines include Dehydrated Onions and Vegetables, Processed Fruits, Tissue Culture, Hybrid & Grafted Plants, Greenhouses, Poly & Shade Houses, Bio-fertilizers, Solar Water Heating Systems, Solar Photovoltaic Appliances (Solar lighting systems), and Bio-Energy sources. The company also provides consulting services for project planning and implementation on topics like watersheds, wastelands, and crop selection and rotation. The company's U.S. subsidiary, Jain (Americas), Inc., commenced operations in Columbus, Ohio in 1992. It served the sign, display and graphic arts industries with extruded Polycarbonate sheets and two types of PVC sheets that quickly gained acceptance by U.S. plastics distributors. By 2002, Jain (Americas) had entered the building materials industry by providing sheet stock and had introduced the Ex-cel® line of PVC products. Today Jain (Americas) also has over 150,000 square feet of manufacturing and warehousing space to serve the building and graphic arts industries with Free Foam. 24 Figure 3-4: Jain Americas NuCedar Mills Plant in Chicopee, MA In 2006 and 2007, Jain Americas acquired four U.S. companies: Chapin Watermatics, NuCedar, Cascade, and Aquarius Brands. The acquisitions were made to access new market segments, get involved with new products, and to establish new marketing outlets for their irrigation products. One of the acquired companies was having financial difficulties and was actively seeking a buyer. The following table summarizes these acquisitions: Table 3-3: Acquisitions by Jain Americas ($M) U.S. Company Acquired Segment Location Date of Acquisition Initial & Subsequent Investments Working Capital Loans % Ownership Chapin Watermatics Micro Irrigation New York May-06 $6.81 $1.00 100% NuCedar Mills Inc. PVC Siding & Trim Boards Mass. Sep-06 $4.00 $5.13 80% Cascade Specialties Inc. 1 Onion Dehydration Oregon Jan-07 $7.82 $7.31 80% Aquarius Brands 2 Micro Irrigation California Feb-07 $15.15 $1.86 100% Total $33.78 $15.30 1. Balance (20%) will be acquired by Dec-11 (Source: P3 on the Company's Investor Information section at: http://www.jains.com/Company/financial/annual%2009/Management%20Discussion%20n%20Analysis.pdf) 2. Renamed Jain Irrigation Inc. The table above shows that Jain Americas has invested $33.8M in these acquisitions since 2006. Since the acquisitions, the U.S. employee base for these four companies has grown by 25 21 percent from 219 to 264. Additionally, Jain (Americas) Inc. has 15 employees in its U.S. headquarters. Only 4 of the 279 employees across all five entities are from India. Jain (Americas) Inc. is the U.S. marketing, distribution, and investment arm for Jain Irrigation Systems Ltd. During the period April 2008 to March 2009, Jain (Americas) Inc. had sales of $23.36 million. The new acquisitions brought additional revenue of $62.9 million over the same fiscal year: • Jain Irrigation Inc. (formerly Aquarius Brands and Chapin Watermatics): $46.75 million • Cascade Specialties Inc.: $15.41 million • NuCedar Mills Inc.: $ 0.74 million Like any company, Jain Americas pays state and federal corporate taxes and payroll taxes. In 2008, the company paid $1.6 million in taxes. The following table shows three additional sources of impact, namely, investments in research and development (R&D), exports from the U.S., and the number of U.S. patents issued. Table 3-4: Additional Sources of Impact ($M) U.S. Company Segment Investment in R&D Exports from the U.S. No. of U.S. Patents Issued Chapin Watermatics Micro Irrigation $0.14 NuCedar Mills Inc. PVC Siding & Trim Boards 2 Patents on manufacturing processes Cascade Specialties Inc. Onion Dehydration $3.03 $7.10 Aquarius Brands Micro Irrigation $3.88 $15.00 8 Patents for irrigation products processes & designs Jain (Americas) Inc. Plastic Sheets Marketing $0.02 Total $7.07 $22.10 Source: Jain Americas Inc. In keeping with their mission, the Jain Americas companies support community initiatives like the California Water Alliance and the California Latino Water Coalition aimed at finding a comprehensive water solution for California. They also fund research at the Kansas State University. And, this year, NuCedar donated products to a community member in need through ABC's Extreme Makeover Home Edition. 26 Case Study: HCL Technologies HCL Technologies is one of India's original IT start-ups and a pioneer in modern computing. Soon after Shiv Nader founded HCL in 1976, HCL became the first Indian computer manufacturer and established itself as a leader in computer hardware and operating systems in India. By the late 1980s, the company entered into a joint venture with Hewlett Packard and began exploring international markets. Today, HCL Technologies is a $2.5 billion (as of December 31, 2009) leading global IT services company with 55,688 employees working in 26 countries with clients in the areas that impact and redefine the core of their businesses. Its American subsidiary, HCL America, was established in 1989 and is headquartered in Sunnyvale, California. With more than 3,000 people across 21 offices in 15 states, HCL America accounts for 55.9% of HCL's total worldwide Consulting and IT Services revenues. HCL America is on a growth trajectory exemplified by its 34.2% year-over-year revenue growth in the quarter ending June 2008. In 2005, HCL underwent radical transformation that led to a focus on "value centricity" and establishment of three services portfolios spanning a variety of industries including Financial Services, Manufacturing, Consumer Services, Public Services and Healthcare: IT Transformation Portfolio, Operations Transformation Portfolio, and the Technology Transformation Portfolio. As part of this transformation, HCL pioneered the management concept of "Employee First, Customer Second" and empowered its employees to better serve its customers through fresh and innovative approaches. One of the program's initiatives involved hiring graduates from top U.S. schools such as the University of Michigan, Northwestern, NYU, Notre Dame, and Duke. Another initiative took advantage of customer engagements designed to overcome cultural and business nuances. Other concepts such as transformational engagements, outcome-based-pricing, and multi-service delivery also became cornerstones of HCL's strategy. HCL's innovative thinking and management style raised the company's profile in the United States and made it the subject of classroom discussion, following the publication of a case study on HCL by the Harvard Business School in 2007. The Fortune magazine featured HCL's management as the 'world's most innovative management' in April 2006 and Business Week, USA Today, and Investor's Business Daily have also recognized the company's unique management approach. In 2009, HCL was featured in the prestigious FinTech Top 25 Enterprise Technology Companies for the first time. Shiv Nadar, the founder, Chairman and Chief Strategy Officer, has been conferred the 'CNBC Asia Business Leader Award 2009 for Corporate Social Responsibility' as well as the 'Asia Viewers' Choice Award.' He was also presented with CNBC's 'India Business Leader Award' for 2009 by the CNBC Asia's International Jury.27 In recent years, HCL America has built significant strategic partnerships with several American industry giants including Boeing, CISCO, Oracle, Jones New York, and Merck & Co. Since 2004, the company has invested more than $80 million in U.S. companies to acquire new capabilities and create more value in key industries and sub-industries. Aalayance. HCL invested $0.45million in 2003 and $1.9 million in 2004 to acquire a 66 percent stake in California-based Aalayance, renamed HCL EAI Services Inc. in 2004. HCL invested an additional $3.49 million in HCL EAI Services Inc. in 2007, giving it a 100 percent ownership of HCL EAI. HCL EAI Services, Inc. provides enterprise application integration services to healthcare, retail, telecommunication, and wireless community markets internationally. It offers outsourcing services in the areas of application development, migration, re-engineering, renovation, and system software. Capital Stream. HCL acquired the Washington-based Capital Stream for $40 million in 2008, which provided it a number of synergies, benefits, and opportunities, including: • the addition of a focused product portfolio to HCL's multi-service capability to enable it to provide commercial banks and other financial institutions comprehensive end-toend solutions globally, with significantly reduced implementation time; • the offerings from Capital Stream that complement HCL's lending technology capabilities in financial services. Control Point Systems. HCL acquired the New Jersey-based Control Point Systems for $20.8 million in 2008. Control Point has four delivery centers in the U.S. with over 200 professionals who provide voice, data, and wireless telecommunications expense management (TEM) services. The acquisition improved HCL's ability to provide end-to-end BPO (business process outsourcing) services in the TEM space and allowed the company to diversify into newer geographic and product markets like utilities and freight. Data Center. HCL completed the acquisition of its first U.S.-based data center, a 35,000- square-foot facility in New Jersey in 2009. HCL took over this data center's staff and operations from a Fortune 500 enterprise in October 2008 and has already invested more than $15 million in this facility in upgrades to support eco-friendly technologies, virtualization, cloud computing, business continuity, and mainframe management services. HCL is further upgrading the facility to a Tier III equivalent data center by deploying best-of-breed ecofriendly technologies from leading solution/technology vendors and acquiring world-class certifications. The company plans to hire more than 100 local U.S. workers for this state-ofthe-art facility. In addition to these acquisitions, HCL America is continuing to grow its U.S. operations organically. It recently announced plans to open a delivery center in Wake County, North Carolina. The company plans to invest $3.2 million and hire more than 500 employees over the next five years at the new delivery center, thanks in part to a North Carolina state Job Development Investment Grant awarded to the company. The new jobs will focus on software development and infrastructure services. 28 Case Study: Ranbaxy Laboratories Ltd. India's largest pharmaceutical company, Ranbaxy had global sales of $1.519 billion in 2009, of which the United States healthcare market accounted for $397 million. The company has presence in 46 countries, with products serving customers in 125 countries, and derives approximately 75 percent of its revenues from outside India. While primarily marketing generic product formulations in the U.S. market, Ranbaxy has 16 branded products and has established presence in both prescription and over-the-counter drugs for both sectors. Ranbaxy entered the United States in 1994 with an office in Raleigh, NC, and relocated to, New Jersey in 1998. The company follows a localization strategy in the markets where it does business. According to CEO and Managing Director Atul Sobti, "When entering the U.S. market, Ranbaxy hired local Americans in the community with pharmaceutical expertise and looked to them as mentors who knew the markets and were able to provide organizational guidance." Ranbaxy acquired manufacturing facilities in New Jersey in 1995 with an investment of around $8 million. Subsequently, the company expanded capabilities and capacities by enlarging and acquiring facilities that today occupy more than 250,000 sq. ft. in New Jersey in 2009 from 40,000 sq. ft. in 1995. During this time period, a new manufacturing facility for the manufacture of liquid product formulations in New York State was added, along with investment in a U.S. distribution facility located in the State of Florida. Over the years, the company invested an aggregate total in excess of $100 million in these facilities. In the United States, the company has operations in New Jersey (administrative headquarters for North America plus manufacturing), New York (manufacturing), and Florida (distribution center). Presently Ranbaxy's U.S. operations have a total of 659 employees, of which 596 are in New Jersey, 13 in New York, and 50 in Florida. In 2008, Ranbaxy paid $3 million in payroll taxes to these three states. Ranbaxy performs research and development in its R&D center in India, which has more than 1,400 researchers. Since establishing US operations, Ranbaxy has filed over 200 drug molecule applications with U.S. Food and Drug Administration and has received 140+ approvals so far; 80+ applications pending approval. Ranbaxy contributes to the communities and countries where it does business and has been recognized for its contributions. For instance, the White House recognized Ranbaxy America for its help during Katrina. Ranbaxy has also been at the forefront to provide relief to AIDS patients on a global basis through its involvement with PEPFAR, OGAC, and the United Nations. Most recently, contributions were made through U.S.-based relief organizations providing aid to the devastation experienced in Haiti in 2010. In New Jersey, Ranbaxy America contributes to civic organizations such as the Plainsboro Public Library and local charities. Daiichi Sankyo Co. Ltd. of Japan acquired a significant stake in Ranbaxy Laboratories Ltd. in June 2008 to create an entity ranked among the Top 20 global pharmaceutical companies.29 Case Study: Firstsource Solutions Limited Firstsource, a global provider of business process management services, works across the banking and financial services, telecommunications, media, and healthcare industries. The company supports the complete customer lifecycle, including customer acquisition, customer care, billing and collections, transaction processing, and business research and analytics. Firstsource's rightshoring approach utilizes a global delivery model with 42 world class centers and over 24,000 employees across India, the U.S., U.K., and the Philippines. Firstsource has been ranked among the world's Top 100 companies by CIO magazine for innovative uses of IT. In the United States, Firstsource has delivery centers in New York, Kansas, Kentucky, Illinois, Nevada, Utah, and Colorado, and has invested more than $400 million in four U.S. companies since 2004. These are: Pipal Research, acquired for $3.9 million in 2004. Pipal is engaged in providing business research services to companies in the BFSI industry. Account Solution Group, acquired for $42.5 million in 2004. New York-based ASG's 500 U.S. employees provide BPO services in the collective services segment. BPM Inc., acquired for $30 million in 2007, BPM Inc is a 300-employee Delaware-based healthcare claims outsourcing company. The acquisition includes BPM Inc.'s two wholly owned operating subsidiaries, MedPlans 2000 Inc. and MedPlans Partners. MedAssist Holdings, acquired for $330 million in 2007. MedAssist, headquartered in Louisville, Kentucky has 4,500 employees in 37 locations and is a pan-American provider of revenue cycle management services to the healthcare industry. In 2009, MedAssist was ranked second among US Healthcare vendors by KLAS for Extended Business Office services. Case Study: Rolta Rolta, headquartered in Mumbai, employs about 5,000 professionals with a countrywide infrastructure and international subsidiaries across the globe. Forbes Global has ranked Rolta amongst the "Best 200 under a Billion" for four of the last six years. Rolta has been included in the S&P Global Challengers List™ 2008, by Standard & Poor's. This list identifies 300 mid-size companies worldwide that have a total market capitalization between US$ 1 & 5 billion and have shown the highest growth characteristics along dimensions encompassing intrinsic and extrinsic growth. Rolta is a global market leader and IT solution provider in the Geospatial, Defense, Homeland Security, Government, Utilities & Communications, Transportation, Process & Power, and Enterprise IT sectors. The company has subsidiaries in the U.S., U.A.E., Saudi Arabia, U.K. and France. Over the years, the company has successfully executed multi-million dollar contracts across a broad spectrum of industries in over 40 countries.30 Figure 3-5: Rolta Headquarters in the U.S. Rolta invests in vertical solutions that are targeted in various industries to improve productivity. As a part of its systematic and aggressive growth plans, Rolta has adopted a clear acquisition strategy of taking over companies that provide a synergetic mix of Technology and IPR, enabling Rolta to move up the value chain for addressing complementary markets. Rolta's entry into the U.S. was through a greenfield investment of $36 million in 1992. The investment funded the establishment of Rolta International Inc. in Georgia. In 2008, Rolta acquired three US companies in Chicago for $61.3 million – TUSC Inc., WhittmanHart Consulting Services, and Piocon Technologies Inc. One of the acquired companies was financially stressed and Rolta's acquisition of the company helped retain 58 jobs. TUSC provides IT consultancy in the area of ERP applications as well as Database and Business Intelligence solutions, based on Oracle technologies. With WhittmanHart Consulting, Rolta can now offer a more complete range of business solutions and consulting services, such as EPM and risk management, especially to its GIS/geospatial and engineering clients. At the same time, Rolta can also leverage the WhittmanHart Consulting customer base by offering its complementary solution suite. Finally, the acquisition of Piocon Technologies has provided Rolta with a template-based solution to address critical operational needs of refineries in the oil and gas sector. Rolta currently has 300 employees in the United States. The company also plans to invest $3.5 million annually in research and development activities in the United States.31 Case Study: Polaris Software Founded in 1993 and publicly-listed, Polaris Software is one of the world's most sophisticated banking and insurance software company. Polaris is the chosen outsourcing partner for 10 of the top 15 global banks and 6 of the top 10 global insurance companies. Polaris offers comprehensive solutions for core banking, corporate banking, wealth & asset management and insurance. Over the last two decades, Polaris has implemented its solutions and services in 200 of the world's largest financial institutions. Polaris Software is also recognized by the world's top analysts (Forrester and Gartner) as global leaders in banking and insurance software. Polaris has 10,500 associates including 750 domain experts in 23 international offices and four global development centers. Polaris operates in the United States through its four offices in California, Illinois, and New Jersey; and its subsidiary Optimus Global Services Limited in Delaware. Polaris invested $2 million in February 1999 to set up a branch office in Iselin, NJ and $50,000 in May 2007 to acquire Optimus. It started with 200 employees in New Jersey in 1999 and now has 606 employees in New Jersey and 15 employees in Pennsylvania. Polaris's most recent acquisition in the U.S. was SEEC Inc. in October 2008 for $7.5 million. SEEC is an innovative and well respected worldwide Service-Oriented-Architecture-based insurance solution provider. Case Study: Indegene Life Systems Pvt. Ltd. Indegene's mission is to enhance commercialization and marketing success of life science companies through their ability to understand, analyze, and apply knowledge of science and clinical practice. It's a preferred global partner to more than fifteen of the top twenty pharmaceutical companies in the world and has presence in the United States, United Kingdom, Singapore, Malaysia, Indonesia, and Australia. In 2005 and 2006, Indegene acquired two failing companies, Medsn Inc. and MedCases LLC, reviving them both in the following years. Medsn Inc. is a New Jersey-based venture capital-funded company with an initial investment of $39 million and it employed 40 employees. Medsn was operating at a loss for seven years and was on the brink of bankruptcy in 2005 at the time Indegene acquired it for $15.5 million in September. Since then Indegene has turned the company around and has been able to save approximately 15 of the existing high paying jobs. Medsn Inc. has led the development of a number of products based on pre-existing technology for Learning Management Systems. It has also re-launched many of its pre-existing products and solutions, with exports to emerging markets across Asia and Africa. MedCases LLC, based in Princeton, New Jersey, was also acquired when it was on the verge of bankruptcy. When Indegene acquired MedCases for $0.8 million in September 2006, the company had no employees. Since the acquisition, the operation has become profitable and currently has five employees. MedCases has been running a unique operation (with Johns Hopkins University) to educate physicians across Africa using MedCases products and technology.32 Case Study: Infotech Enterprises Group Infotech Enterprises Group, founded in 1991, is a $200 million Global IT services company with over 7,600 employees specializing in engineering services, geographic information systems (GIS), and IT services. It provides services to a wide range of industries, including Aerospace, Automotive, Energy, Government, HiTech Consumer & Medical Devices, Marine, Rail, Retail, Telecom, and Utilities. Infotech has a distinctive business model, "offshore services, onshore responsibility." It combines extensive software development capability based in India with global delivery through offices in the U.S., U.K., Germany, Australia, and the Netherlands that provide local customer interface and project management. It operates from 27 global locations, and has 7 development centers. Since 1999, Infotech has made several investments in the United States, first establishing Infotech Enterprises America Inc. in 1999 through a greenfield investment of $150,000 in East Hartford, Connecticut. Subsequently, they made investments totaling $2.85 million for various expansions. And, in May 2005, Infotech inaugurated a geospatial production facility in Frostburg, Maryland. Infotech made two acquisitions during the study period – Vargis, a GIS company, for $2.95 million in January 2004, and Time To Market (TTM), a California-based provider of ASIC design and embedded software solutions in September 2008 for $6 million. TTM with 40 engineers based in San Jose, California, became part of the newly created Hitech vertical at Infotech to focus on U.S. markets and to leverage its recent entry into Japan. Infotech Enterprises America Inc. currently has 396 employees, with revenues of $74 million in FY 2008-09. The company paid $2.4 million in Federal, $60,000 in State, and $1.8 million in payroll taxes in 2008.33 Section 4. A Splendid Exchange 1 How the United States and India both Benefit from Trade "Trade raises the general wage level by expanding the opportunity for Americans to work in sectors where productivity and pay exceed the average. Because of comparative advantage, American workers tend to be most productive in those sectors that are most capital intensive – those that require large investments in physical and human capital and intellectual property… Trade has delivered better jobs for American workers. Most of the net new jobs created in the past decade pay more than the average manufacturing job." - Daniel Griswold, Mad About Trade: Why Main Street America Should Embrace Globalization, Cato Institute, 2009 In his fascinating book, A Splendid Exchange: How Trade Shaped the World, William Bernstein shows how trade has been a key element in the wealth of nations for millennia. As humans, we want new, cheaper, and better goods and services, and trade makes it possible – and, in the process, unites us beyond geographies, languages, cultures, and politics. The history of trade between America and India has indeed been a splendid exchange! In the 1700s, America traded more with India than with all of Europe combined. Today, India is America's 17 th largest export market. Table 4-1shows that trade between the U.S. and India tripled over the five-year period, 2004- 2008, benefiting both the United States and India. In the last six years (2004-2009), U.S. exports to India have increased by 269 percent. During the same period, India's exports to the United States grew by 136 percent.
1 With apologies to William Bernstein, author of A Splendid Exchange: How Trade Shaped the World, Grove Press, New York, 200834 Table 4-1: U.S.-India Merchandise Trade, 2004, 2008 and 2009 Item 2004 2008 2009 CAGR* 2004-2008 CAGR* 2004-2009 % Overall Increase 2004-2008 % Overall Increase 2004-2009 Exports to India ($M) 6,109 17,682 16,462 30.43% 21.93% 289.43% 269.46% Imports from India ($M) 15,572 25,704 21,176 13.35% 6.34% 165.07% 135.99% Total U.S.- India Trade ($M) 21,681 43,386 37,639 18.94% 11.66% 200.11% 173.60% * CAGR: Compounded Annual Growth Rate Source: http://tse.export.gov/ U.S. Merchandise Exports to India The United States exports to India high-technology products such as nuclear reactors, aircraft, electrical machinery, optic and surgical instruments, chemicals, plastics, pharmaceuticals, vehicles, and railway stock and traffic signal equipment, as well as natural pearls and precious stones, fertilizers, and iron and steel Table 4-2, most of which pay much above-average employee wages. As the table shows, U.S. exports to India grew by a compounded annual growth rate of over 30% during 2004-2008, with spectacular increases for several industries. (The table excludes agricultural, mining, and services exports to India, which have their own implications for job creation in the United States). By contrast, the Top 10 products the United States imports from India are: natural pearls and precious stones, pharmaceuticals, organic chemicals, apparel and accessories, needlecraft sets, electrical machinery, articles of iron and steel, nuclear reactors and machinery, and carpets. This is because of the comparative advantages India has in producing such, often low valueadded, products, which go to lower the cost of living in the United States. In fact, in a 2009 op-ed article in the Hindustan Times, Dr. Amit Mitra, Secretary-General of the Federation of Indian Chambers of Commerce & Industry, recommended an "ideal swap", whereby India should offer its huge market in exchange for technology and knowledge from the United States. xviii35 Table 4-2: U.S. Merchandise Exports to India by Industry, 2004, 2008, and 2009 Top Ten Industries U.S. Exports to India ($000) CAGR 2004-2008 CAGR 2004-2009 2004 2008 2009 71--NAT ETC PEARLS, PREC ETC STONES, PR MET ETC; COIN 582,563 2,545,538 2,339,271 44.58% 32.05% 84--NUCLEAR REACTORS, BOILERS, MACHINERY ETC.; PARTS 1,148,051 2,322,424 2,325,100 19.26% 15.16% 88--AIRCRAFT, SPACECRAFT, AND PARTS THEREOF 482,749 1,849,480 2,254,144 39.90% 36.10% 85--ELECTRIC MACHINERY ETC; SOUND EQUIP; TV EQUIP; PTS 883,468 1,325,855 1,301,324 10.68% 8.05% 31—FERTILIZERS 118,701 2,787,348 1,157,693 120.13% 57.70% 27--MINERAL FUEL, OIL ETC.; BITUMIN SUBST; MINERAL WAX 313,696 884,550 959,775 29.58% 25.06% 90--OPTIC, PHOTO ETC, MEDIC OR SURGICAL INSTRMENTS ETC 461,524 917,004 920,479 18.73% 14.81% 72--IRON AND STEEL 158,247 572,120 643,007 37.89% 32.37% 29--ORGANIC CHEMICALS 470,526 589,663 641,764 5.80% 6.40% 39--PLASTICS AND ARTICLES THEREOF 157,729 499,755 637,031 33.42% 32.21% Some Other High-Tech Industries 38--MISCELLANEOUS CHEMICAL PRODUCTS 234,986 369,907 413,240 12.01% 11.95% 28--INORG CHEM; PREC & RAREEARTH MET & RADIOACT COMP 35,999 366,066 209,916 78.57% 42.28% 87--VEHICLES, EXCEPT RAILWAY OR TRAMWAY, AND PARTS ETC 41,698 133,302 158,950 33.72% 30.69% 30--PHARMACEUTICAL PRODUCTS 27,650 87,422 126,405 33.35% 35.52% 86--RAILWAY OR TRAMWAY STOCK ETC; TRAFFIC SIGNAL EQ 16,938 31,148 51,788 16.45% 25.05% Total Exports to India (All Industries) 6,109,357 17,682,085 16,462,437 30.43% 21.93% Source: http://tse.export.gov/ In 2009, India was United States' 17 th largest goods export market, and 15 th largest supplier of goods imported into the United States. Goods exports to India account for 1.6 percent of U.S. exports worldwide, up from 1.4 percent in 2008, and from 0.5 percent in 1994 (the year WTO was founded). United States exports to India grew by a compounded annual growth rate (CAGR) of 22% during the last six years, 2004-2009, and by over 30% during 2004-2008; exports suffered a decline due to the worldwide recession in 2008-2009. America's exports to India have been 36 growing at a much faster rate than exports to practically all developed and developing nations (Table 4-3). Table 4-3: Compounded Annual Growth Rates of U.S. Exports to Selected Developed and Developing Countries, 2004, 2008, and 2009 Country U.S. Exports ($000) CAGR 2004-2008 CAGR 2004-2009 2004 2008 2009 World Total 814,874,654 1,287,441,997 1,056,931,976 12.11% 5.34% Canada 189,879,866 261,149,834 204,728,094 8.29% 1.52% Mexico 110,731,285 151,220,056 128,997,679 8.10% 3.10% China 34,427,772 69,732,838 69,576,048 19.30% 15.11% Japan 53,568,694 65,141,753 51,179,644 5.01% -0.91% U.K. 35,901,658 53,599,070 45,713,722 10.54% 4.95% Germany 31,415,882 54,505,256 43,298,596 14.77% 6.63% South Korea 26,186,736 34,668,671 28,639,972 7.27% 1.81% France 20,917,747 28,840,097 26,522,336 8.36% 4.86% Brazil 13,886,423 32,298,655 26,175,324 23.49% 13.52% India 6,109,357 17,682,085 16,462,437 30.43% 21.93% Italy 10,684,740 15,460,836 12,232,636 9.68% 2.74% Chile 3,605,984 11,857,444 9,365,333 34.66% 21.03% Russian Fed. 2,960,997 9,334,582 5,382,838 33.25% 12.70% Source: http://tse.export.gov/ Even from 2007 to 2008, U.S. merchandise exports to India grew by over 18%, when the world was experiencing a huge recession. According to Mark Zandi, chief economist at Moody's Economy.com, "Exports have suddenly become a key source of growth at a time when the economy is looking for any growth it can get."37 Exports and Jobs According to the U.S. Department of Commerce, in 2006, total manufactured exports from the United States accounted for 4.3 percent of all civilian employment in the U.S. In terms of jobs, U.S. worldwide manufactured exports in 2006 were linked to 2.6 million manufacturing and 3.4 million non-manufacturing jobs in the United States. xix United States' merchandise exports to India were linked to over 96,000 manufacturing and non-manufacturing jobs in the U.S. in 2009. (Jobs linked to non-manufactured exports, such as agricultural and mineral products, and to services exports, are additional). Table 4-4 shows the total numbers of U.S. jobs linked to merchandise exports to India for the last six years. As indicated earlier, these numbers do not include U.S. jobs linked to exports of agricultural and mineral products as well as services to India. For instance, the United States exported $9.4 billion worth of services to India in 2007, compared to merchandise exports of $15 billion. Services exports to India must also account for tens of thousands of even higher value jobs in the United States. Table 4-4: No. of U.S. Jobs Linked to U.S. Merchandise Exports to India, 2004-2009 2004 2005 2006 2007 2008 2009 Total Exports ($M) $6,109 $7,919 $9,674 $14,969 $17,682 $16,462 No. of U.S. Jobs Linked to Exports to India (Estimate) 33,961 44,018 53,774 83,210 98,292 96,026 Source: No. of jobs linked to manufactured exports to India estimated based on: http://www.trade.gov/td/industry/otea/jobs/Reports/2006/jobs_by_state.html (See the Methodology Appendix for more details) Table 4-5 has information on the 25 U.S. states with the highest numbers of jobs linked to exports to India in 2009. It includes jobs in both manufacturing and non-manufacturing occupations linked to manufactured exports (and does not include non-manufactured exports, such as agricultural and mineral products, and services). The Top 10 states, in terms of the number of jobs related to exports to India, are: California, Washington, Texas, Illinois, New York, Utah, Pennsylvania, South Carolina, Florida, and Georgia.38 Table 4-5: The Top 25 States – Numbers of Jobs Linked to Manufactured Exports from Individual U.S. States to India in 2009 2009 Manufactured Exports ($M) # Jobs Related to Exports (Estimate) State California 2,182 11,812 Texas 1,949 7,490 Washington 1,844 11,159 New York 1,515 5,333 Florida 1,051 3,494 Illinois 769 5,438 Louisiana 701 2,647 Utah 650 4,040 Pennsylvania 439 3,698 Georgia 420 3,478 New Jersey 405 1,943 Ohio 380 3,167 South Carolina 318 3,506 Massachusetts 306 2,139 Virginia 284 1,990 Maryland 233 1,229 Wisconsin 210 2,136 West Virginia 208 1,492 Indiana 192 1,631 North Carolina 187 1,641 Michigan 172 1,032 Tennessee 164 1,056 Alabama 161 1,297 Arkansas 158 1,942 Minnesota 148 1191 Total U.S. (Including Others) 16,462 96,026 Sources: Exports http://tse.export.gov/ No. of jobs linked to manufactured exports to India estimated based on: http://www.trade.gov/td/industry/otea/jobs/Reports/2006/jobs_by_state.html (See the Methodology Appendix for more details)39 The Importance of India as an Export Market to Different States The importance of India as an export destination varies from state to state. The following table shows the fifteen U.S. states with the highest percentage of their exports going to India. Table 4-6: Share of India in Total State Merchandise Exports, 2009 Source: http://tse.export.gov/ President Obama's State of the Union address on January 27, 2010 presented his policy solutions for resolving Americans' Number 1 concern – the economy and jobs. On the jobs front, he said that the United States will double its exports over the next five years, creating two million new jobs in the economy. America's fastest growing export markets are the emerging markets of China, India, and Brazil. Of these three big export markets, U.S. merchandise exports grew the fastest to India over the last six years – by a compounded growth rate of over 22 percent per year – and almost 100,000 jobs were linked to manufactured exports to India in 2009. With India's penchant for all things American, and with the U.S.-India civilian nuclear agreement in hand, U.S. exports to India are likely to grow even faster in the coming years – creating even more jobs in the United States. State Exports to India, 2009 ($M) Total U.S. Exports, 2009 ($M) India as % of Total U.S. Exports Utah 650 10,337 6.28% West Virginia 208 4,822 4.32% Washington 1,844 51,739 3.56% Arkansas 158 5,267 3.01% New York 1,515 57,321 2.64% Maryland 233 9,229 2.52% Rhode Island 37 1,495 2.49% Florida 1051 46,920 2.24% Louisiana 701 32,715 2.14% Mississippi 122 6,308 1.93% South Carolina 318 16,516 1.93% Virginia 284 15,045 1.89% Illinois 769 41,514 1.85% California 2182 120,142 1.82% North Dakota 39 2,178 1.81% Total - U.S. 16,462 1,056,932 1.56%40 Section 5. Immigrant Entrepreneurs, Professionals, and Students from India Give me your tired, your poor, Your huddled masses yearning to breathe free, The wretched refuse of your teeming shore. Send these, the homeless, tempest-tossed to me, I lift my lamp beside the golden door! - Emma Lazarus, The New Colossus, 1883 When Emma Lazarus wrote the sonnet, The New Colossus, from which these famous lines were taken, she was referring to large numbers of European immigrants fleeing persecution and destitution in their native lands in the late 1800s – hoping for a better life in America, the land of opportunity. Many of them went on to become successful entrepreneurs, industrialists, scholars, scientists, and artists, making America what it is today. xx Immigrants, and other professionals and students from India, who came to the United States in the last several decades, also seeking opportunity, however, do not fit the huddled masses connotation. They are often highly educated individuals bringing valuable skills, and they have been making a mark on American economy and society in many ways. However, the process known as "brain drain" has begun to reverse to some extent in the last decade. xxi This section highlights the contributions of immigrant entrepreneurs, professionals, and students from India to the U.S. economy and society. Given the wide variety of pursuits they have followed, we have chosen to focus only on the contributions of these three sets of people of Indian origin in the United States. Who are the Indian Americans The Asian Indian xxiii xxii population in America, according to the American Community Survey of the U.S. Census Bureau, was 2.57 million in 2007, less than one percent of the U.S. population. They are the third largest Asian American ethnic group in the United States, after Chinese Americans and Filipino Americans. They are the most educated and have the highest income, compared to all other ethnic groups. The 2005 American Community Survey reported their median household income at $71,932, compared to the median household income of $46,242 for the total U.S. population. About 70 percent of the Indian Americans have a bachelor's degree or higher, almost three times the national average of 27 percent. Sixty-one percent of the Indian Americans are in management, professional, and related occupations compared to 34 percent for the total population. And, 19 percent of Indian Americans work in "professional, scientific, and management, and administrative and waste management services" industries compared to 10% for the United States population. Immigrant Entrepreneurs from India According to the Survey of Business Owners by the U.S. Census Bureau, there were 231,000 businesses owned by Indian Americans in 2002, which employed 615,000 workers and had 41 revenues of over $89 billion. (The Census Bureau conducts the survey every five years, and the results of the 2007 survey are to become available starting in mid-2010). Given their high educational, technical, and professional backgrounds, it is only to be expected that Indian Americans' contributions to the American economy and society are also much above average, as the following discussion shows. High-tech Entrepreneurs. A 2007 joint Duke University-UC Berkeley study by Vivek Wadhwa and others found that Indian immigrants had founded more engineering and technology companies during 1995-2005 than immigrants from Britain, China, Japan, and Taiwan combined. xxiv Figure 5-1 Of all immigrant-founded companies, 26 percent had Indian founders. and Figure 5-2 show the states and the industries where immigrant Indian entrepreneurs had founded companies during the 1995-2005 decade (based on Wadhwa et al, 2007). The bulk of the companies they founded were in high-tech industries. These results are not surprising given that immigrants tend to possess greater entrepreneurial capacity, particularly in technical fields – the finding of a 2007 National Venture Capital Association (NVCA) study, "American Made: The Impact of Immigrant Entrepreneurs and Professionals on U.S. Competitiveness." xxv Over half of the employment generated by U.S. public venture-backed high-tech manufacturers came from immigrant-founded companies. These companies pay high salaries to white collar American workers in professional positions. The NVCA survey also found that almost two-thirds of the immigrant founders of privately held venture-backed companies have started or intend to start more companies in the United States, thereby creating more jobs. According to the study, 25 percent of U.S. public venture capital-backed corporations were started by immigrants over the last fifteen years. Immigrant-founded venture-backed companies are concentrated in cutting-edge sectors, including high-tech manufacturing, information technology, and life sciences. The study also found that 40 percent of U.S. publicly traded venture-backed companies in high-technology manufacturing were started by immigrants. While immigrant founders in venture-backed public companies came from across the globe, India was the most common place of birth for foreign-born founders in the NVCA survey, followed by U.K., China, Iran, and France "The story is not new. Immigrants were founders of such corporations as Dow Chemical, DuPont, Pfizer, Proctor & Gamble and Carnegie (later U.S.) Steel. And not just yesteryear: Immigrants founded Google, Yahoo, Intel, PayPal and YouTube. Since 1995, they've formed more than half of new Silicon Valley firms, driving one of the world's hottest economies." - Neal Peirce, The Washington Post, December 27, 200942 Figure 5-1: Engineering and Technology Companies Founded by Immigrants from India Figure 5-2: Industries in Which Immigrants from India Founded Companies
Source for Both Charts: Wadhwa et al, 200743 Table 5-1: Select Immigrant-Entrepreneurs from India and the Companies they Founded Company Founder/Cofounder (c) State Sales ($M) Employees Akamai Preetish Nijhawan (c) MA 859.8 1,750 Art Technology Group Jeet Singh MA 179.38 545 Bose Corporation Amar Bose MA NA 8,000 Cirrus Logic Suhas Patil (c) TX 220.99 505 CyberMedia Unni Warrier CA 71.2 257 i2 Technologies Inc. Sanjiv Sidhu TX 256 1,280 iGate Sunil Wadhwani (c) CA 193.1 6,910 InfoGROUP Inc. Vinod Gupta NE $500 3,146 Infospace Naveen Jain WA 207.65 157 Juniper Networks Pradeep Sindhu CA 3,320 7,231 Kanbay International Inc. Dileep Nath (c) IL 230.5 6,900 PortalPlayer Inc. Sanjeev Kumar CA NA 201-500 Qlogic Corporaion H. K. Desai CA 549.07 1,038 SanDisk Sanjay Mehrotra (c) CA 3,570 3,267 Scandent Group Ramesh Vangal NJ NA 3,000 SonicWall Inc. Sreekanth Ravi CA 200.57 819 Sun Microsystems Vinod Khosla (c) CA 11,450 29,000 Sycamore Networks Desh Deshpande MA 67.4 405 Synaptic Digital Inc Shobha Purushothaman (c) NY NA 117 Syntel Bharat Desai MI 419 13,600 TIBCO Software Inc. Vivek Ranadive CA 621.4 2,097 TranSwitch Corporation Santanu Das CT 56.1 227 WebEx Communications Subrah S. Iyar CA NA 2,411 Sources: Various public sources, NVCA study, and hoovers.com Notes: Sales and employment data are the latest available. Some of these companies have since been acquired by other companies. Table 5-1 provides a select list of companies founded by Indian immigrants in the United States, along with information on sales and employment. Practically all these companies are in high-tech sectors that pay above-average wages. 44 Hotel Owners. To anyone who has stayed at hotels/motels in the United States, it may not come as a surprise that Indian Americans are the largest ethnic group of hotel owners in the U.S. According to a recent study by the Atlanta-based PKF Hospitality Research, sponsored by the Asian American Hotel Owners Association (AAHOA), the 10,000 members of AAHOA own 20,156 hotels, which together have 1.8 million rooms and a property value of $129 billion. xxvi Indian Americans own over 40 percent of all hotels in the United States and 39 percent of all guest rooms. They employ 578,600 workers, including the equivalent of 436,900 full-time jobs plus additional part-time employees. Salaries and wages paid to these workers total $9.4 billion annually, plus another $2.5 billion paid in payroll taxes and employee benefits. Over 95 percent of AAHOA members are Indian Americans. They are "typically small business entrepreneurs, but many have established portfolios that include numerous fullservice, limited-service, and independent lodging facilities. They have strong roots in their communities and generate a powerful local 'ripple' economic effect through their expenditure of operating expenses plus capital investments." For instance, AAHOA members spend over $31 billion annually on operating costs such as: wages ($11.9 billion), utilities ($2.3 billion), franchise fees and marketing and reservation expenses ($2.2 billion), property taxes ($2 billion), food and beverage purchases ($1.3 billion), supplies ($1.2 billion), credit card commissions ($1.1 billion), and capital improvements ($900 million). Indian American Professionals Indian Americans are contributing to the U.S. economy and society in literally all fields. Here's brief information on, and select lists of, such individuals in different categories. Physicians. For over 25 years, Indian Americans physicians have been making significant contributions to their communities, to health care, and to the medical profession in the United States – not only practicing in inner cities, rural areas, and peripheral communities, but also at the top medical schools and other academic centers. The American Association of Physicians of Indian Origin (AAPI) is the largest ethnic medical organization in the United States, second only to the American Medical Association, and represents the interests of more than 50,000 physicians and about 15,000 medical students/residents of Indian heritage in America. Although Indian Americans represent less than one percent of the U.S. population, students of Indian origin constitute 10-12 percent of medical students entering U.S. schools. xxvii The Association (AAPI) currently has 17,441 active members. Table 5-2 on the next page shows the numbers of AAPI members in the Top 15 states, as well as the top 15 specialties of Indian American physicians. Nobel Laureates. Har Gobind Khurana (Medicine, 1968), Subramanyan Chandrasekhar (Physics, 1983), Amartya Sen (Economics, 1998), and Venkatraman Ramakrishnan (Chemistry, 2009).45 Table 5-2: The Number of AAPI Members by State and by Specialty State Count Specialty Count New York 2,365 Internal Medicine 3,204 California 1,534 Pediatrics 1,600 Illinois 1,456 Psychiatry 1,263 Ohio 1,258 Anesthesiology 1,051 New Jersey 1,143 Cardiovascular Diseases 996 Texas 1,105 Obstetrics & Gynecology 597 Michigan 942 Pathology 536 Florida 882 Gastroenterology 444 Pennsylvania 847 Neurology 373 Maryland 560 Family Practice 360 Indiana 368 Pulmonary Diseases 328 Massachusetts 359 Diagnostic Radiology 252 Virginia 359 Urology 238 Georgia 348 Physical Medicine & Rehabilitation 235 Missouri 280 Orthopedic Surgery 183 Total (U.S.) 17,441 Total (All Specialties) 17,441 Source: AAPI Note: Data shown above do not include the other medical and healthcare professionals of Indian heritage in the United States, such as dentists, pharmacists, and nurses. CEOs at Major Corporations. Indira Nooyi (PepsiCo), Vikram Pandit (Citigroup), Shantanu Narayen (Adobe Systems), Francisco D'Souza (Cognizant Technology Solutions), Surya Mohapatra (Quest Diaagnostics), Dinesh Paliwal (Harman International), Jai P. Nagarkatti (Sigma-Aldrich), and Abhijit Talwalkar (LSI). xxviii Educators. This is also an area where Indian Americans have made major contributions to the United States and to their disciplines. Just to name a few, here's a select list of "college deans" in major business and engineering schools in the United States: G. Anandalingam (Dean, Robert H. Smith School of Business, University of Maryland), Vijay Dhir (Dean, Henry Samueli School of Engineering, UCLA), Pradeep Khosla (Dean of Engineering, Carnegie Mellon University), Nitin Nohria (Dean, Harvard Business School), Shankar Sastry (Dean of Engineering, University of California, Berkeley), and Subra Suresh (Dean of Engineering, Massachusetts Institute of Technology). There are thousands of other corporate executives of Indian heritage who are senior and top-level executives of medium and large businesses throughout the United States.46 Engineers, Scientists, and Technologists. Of the thousands of engineers, scientists, and technologists of Indian heritage in the United States, a special mention must be made of those who graduated from the famed Indian Institutes of Technology (IITs). Most Fortune 500 and other high-technology companies have one or more IITians in their senior executive cadres, so do Wall Street investment banks, federal government agencies like NASA, the World Bank, and so on. There are even management gurus who received their first degree at an IIT. It will be an impossible task to capture the contributions of the IITians to the American economy in a study like this. However, some of their achievements have been documented in publications like The IITians: The Story of a Remarkable Indian Institution and How Its Alumni Are Reshaping the World by Sandipan Deb (Penguin/Viking, 2004). Obama Administration Appointees. A select list of Indian Americans serving in the Obama Administration are: Rajen Anand (Executive Director, Policy, USDA Center for Nutrition and Promotion), Aneesh Chopra (Federal Chief Technology Officer), Ro Khanna (Deputy Assistant Secretary for Domestic Operations, US and Foreign Commercial Service, International Trade Administration), Vivek Kundra (Federal Chief Information Officer), Arun Majumdar (Director, Advanced Research Projects Agency, Department of Energy), Farah Pandith (US Special Representative to Muslim communities), Rajiv Shah (Administrator, U.S. Agency for International Development), Rajiv Shah (Undersecretary for Research, Education & Economics and Chief Scientist, Department of Agriculture), Islam A. Siddiqui (Chief Agricultural Negotiator, Office of the US Trade Representative), Vinai Thummalapally (US envoy to Belize), and Richard Verma (Assistant Secretary for Legislative Affairs, State Department). Politicians. Bobby Jindal, the Governor of Louisiana, is the highest-profile Indian American in the political sphere in the United States. There are also dozens of state Senators and Assembly men and women as well as city mayors, Council members, and other elected officials of Indian heritage that serve their respective constituencies. Journalists. They are often the most visible group of Indian Americans in the United States. Some of them are: Falguni Lakhani (Producer, Dateline NBC), Vinita Nair (Anchor, World News Now and America This Morning, ABC), Raju Narisetti (Managing Editor, The Washington Post), Uma Pemmaraju (Senior News Anchor, Fox News Channel), Gopal Raju (Editor, India Abroad, and pioneer of American Indian media in the United States), Shihab Rattansi (CNN International Anchor), Ali Velshi (CNN Business News Anchor), Zain Verjee (CNN Anchor), and Fareed Zakaria (Editor, Newsweek, and host of Fareed Zakaria GPS on CNN). xxix This has necessarily been a very brief listing of Indian Americans and their contributions to the American economy and society. We have had to leave out many prominent Indian Americans and categories, e.g., artists and entertainers, who are also making a difference to America.47 Appendix: Methodology This study is based on an extensive amount of research utilizing a variety of data sources, both primary and secondary. The key data sources used were: Greenfield investment and jobs data were obtained from fDi Intelligence, a service of Financial Times Limited, U.K. which captures such data for most countries. As companies do not always release information on investment amount or job creation, fDi Intelligence uses a proprietary econometric model (patent pending) to estimate the jobs and investments where the actual value is not known. For more information on the methodology used by fDi, please visit: http://www.fdimarkets.com/index.cfm?page_name=markets§ion=faq M&A data were obtained from several sources, including Thompson's SDC Database, FICCI publications produced jointly with Ernst & Young, publications of Virtus Global Partners, and Prof. Jaya Prakash Pradhan. We merged the FDI information from these sources and verified it through our own research on investment announcements in daily and business press, company Websites, other Internet resources (e.g., Hoovers), and completed survey questionnaires received from some companies. (We had sent out a survey questionnaire to a number of Indian companies operating in the United States, and incorporated the information received from survey respondents in this report). Finally, we did phone or personal interviews with a few companies. Professor Jaya Prakash Pradhan of the Sardar Patel Institute of Economic & Social Research was kind enough to provide us data on foreign direct investments from India, based on published sources and the Reserve Bank of India (which approves foreign investments by Indian companies). Two of his publications provide more information on his research: Pradhan, J.P. (2009) 'Indian FDI Falls in Global Economic Crisis: Indian Multinationals Tread Cautiously', Columbia FDI Perspectives , No. 11, Columbia Law School and The Earth Institute, Columbia University, August 17. (For M&A Data) Pradhan, Jaya Prakash (2008): Indian Direct Investment in Developing Countries: Emerging Trends and Development Impacts. ISID Working Paper, No. WP2008/08. (For Greenfield Indian FDI Data) Data on U.S. trade with India and other countries, as well as the numbers of jobs linked to exports, were obtained from two U.S. Department of Commerce Websites: http://www.trade.gov/td/industry/otea/jobs/Reports/2006/jobs_by_state.html Tables 4-1, 4-2, and 4-3: Exports data were derived from http://tse.export.gov/48 The following U.S. Department of Commerce site provides the numbers of jobs linked to exports from the 50 U.S. states and the District of Columbia for Year 2006. http://www.trade.gov/td/industry/otea/jobs/Reports/2006/jobs_by_state.html For each state, we computed the ratio of jobs linked to total worldwide merchandise exports from the state in 2006, and then used this ratio for computing jobs linked to exports from that state to India in 2008 (Table 4-4 and 4-5). Example: California Total Worldwide Exports (2006): $127,770,794,000 No. of Jobs Linked to Exports (2006): 691,800 Exports/Jobs: $184,693.26 Implication: For California, each $184,693 in exports was linked to one job in the state in 2006. (Note: This number is different for different states) Exports to India (2008): $2,328,638,000 No. of Jobs Linked to Exports to India (2008): 12,608 (= $2,328,638,000 ÷ $184,693) Performing the above computation for each state and the District of Columbia, we estimated that a total of 98,292 jobs were linked to total exports ($17,682,085,000) from the United States to India in 2008. Tables 4-4 and 4-5: We used the ratio (98,292 ÷ $17,682,085,000) to estimate the numbers of jobs for the other years (2004-2007) in Table 4-4 and 4-5. These estimates include jobs in both manufacturing and non-manufacturing occupations linked to manufactured exports to India, and do not include jobs linked to non-manufactured exports, such as agricultural and mineral products, and services exports. Disclaimer: This report was developed based largely on secondary sources of information (plus some primary sources, including information provided by some of the companies included in the report). While care has been taken to be as accurate as possible in reporting this information, the authors, the India-US World Affairs Institute, FICCI, and the Robert H. Smith School of Business, University of Maryland accept no responsibility for the accuracy or otherwise of the contents of this report. The opinions expressed in this report are those of the authors and not of any of the study's sponsors.49 Acknowledgements A project like this could not have been completed without the active support and cooperation of a lot of individuals and organizations. In view of space limitation, we can acknowledge only some of them. However, we offer our gratitude to everyone who contributed to the study, whether or not they are identified here. The project got a head start when the authors met with Ranjana Khanna, FICCI's Deputy Secretary General based in Washington D.C., who provided a broad outline of what the study could cover and also provided us with contact information for dozens of Indian companies in the United States. We also received encouragement for the study when we met with FICCI Secretary General, Dr. Amit Mitra, V.K. Topa, Advisor to the Secretary General, Ashok Ummat, Executive Director, and Sunita Rattan, Senior Assistant Director for Americas at FICCI headquarters in New Delhi in August 2009. Our grateful thanks to all of them. A number of other individuals and organizations provided a good deal of information for the study, for which we are thankful to them. These include Professor Jaya Prakash Pradhan of the Sardar Patel Institute of Economic & Social Research; Dr. Vinod Shah, the current president of the American Association of Physicians of Indian Origin (AAPI), and Ms. Vijaya Kodali, also of AAPI; Mr. Fred Schwartz, President, and Mr. Chris Carlson, P.R. and Communications Manager, of the Asian American Hotel Owners Association; and Mr. Gunjan Bagla, President of PanIIT, the worldwide association of IIT alumni. Mahdi Zanddizari, Vinod's Graduate Assistant at the Smith School, did a good amount of work to develop lists of Indian companies investing in the United States based on library databases and Google searches. Many other individuals and companies provided information about their U.S. operations in our survey of Indian companies in the United States, which provided depth to our analysis and a check on the data we collected from secondary sources. These are: Hiranya Ashar (Rolta); Raghu Balakrishnan (Polaris Software); Chuck Caprariello (Ranbaxy); Avisek Das, David Good, and Anjali Sharan (Tata); Rajesh Nair (Indegene/ILSL Holdings); Murali Ramanathan (Jain Americas); Rajesh Sinha (Thermax); Greg Tilley (Infotech Enterprises); and Josh Wendroff (3i Infotech); among others. Thank you. Finally, we received an incredible amount of help from our daughters, Sumita and Anupama, who spent days with us, in person and virtually, researching, editing, and contributing to the study in numerous ways. Sumita and Anu, this could not have been done without you! Thank you! Vinod K. Jain Kamlesh Jain50 About the Authors Vinod Jain is professor and associate director of research at the Robert H. Smith School of Business, University of Maryland, and President and CEO of India-US World Affairs Institute, Inc. A true cosmopolitan and Fulbright Scholar, Vinod has lived and worked in India, the United States, Western Europe, Eastern Europe, China, and the Middle East. During the last ten years, he has received and managed five competitive grants from the U.S. Department of Education, including a $1.43 million grant in 2006 to establish the Center for International Business Education & Research at the University of Maryland, which he headed until February 2009. Vinod teaches "strategy", "global strategy", and "emerging markets" on Smith School's MBA program, and "strategy" at the University of Lodz in Poland. He has also taught on Smith School's Executive MBA program in China and Switzerland. His current research involves measuring regional innovation in the United States, a project funded partially by the IBM Center for the Business of Government. Prior to returning to academia in 1990, Vinod worked in industry for some fifteen years and held a variety of middle and senior executive positions with multinational corporations. And, he has been honored by the Governors of both Ohio (2001) and Maryland (2004) for his services to their states. He has a Ph.D. in business and management from the University of Maryland and Master's degrees in Management (UCLA) and Statistics (Indian Statistical Institute). He serves on the Maryland/Washington D.C. District Export Council, to which he was appointed by the Secretary, U.S. Department of Commerce in 2008. He is a member of the Academy of International Business, Academy of Management, Mensa, and the Asia Society. Kamlesh Jain is Director of Research & Education at the India-US World Affairs Institute. Prior to her current position, she worked for the U.S. Department of the Treasury for six years, first in the Office of Research and then in Corporate Performance Budgeting, in positions such as Section Chief for the Operating Divisions Office and Supervisory Budget Analyst. She has also taught at several universities in the United States and abroad, including University of Maryland, College Park, University of Texas at Dallas, and the University of Aston in Birmingham, U.K. She headed the training function at the Industrial Finance Corporation of India, Mumbai, and Tata Consultancy Services, New Delhi, while based in India in the 1980s. She has a Ph.D. in Management Science/Statistics from University of Maryland, a Master's in Management from UCLA, and an Honors Bachelor's and a Master's degrees in Statistics from the Indian Statistical Institute.51 India-US World Affairs Institute, Inc. Founded in 2006, the India-US World Affairs Institute, Inc. is an independent, non-profit, taxexempt 501(c)(3) institution dedicated to promoting understanding and positive relationships between and among the peoples of India, the United States, and the world – through education, experiential learning, research, thought leadership, publications, seminars, conferences, travel and study abroad, and strategic partnerships. Our mission is to encourage individuals and organizations transcend boundaries – physical, social, and cultural – to improve their global bandwidth. Our members, staff, board of advisors, board of directors, and alumni constitute a global network of men and women with diverse professional backgrounds and global expertise in areas such as society, culture, foreign affairs, economics, economic development, global business, and strategy and competitiveness. For more information, please visit www.india-us.org or contact: vjain@india-us.org. Federation of Indian Chambers of Commerce & Industry Established in 1927, FICCI is the largest and oldest apex business organization in India. Its history is closely interwoven with India's struggle for independence and its subsequent emergence as one of the most rapidly growing economies globally. FICCI plays a leading role in policy debates that are at the forefront of social, economic and political change. Through its FICCI is active in 39 sectors of the Indian economy and its stand on policy issues is sought out by think tanks, governments, and academia. FICCI has direct membership from the private as well as public sectors, including SMEs and MNCs, and an indirect membership of over 83,000 companies from regional chambers of commerce. FICCI is headquartered in New Delhi and has eight regional offices throughout India and six overseas offices, including one in Washington, D.C. Robert H. Smith School of Business, University of Maryland The Robert H. Smith School of Business at University of Maryland is an internationally recognized leader in management education and research. A comprehensive business school, Smith offers undergraduate, full-time and part-time MBA, Executive MBA, PhD, and nondegree executive education programs, as well research and outreach services to the corporate community. Smith School is one of only a few schools of business in the world to be ranked in the top schools for both research and teaching. Smith School is one of 13 schools and colleges that comprise the University of Maryland, College Park, the only highly ranked, comprehensive, and research-focused university in the National Capital Area. 52 53 What can we do for you? The India-US World Affairs Institute Inc. is the only Washington D.C.-based independent, nonprofit educational and research institution dedicated to promoting understanding and positive relationships between and amongst the peoples of India, the United States, and the world. Our members, staff, board of directors, board of advisors, and alumni constitute a global network of men and women with diverse professional backgrounds and global expertise in areas such as society, culture, education, foreign affairs, economics, economic development, global business, technology, innovation, and strategy and competitiveness. Educational Institutions With the coming changes in legislation, India offers opportunities for foreign universities interested in establishing a beachhead in India. We offer the following services for American universities. Find strategic partners in India – for joint educational and research programs, student and faculty exchanges, company visits, and corporate internships Design and lead study abroad programs in India for students/faculty, including programs with built-in internships or project work for students, as well as immersion experiences in India We also offer similar services for Indian universities interested in the United States. Economic Development Organizations We assist economic development organizations from the United States seek out Indian companies interested in investing in their jurisdictions, and U.S. companies seeking to build strategic alliance or joint venture with Indian companies. We also offer similar services for economic development organizations and corporations in India interested in exploring the U.S. marketplace. Corporations A small sampling of educational seminars our staff and board members have offered in the past: Doing Business in India Doing Business in America The Bangalore Seminar The Washington Seminar Executive Leadership Global Strategy Competing and Winning in Emerging Market For more information, please visit www.india-us.org, or contact President@india-us.org54 55 Endnotes
i David Griswold, Mad About Trade: Why Mainstreet America Should Embrace Globalization, Cato Institute, 2009. ii http://minnesota.publicradio.org/display/web/2008/09/19/steelplantopens/ iii Based on: David Griswold, 2009. iv Authors' interview with company management. v http://abcnews.go.com/Politics/obama-travels-asia-climate-change-north-koreatrade/story?id=9053006 vi http://www.opendoors.iienetwork.org vii N.S.B. Gras, "A Great Indian Industrialist: Jamsetji Nusserwanji Tata, 1839-1904", Bulletin of the Business Historical Society, 23(3), 1949. viii Ann Graham, "Too Good to Fail", Strategy+Business, Spring 2010. ix Source: http://northamerica.tata.com x Ravi Ramamurti and Jitendra V. Singh, "Indian Multinationals: Generic Internationalization Strategies." In Ravi Ramamurti & Jitendra V. Singh (eds.), Emerging Multinationals from Emerging Markets, Ch. 6, Cambridge University Press, 2008. xi For business and financial market sophistication, India ranks very high among all countries, not just among developing countries, in the Global Competitiveness Index, 2009-2010 (World Economic Forum). xii IMaCS VIRTUS Global Partners, US-Bound Acquisitions by Indian Companies, January 2010. xiii http://www.unctad.org/Templates/WebFlyer.asp?intItemID=3968&lang=1 xiv xv xvi http://www.tradeandindustrydev.com/ID-897-news.aspx xvii Antoine van Agtmael, The Emerging Markets Century: How a New Breed of World-Class Companies is Overtaking the World, Free Press, 2007 xviii Amit Mitra, "N-Power to Brain Power", Hindustan Times, October 23, 2009, http://www.hindustantimes.com/StoryPage/Print/468167.aspxx56
xix Employment Related to Manufactured Exports, 2006, U.S. Department of Commerce, International Trade Administration: http://www.trade.gov/td/industry/otea/jobs/Reports/2006/jobs_by_state.html. These data do not include jobs involved in the export of non-manufactured goods, such as farm products, minerals, and services sold to foreign buyers. The results are based on the 2006 Annual Survey of Manufactures, conducted by the Bureau of the Census, U.S. Department of Commerce. xx The sonnet is inscribed on a bronze plaque in an exhibit on the second floor of the pedestal to the Statue of Liberty in New York Harbor. xxi The term, "brain drain" was coined to refer to such emigration from developing countries such as India. In recent years, however, there have been tens of thousands cases of "reverse brain drain" when people from India and China returned to their home countries as economic conditions improved there. xxii The Census Bureau uses the "Asian Indian" terminology to refer to people from Indian origin in the United States. xxiii The 2005 American Community Survey: http://factfinder.census.gov/servlet/IPTable?_bm=y&- geo_id=01000US&-qr_name=ACS_2005_EST_G00_S0201&- qr_name=ACS_2005_EST_G00_S0201PR&-qr_name=ACS_2005_EST_G00_S0201T&- qr_name=ACS_2005_EST_G00_S0201TPR&- reg=ACS_2005_EST_G00_S0201:032;ACS_2005_EST_G00_S0201PR:032;ACS_2005_EST_G00_S0 201T:032;ACS_2005_EST_G00_S0201TPR:032&-ds_name=ACS_2005_EST_G00_&-_lang=en&- format= xxiv Wadhwa et al. (2007). America's New Immigrant Entrepreneurs: Part I. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=990152 xxv http://www.nfap.com/researchactivities/studies/immigrant_entreprenuers_professionals_november_200 6.pdf xxvi http://www.aahoa.com/AM/Template.cfm?Section=Press_Releases1&TEMPLATE=/CM/ContentDispl ay.cfm&CONTENTID=4717 xxvii xxviii http://www.forbes.com/2009/12/17/indian-ceos-united-states-forbes-asia-indian-ceos.html xxix http://en.wikipedia.org/wiki/List_of_Indian_Americans#Academic
Purchasing power parityFrom Wikipedia, the free encyclopedia Purchasing power parity (PPP) is a measure of long-term equilibrium exchange rates based on relative price levels of two countries[citation needed]. The idea originated with the School of Salamanca in the 16th century [1] and was developed in its modern form by Gustav Cassel in 1918.[2] The concept is founded on thelaw of one price, the idea that in absence of transaction costs and official barriers to trade, identical goods will have the same price in different markets when the prices are expressed in terms of one currency.[3] In its "absolute" version, the purchasing power of differentcurrencies is equalized for a given basket of goods. In the "relative" version, the difference in the rate of change in prices at home and abroad—the difference in the inflation rates—is equal to the percentage depreciation or appreciation of the exchange rate. Deviations from the theory imply differences in purchasing power of a "basket of goods" across countries, which means that for the purposes of many international comparisons, countries' GDPs or other national income statistics need to be "PPP adjusted" and converted into common units. The best-known purchasing power adjustment is the Geary–Khamis dollar (the "international dollar"). The real exchange rate rate is then equal to the nominal exchange rate, adjusted for differences in price levels. If purchasing power parity held exactly, then the real exchange rate would always equal one. However, in practice the real exchange rates exhibit both short run and long run deviations from this value, for example due to reasons illuminated in the Balassa–Samuelson theorem. There can be marked differences between purchasing power adjusted incomes and those converted via market exchange rates.[4] For example, the World Bank's World Development Indicators 2005 estimated that in 2003, one Geary-Khamis dollar was equivalent to about 1.8Chinese yuan by purchasing power parity[5]—considerably different from the nominal exchange rate. This discrepancy has large implications; for instance, when converted via the nominal exchange rates GDP per capita in India is about US$1,704.063[6] while on a PPP basis it is about US$3,608.196.[7] This means that if calculated at nominal exchange rates, India has the tenth largest economy, while at PPP-adjusted rates, it has the fourth largest economy in the world. At the other extreme, Denmark's nominal GDP per capita is around US$62,100, but its PPP figure is only US$37,304.
[edit]PPP measurementThe PPP exchange-rate calculation is controversial because of the difficulties of finding comparable baskets of goods to compare purchasing power across countries. Estimation of purchasing power parity is complicated by the fact that countries do not simply differ in a uniform price level; rather, the difference in food prices may be greater than the difference in housing prices, while also less than the difference in entertainment prices. People in different countries typically consume different baskets of goods. It is necessary to compare the cost of baskets of goods and services using a price index. This is a difficult task because purchasing patterns and even the goods available to purchase differ across countries. Thus, it is necessary to make adjustments for differences in the quality of goods and services. Additional statistical difficulties arise with multilateral comparisons when (as is usually the case) more than two countries are to be compared. For example, in 2005 the price of a gallon of gasoline in Saudi Arabia was $0.91 USD, and in Norway the price was $6.27 USD.[8] The significant differences in price wouldn't contribute to accuracy in a PPP analysis, despite all of the variables that contribute to the significant differences in price, such as Saudi Arabia having significant crude oil in its country and Norway not having stated resources. Further comparisons have to be made and utilized as variables in the overall formulation of the PPP. When PPP comparisons are to be made over some interval of time, proper account needs to be made of inflationary effects. [edit]The Relationship Between PPP and the Law of One PriceAlthough it may seem as if PPP and the law of one price are the same, there is in fact a difference: the law of one price applies to individual commodities whereas PPP applies to the general price level. If the law of one price is true for all commodities then PPP is also therefore true; however, when discussing the validity of PPP, some argue that the law of one price does not need to be true exactly for PPP to be valid. If the law of one price is not true for a certain commodity, the price levels will not differ enough from the level predicted by PPP.[9] The purchasing power parity theory states that the exchange rate between one currency and another currency is in equlibirium when their domestic purchasing powers at that rate of exchange are equivalent. Example: -- Suppose that one USD is currently selling for ten Mexican Pesos (MXN) on the exchange rate market. In the US baseball bats selling for $40 while in Mexico they sell for 150 pesos. Since 1 USD = 10 MXN, then the bat costs 40 USD if we buy it in US but only 15 USD if we buy it in Mexico. Clearly, there's an advantage to buying the bat in Mexico, so consumers are much better off going to Mexico to buy their bats. [edit]Big Mac IndexMain article: Big Mac Index An example of one measure of law of one price, which underlies purchasing power parity, is theBig Mac Index popularized by The Economist, which looks at the prices of a Big Mac burger inMcDonald's restaurants in different countries. By determining whether a currency is undervalued or overvalued, the index should give a guide to the direction in which currencies should move. The Big Mac Index is presumably useful because it is based on a well-known good whose final price, easily tracked in many countries, includes input costs from a wide range of sectors in the local economy, such as agricultural commodities (beef, bread, lettuce, cheese), labor (blue and white collar), advertising, rent and real estate costs, transportation, etc. This index provides a test of the law of one price, but the dollar prices of Big Macs are actually different in different countries. This can be explained by a number of factors: transportation costs and government regulations, product differentiation, and prices of nonfood inputs.[10] Furthermore, in some emerging economies, western fast food represents an expensive niche product price well above the price of traditional staples—i.e. the Big Mac is not a mainstream 'cheap' meal as it is in the west but a luxury import for the middle classes and foreigners. This relates back to the idea of product differentiation: few substitutes for the Big Mac allows McDonald's to have market power. [edit]Starbucks tall latte indexThe tall latte index is a variant of the Big Mac Index; it can give information regarding exchange rates similar to the Big Mac Index. The tall latte index was compiled in 2004, during which time both a Big Mac and tall latte cost $2.80. The measures told the same story in most cases with the notable exception of Asia. According to the Big Mac index, the yen was 12% undervalued against the dollar, whereas it was 13% overvalued according to the tall latte index. Furthermore, the Chinese yuan was 56% undervalued based on the Big Mac index but neither significantly undervalued nor overvalued according to the Starbucks index.[11] The following table, based on data from The Economist's 2004 calculations, shows the under (-) and over (+) valuation of the local currency according to the Starbucks tall latte index and the Big Mac index.
[edit]Measurement IssuesIn addition to methodological issues presented by the selection of a basket of goods, PPP estimates can also vary based on the statistical capacity of participating countries. The International Comparison Program, which PPP estimates are based on, require the disaggregation of national accounts into production, expenditure or (in some cases) income, and not all participating countries routinely disaggregate their data into such categories. Some aspects of PPP comparison are theoretically impossible or unclear. For example, there is no basis for comparison between the Ethiopian laborer who lives on teff with the Thai laborer who lives on rice, because teff is impossible to find in Thailand and vice versa, so the price of rice in Ethiopia or teff in Thailand cannot be determined. As a general rule, the more similar the price structure between countries, the more valid the PPP comparison. PPP levels will also vary based on the formula used to calculate price matrices. Different possible formulas include GEKS-Fisher, Geary-Khamis, IDB, and the superlative method. Each has advantages and disadvantages. Linking regions presents another methodological difficulty. In the 2005 ICP round, regions were compared by using a list of some 1,000 identical items for which a price could be found for 18 countries, selected so that at least two countries would be in each region. While this was superior to earlier "bridging" methods, which is not fully take into account differing quality between goods, it may serve to overstate the PPP basis of poorer countries, because the price indexing on which PPP is based will assign to poorer countries the greater weight of goods consumed in greater shares in richer countries. [edit]2005 ICPThe 2005 ICP round resulted in large downward adjustments of PPP (or upward adjustments of price level) for several Asian countries, including China (-40%), India (-36%), Bangladesh (-42%) and the Philippines (-43%). Surjit Bhalla has argued that these adjustments are unrealistic. For example, in the case of China, backward extrapolation of 2005 ICP PPP based on Chinese annual growth rates would yield a 1952 PPP per capita of $153 1985 International dollars, but Pritchett has persuasively argued that $250 1985 dollars is the minimum required to sustain a population, or has ever been observed for more than a short period. Therefore, both the 2005 ICP PPP for China and China's growth rates cannot both be correct. Angus Maddison has calculated somewhat slower growth rates for China than official figures, but even under his calculations, the 1952 PPP per capita comes to only $229. Angus Deaton and Alan Heston have suggested that the discrepancy can be explained by the fact that the 2005 ICP examined only urban prices, which overstate the national price level for Asian countries, and also the fact that Asian countries adjusted for productivity across noncomparable goods such as government services, whereas non-Asian countries did not make such an adjustment. Each of these two factors, according to him, would lead to an underestimation of GDP by PPP of about 12%. [edit]Need for PPP adjustments to GDPThe exchange rate reflects transaction values for traded goods between countries in contrast to non-traded goods, that is, goods produced for home-country use. Also, currencies are traded for purposes other than trade in goods and services, e.g., to buy capital assets whose prices vary more than those of physical goods. Also, different interest rates, speculation, hedging or interventions by central banks can influence the foreign-exchange market. The PPP method is used as an alternative to correct for possible statistical bias. The Penn World Table is a widely cited source of PPP adjustments, and the so-called Penn effect reflects such a systematic bias in using exchange rates to outputs among countries. For example, if the value of the Mexican peso falls by half compared to the U.S. dollar, the Mexican Gross Domestic Product measured in dollars will also halve. However, this exchange rate results from international trade and financial markets. It does not necessarily mean that Mexicans are poorer by a half; if incomes and prices measured in pesos stay the same, they will be no worse off assuming that imported goods are not essential to the quality of life of individuals. Measuring income in different countries using PPP exchange rates helps to avoid this problem. PPP exchange rates are especially useful when official exchange rates are artificially manipulated by governments. Countries with strong government control of the economy sometimes enforce official exchange rates that make their own currency artificially strong. By contrast, the currency's black market exchange rate is artificially weak. In such cases a PPP exchange rate is likely the most realistic basis for economic comparison. [edit]DifficultiesThere are a number of reasons why different measures do not perfectly reflect standards of living. [edit]Range and quality of goodsThe goods that the currency has the "power" to purchase are a basket of goods of different types:
The more a product falls into category 1 the further its price will be from the currency exchange rate. (Moving towards the PPP exchange rate.) Conversely, category 2 products tend to trade close to the currency exchange rate. (For more details of why, see: Penn effect). More processed and expensive products are likely to be tradable, falling into the second category, and drifting from the PPP exchange rate to the currency exchange rate. Even if the PPP "value" of the Ethiopian currency is three times stronger than the currency exchange rate, it won't buy three times as much of internationally traded goods like steel, cars and microchips, but non-traded goods like housing, services ("haircuts"), and domestically produced crops. The relative price differential between tradables and non-tradables from high-income to low-income countries is a consequence of the Balassa-Samuelson effect, and gives a big cost advantage to labour intensive production of tradable goods in low income countries (like Ethiopia), as against high income countries (like Switzerland). The corporate cost advantage is nothing more sophisticated than access to cheaper workers, but because the pay of those workers goes further in low-income countries than high, the relative pay differentials (inter-country) can be sustained for longer than would be the case otherwise. (This is another way of saying that the wage rate is based on average local productivity, and that this is below the per capita productivity that factories selling tradable goods to international markets can achieve.) An equivalent cost benefit comes from non-traded goods that can be sourced locally (nearer the PPP-exchange rate than the nominal exchange rate in which receipts are paid). These act as a cheaper factor of production than is available to factories in richer countries. The Bhagwati-Kravis-Lipsey view provides a somewhat different explanation from the Balassa-Samuelson theory. This view states that price levels for nontradables are lower in poorer countries because of differences in endowment of labor and capital, not because of lower levels of productivity. Poor countries have more labor relative to capital, so marginal productivity of labor is greater in rich countries than in poor countries. Nontradables tend to be labor-intensive; therefore, because labor is less expensive in poor countries and is used mostly for nontradables, nontradables are cheaper in poor countries. Wages are high in rich countries, so nontradables are relatively more expensive.[12] PPP calculations tend to overemphasise the primary sectoral contribution, and underemphasise the industrial and service sectoral contributions to the economy of a nation. [edit]Trade Barriers and NontradablesThe law of one price, the underlying mechanism behind PPP, is weakened by transport costs and governmental trade restrictions, which make it expensive to move goods between markets located in different countries. Transport costs sever the link between exchange rates and the prices of goods implied by the law of one price. As transport costs increase, the larger the range of exchange rate fluctuations. The same is true for official trade restrictions because the customs fees affect importers' profits in the same way as shipping fees. According to Krugman and Obstfeld, "Either type of trade impediment weakens the basis of PPP by allowing the purchasing power of a given currency to differ more widely from country to country."[13] They cite the example that a dollar in London should purchase the same goods as a dollar in Chicago, which is certainly not the case. Nontradables are primarily services and the output of the construction industry. Nontradables also lead to deviations in PPP because the prices of nontradables are not linked internationally. The prices are determined by domestic supply and demand, and shifts in those curves lead to changes in the market basket of some goods relative to the foreign price of the same basket. If the prices of nontradables rise, the purchasing power of any given currency will fall in that country.[14] [edit]Departures from Free CompetitionLinkages between national price levels are also weakened when trade barriers and imperfectly competitive market structures occur together. Pricing to market occurs when a firm sells the same product for different prices in different markets. This is a reflection of differing demand conditions between countries. According to Krugman and Obstfeld, this occurrence of product differentiation and segmented markets results in violations of the law of one price and absolute PPP. Overtime, shifts in market structure and demand will occur, which may invalidate relative PPP.[15] [edit]Differences in Consumption Patterns and Price Level MeasurementMeasurement of price levels differ from country to country. Inflation data from different countries are based on different commodity baskets; therefore, exchange rate changes do not offset official measures of inflation differences. Because it makes predictions about price changes rather than price levels, relative PPP is still a useful concept. However, change in the relative prices of basket components can cause relative PPP to fail tests that are based on official price indexes.[16] [edit]PPP and Global Poverty LinesThe global poverty line is a worldwide count of people who live below an international poverty line, referred to as the dollar-a-day line. This line represents an average of the national poverty lines of the world's poorest countries, expressed in international dollars. These national poverty lines are converted to international currency and the global line is converted back to local currency using the PPP exchange rates from the ICP. The primary problem associated with this calculation lies in the fact that price indexes are weighted averages of prices, and both weights and prices could be incorrect. Individuals living at the poverty line may face prices that are different from the average national prices, but the ICP bases calculations on the average national prices. Furthermore, the expenditure patterns at the poverty line are substantially different from national expenditure patterns, and these expenditure patterns in the National Accounts provide the weights used for the consumption PPPs described by the ICP. A recent study published in the American Economic Journal sought to address this issue by using poverty-weighted purchasing power parities, PPPPs or P4s. Household surveys are the distinguishing difference between P4s and P3s. The study found that the substitution of poverty weights for national accounts does not make a large difference to global poverty counts. It did find, however, that the method of calculating the global poverty line does make a large differences. When the global poverty line was calculated using the weighted average of fifty national poverty lines, the global poverty count was significantly lower than when the poverty lines from the fifteen poorest countries were used, which is the method used by the World Bank to calculate the global poverty line. Because the numbers of people in poverty are used as weights, this difference in outcomes based on calculation-method is explained by countries, such as India, with a large number of people living in poverty that are included in the fifty but not in the fifteen poorest. India has a large number of poor people and, by international standards, a low national poverty line. The global poverty line is much lower when India is included than when it is excluded.[17] The study explains dollars were not used to calculate poverty lines because the structure of advanced economies is different from the structure of economies where the global poor live. For this reason, rupees were more appropriate. The study makes recommendations to others who wish to make international comparisons of living standards for how to measure different indexes for the 2005 calendar year and also how to update these indexes when the results of the 2011 ICP become available. Among these recommendations include methods of converting rupees to dollars (which may be done because many people would want to read this information in terms of dollars). [edit]See also
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 Food inflation at 20-month low at 7.33% for week ended July 16Hawlish RBI hikes key rates by 50 bpsIndia cuts growth forecast as rate hikes bitesIndia's May IIP Growth Rate Declines to 5.6%June inflation jumps to 9.44%Exports jump 46.4 per cent to $29.2 billion in JuneServices exports up 3.2% in May, imports rise 2.8%National Sample Survey finds huge disparity in Indians' incomeCredit up 20.1%, deposits rise 18% in 12 monthsFinance Ministry announces measures to cut government spendingRecord foograin output in 2010-11NSSO data, shows a 3% decline in the total labour force participation rate | 
Global Economic Indicators
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Sectoral Reform In the Indian Economy
ARUSH KISHORE
Arush Kishore comments on the existing policies and regulations in place for major sectors of the Indian economy and recent amendments made to them, or not. Several areas still await reform which is much needed if India is to prosper. While progress has been made, much is left to be done.
"Regulatory and policy reforms needed to facilitate growth"
• We have started believing that along with China, our turn has come to occupy the place at the top of the global economy hierarchy. Are we already a World power? India National Security Review 2010 placed India as the 5th strongest country in the World after US, China, Japan, and Russia. When analyzed deeper, India faces severe challenges of policy, investment and productivity. These need speedy and effective reforms.
• The most important lesson from the global financial crisis is that it would be incorrect to say the days of regulation are over. Market based economic systems, particularly financial markets, need more regulation. However, the focus of this regulatory architecture should safeguard retail investors and customers, while at the same time foster growth and competition.
• India has traditionally been perceived as having too many regulatory constraints. However, these shackles had been largely removed with the first phase of reforms in the early 90s. In addition, regulatory oversight in India has transformed from the administrative controls of the earlier phase into the current and more market-friendly structure of economic regulation.
• India has been posting incredible rates of growth in recent years. However, there is a disconnect between the existing regulations and India's growth. Moving forward on the second generation reforms has become critical, with a perception that policy reforms in India have stalled. Some of these reforms are administrative in nature, but broadly they require changes in the statutory framework governing the sector. Presently, we can identity some key policy reforms that are needed to address the constraints that are impeding investment and growth and generating negative sentiments.
Financial sector / banking reforms
Banking
PricewaterhouseCoopers (PwC) report titled 'Banking In 2050', states that India's could become the third largest banking sector by 2050, after China and the U.S., leaving Japan, UK, and Germany behind . This is quite possible if the foundations of the mission are laid firmly now. Fitch ratings have stated India is better placed compared to China in regulating the flow of bank credit. India's regulatory environment has remained focused on controlling credit growth .However, the most pressing issue for banks in India is access to capital. There is currently a cap on voting rights at 10% for private banks and 1% for public sector banks, which is deterring equity investors from subscribing to equity issues, given that they will not have the requisite "voice" in board decisions. The Banking Laws (Amendment) Bill 2011 seeks to align the voting rights with shareholding patterns. In addition, the Bill provides more flexibility for Public Sector Banks in increasing the limits of authorized capital and permits the use of additional instruments to raise capital. The earlier this is done, the better it would be.
Insurance
• Increased insurance cover is required to supplement the social security net, particularly to provide affordable life and health coverage for a wider section of the population. Being a very capital intensive business, the insurance sector needs access to large additional equity funds and domestic capital will need to be augmented by foreign funds.
The proposed Insurance Laws (Amendment) Bill 2008, seeks to raise the cap on FDI (foreign direct investment) from the current 26% to 49% of paid up equity capital. The need to put this on the Statute Book cannot be overemphasized.
Similarly, in the domain of Pension Funds; the New Pension Scheme (NPS) needs to mobilize the massive pension requirement and potential in India, and there is a need to make the regulator a statutory entity in order to provide more certainty for investors. The Pension Fund Regulatory and Development Authority (PFRDA) Bill 2011, lays out the main components of the regulator's structure, but does not cover foreign investment policies in the sector. This aspect would need to be covered comprehensively.
Sarah Palin speaks at a conference organized by a media house in New Delhi, India, Saturday, March 19, 2011.
If there was any question of whether Sarah Palin's star-appeal translated overseas, the standing-room only crowd when she took the stage Saturday night in New Delhi provided an answer. Speaking at a two-day conference that boasted a lineup including a Nobel laureate and Indian Prime Minister Manmohan Singh, the former Vice-Presidential candidate was clearly the main event.
In her speech titled "My Vision of America," the former Governor of Alaska, who was on her first trip to India, did simply articulate her vision of America but touched on a range of topics from the rise of China, energy independence, Indian-American ties, and, in a rather timely fashion, the use of force in the Arab world.(See pictures from Sarah Palin's reality show.)
She stopped short of saying whether she'd run for U.S. President, allowing only that "I'm still thinking about it." But that didn't stop her from positing what she'd do if she had the job. Speaking just as the U.S. and its allies began their military intervention in Libya, she said that a Palin administration would differ from the Obama administration in there would be "less dithering" in America's dealings with the Arab world. "Certainly more decisiveness, more commitment to making sure those who are freedom fighters know that America is on their side," she said. In Libya, while not ruling out military action, Palin expressed support for the no-fly zone, but stopped short of committing American troops — echoing Obama.
Palin dismissed the notion of declining American influence. "I completely reject that," she said. "It represents wrongheaded thinking by our friends and wishful thinking by some enemies." Speaking to a crowd of political and business leaders, hosted by India Today magazine, Palin stressed that while America is not in decline, India is rising to meet it. Deepening economic, military and diplomatic ties between the two countries are vital, she said. "The relationship is the key to the future, the security, the prosperity of our world," she said. "I see it strengthening. Whoever's President, it better strengthen. We're going to need each other especially as these other regions rise, if we want a peaceful world, India and the United States have to be linked."(What is the next political step for Sarah Palin?)
While lauding India's democratic rise and economic liberalization, she expressed concern over China's growing economic influence and militarization. She described Chinese ownership of American debt as a "dangerous" and questioned the country's new military buildup. "I personally have huge military concerns about China. They are stockpiling ballistic missiles, submarines, new age ultra modern fighter aircraft. Is that all for a defensive posture? How could that be when you don't see a tangible outside threat to that country?"
Palin's personal appeal was apparent to those who attended the event. "She said the right things," said Kiran Aurora a retiree from New Delhi. "I don't know if she's Presidential material, but she's charismatic. There is a charm about her." "She came across as a very honorable person, who's still maturing as a politician," said Sandip Ganguli, a hotel executive in India. "What she appeared to lack in global knowledge and experience was made up by her belief in America and that the American people have what it takes to come back."
But there were still some questions. "I expected her to be entertaining and in bits it was," says Nikhil Pawha a publisher at a digital media company. "She had a good sense of humor, but her answers on the financial crisis didn't seem assured."
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Read more:http://www.time.com/time/world/article/0,8599,2060415,00.html#ixzz1Ttkhik5G
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In the Asian, African and Latin American countries, well over 500 million people are living in what the World Bank has called "absolute poverty"
Every year 15 million children die of hunger
For the price of one missile, a school full of hungry children could eat lunch every day for 5 years
Throughout the 1990's more than 100 million children will die from illness and starvation. Those 100 million deaths could be prevented for the price of ten Stealth bombers, or what the world spends on its military in two days!
The World Health Organization estimates that one-third of the world is well-fed, one-third is under-fed one-third is starving- Since you've entered this site at least 200 people have died of starvation. Over 4 million will die this year.
One in twelve people worldwide is malnourished, including 160 million children under the age of 5. United Nations Food and Agriculture
The Indian subcontinent has nearly half the world's hungry people. Africa and the rest of Asia together have approximately 40%, and the remaining hungry people are found in Latin America and other parts of the world. Hunger in Global Economy
Nearly one in four people, 1.3 billion - a majority of humanity - live on less than $1 per day, while the world's 358 billionaires have assets exceeding the combined annual incomes of countries with 45 percent of the world's people. UNICEF
3 billion people in the world today struggle to survive on US$2/day.
In 1994 the Urban Institute in Washington DC estimated that one out of 6 elderly people in the U.S. has an inadequate diet.
In the U.S. hunger and race are related. In 1991 46% of African-American children were chronically hungry, and 40% of Latino children were chronically hungry compared to 16% of white children.
The infant mortality rate is closely linked to inadequate nutrition among pregnant women. The U.S. ranks 23rd among industrial nations in infant mortality. African-American infants die at nearly twice the rate of white infants.
One out of every eight children under the age of twelve in the U.S. goes to bed hungry every night.
Half of all children under five years of age in South Asia and one third of those in sub-Saharan Africa are malnourished.
In 1997 alone, the lives of at least 300,000 young children were saved by vitamin A supplementation programmes in developing countries.
Malnutrition is implicated in more than half of all child deaths worldwide - a proportion unmatched by any infectious disease since the Black Death
About 183 million children weigh less than they should for their age
To satisfy the world's sanitation and food requirements would cost only US$13 billion- what the people of the United States and the European Union spend on perfume each year.
The assets of the world's three richest men are more than the combined GNP of all the least developed countries on the planet.
Every 3.6 seconds someone dies of hunger
It is estimated that some 800 million people in the world suffer from hunger and malnutrition, about 100 times as many as those who actually die from it each year.
| << Previous The world hunger problem: Current campaigns http://library.thinkquest.org/C002291/high/present/stats.htm |
Isher Judge Ahluwalia and I.M.D. Little (editors)
India's Economic Reforms and Development
Essays for Manmohan Singh
Oxford University Press, Oxford, 1998, viii + 412 pp., £19.99 (cloth).
When asked to name economic reformers in South Asia, most economists would put Manmohan Singh at the head of the list. The late Harry G. Johnson used to say half-seriously that economists have their best ideas by the time they are 35 years old but are only in a position to implement them when they are over 50. By that time, unfortunately, their ideas are 15 years out of date! Manmohan Singh does not fit this pattern. It is true that his ideas on the relation between foreign trade and India's development were formed when he was studying at Cambridge University in the early 1960s. He then became part of the Indian policy-bureaucratic establishment, holding a number of senior government posts, including Deputy Chairman of the Planning Commission and Governor of the Reserve Bank of India. In 1991, he was appointed Minister of Finance, when India was in the midst of a very serious economic crisis. The time was opportune and Manmohan Singh put in place a series of measures designed—and destined—to change the Indian economy in a fundamental way. His ideas on the importance of macroeconomic stabilization and opening up the trade and payment system were hardly outdated; indeed, they were completely consistent with the economic thinking and philosophy sweeping the world at the time.
In putting together this volume to honor Manmohan Singh, the editors have created required reading for those with more than passing interest in the Indian economy. The topics covered in the volume deal with virtually all of the important economic policy issues in India—development strategy, transition to an open economy, poverty, and fiscal federalism. The editors were also able to attract the very best of Indian economists to write on these issues, including a number who have settled abroad and attained worldwide fame. The result is a first-rate volume that will be of value for the economics profession at large.
The volume contains an excellent introductory chapter, followed by 15 papers covering 4 major themes. The first three papers—by Jagdish Bhagwati, Meghnad Desai, and Amartya Sen, respectively—reexamine the development model India adopted in the 1950s and then show how the reforms associated with Manmohan Singh fundamentally altered India's development strategy. Desai argues that the early strategy—with its emphasis on self-sufficiency in capital goods production and neglect of agriculture and exports—was flawed to begin with. Bhagwati disagrees with Desai's thesis, claiming that the strategy only started to fail in the 1960s, when India continued to rely on import substitution and did not follow the East Asian export-oriented growth model. But export orientation was not part of the basic development model India had chosen, so a shift to the East Asian model, as suggested by Bhagwati, would have been inconsistent and unlikely. It was only when Manmohan Singh came on the scene that Indian policy and attitudes toward exports and export promotion changed. Sen, for example, outlines in considerable detail the thinking of Manmohan Singh, as contained in Singh's 1964 book on trade and development in India, India's Export Trends and the Prospects for Self Contained Growth. He points out that many of the now-standard arguments for export-led growth are in the book, although very carefully and cautiously worded, reflecting, no doubt, Indian politics and Cambridge University economics at that time.
Expanding further on the export theme, T.N. Srinivasan demonstrates that openness has positive effects on both the level and growth of output. This theoretical result runs counter to the neoclassical growth-theory proposition that foreign trade has only level effects in the steady state. He backs up his theoretical hypothesis by referring to the large number of empirical studies that have shown the positive effects of openness on the growth rate. While Indian exports have risen significantly as a consequence of the Manmohan Singh reforms, Srinivasan believes they remain hampered by the lack of infrastructure, particularly port facilities, and the bureaucratic red tape that has inhibited foreign investors from moving into the export sector. This is where the next set of reforms should be instituted.
From the standpoint of theory and experience, macroeconomic stabilization is a necessary condition for structural reforms to succeed in permanently raising the growth rate. Manmohan Singh recognized this, and the first thing he did upon coming into office was put in place a macroeconomic adjustment program with IMF support. This program combined monetary, fiscal, and exchange rate policies to reduce the gaping internal and external imbalances that had emerged in India. Unfortunately, the volume does not contain a paper analyzing the Indian macroeconomic stabilization experience during Manmohan Singh's stewardship. The entire volume makes no mention of the critical role the IMF played in assisting India at the time of the crisis. Why this is so is a matter of conjecture. Perhaps macroeconomic policy issues associated with the IMF do not appeal to Indian academic economists and are left largely in the hands of bureaucrats, who, in turn, tend not to write about them. The two macro-oriented papers in the volume—by C. Rangarajan and Vijay Joshi—have somewhat narrow perspectives, in that they look only at specific policies. Rangarajan, for example, concludes that while monetary policy was on the right track, more could have been done to reduce inflation. But monetary policy in India, as in many developing countries, plays second fiddle to fiscal policy. Here, as Joshi shows, there was limited success. Fiscal deficits continued to be large, forcing monetary policy to bear the burden of controlling inflation, at some cost to growth.
While the export promotion strategy was broadly successful, with the growth of exports and output rising well above previous trends, the Indian reforms did not go deep enough and particularly did not reach the sectoral level. As Isher Ahluwalia points out in her paper, investment in infrastructure did not expand sufficiently; the lack of investment became a growth bottleneck. The public sector continued to dominate infrastructure development, and, with the exception of the power sector, the private sector was not allowed to participate. Similarly, Ashok Gulati details the limited opening up of the agricultural sector to foreign trade. Ajit Singh notes that financial liberalization has been only partial but, even so, this has allowed Indian corporations to raise substantial amounts of equity finance both at home and abroad. Capital controls are, however, still in place in India, and there is considerable debate on whether and when further relaxation will occur.
In any discussion of India, the issue of poverty has to be addressed. The papers by Deepak Lal, Kirit Parikh, and Suresh Tendulkar look at the relationship between reform policies aimed at raising the growth rate and their effects on poverty. Deepak Lal makes the standard neoclassical, market-oriented point that there is no conflict between growth and poverty alleviation. He claims that if India reached the (pre-crisis) growth rates of East Asia, poverty would be eliminated in a generation. Parikh agrees with this view but goes on to argue that this growth has to be labor intensive to absorb the increase in labor supply and that the skills of the labor force need to be broadened. Tendulkar makes the valid point that the transitional effects of a reform program may have a negative effect on the poor, but this really is an argument for providing temporary and targeted relief rather than for postponing or abandoning reforms.
The last three papers—by Amaresh Bagchi, Raja J. Chelliah, and V.A. Pai Panandiker—deal with center-state relations. Basically, the picture has not changed significantly as a result of the reforms. The center dominates economic policies and activities, rendering the states dependent on the center. In a sense, all three papers are forward looking, since they outline the reforms that are needed to better allocate taxation and expenditure functions between the center and the states. But, of course, the transfer of power to the states carries some risk. It is possible that the reform process would suffer, as the states tend to have a more parochial view of the advantages and disadvantages of economic reforms.
All in all, this volume is worthwhile reading and will have a long shelf life as a reference book on India and on economic development in general. With its long list of unfinished business, it will also serve as a helpful guide to the next Indian economic reformer, as well as to reformers in the rest of South Asia.
Daniel Yergin and Joseph Stanislaw
The Commanding Heights
The Battle Between Government and the Marketplace That Is Remaking the Modern World
Simon & Schuster, New York, 1998, 464 pp., $26.00 (cloth).
Capitalism ruled the world at the end of the nineteenth century, and capitalism—rechristened as market economics—rules in the vast majority of countries as our century draws to a close. Between these end points, far-reaching experiments with different types of economic systems have had profound effects on the countries they have touched. In this excellent, very readable book, Daniel Yergin and Joseph Stanislaw explore this evolution by looking at the role of government in different economic systems or, as they put it, exploring where and why the frontier between state and market was drawn. Their book entertainingly chronicles the massive intellectual and political battles that determined the rise of central planning and its downfall, the appeal of the welfare state in Western Europe and its transformation under the influence of Thatcherite policies, and that peculiar form of capitalism found in the United States—"free markets" tempered by more or less heavy doses of government regulation. The book also devotes considerable space to analyzing the shifting economic and political approaches that influenced the role assigned to government in the developing countries in the postwar period.
Why was the state permitted to intrude into so many corners of economic life during the first three quarters of the twentieth century? Yergin and Stanislaw show that the answer is complex and differs from country to country. At one extreme, the communist system of central planning was driven by a brutal ideology of equalization under which government would be all knowing. All aspects of economic life would be planned centrally, with the state owning all of the means of production. In many Western industrial countries, the need to protect their populations from the economic dislocations caused by the Great Depression, the socially leveling influence of two world wars, and the need to rebuild their economies in the aftermath, as well as the intellectual influence of economists such as J.M. Keynes, provided a compelling rationale for governments in those countries to move to a "mixed economy" model. Under this model, governments step in to correct market failures without completely stifling the market mechanism.
Some of the most interesting parts of the book concern the rise and fall of the state in economic life in developing countries. The issue for the newly independent governments was how to free themselves from economic dependence on the colonial powers. For many countries, this took the form of a plunge into self-sufficiency, with the state taking a majority stake in key sectors of the economy and/or weaving a dense web of government regulation around the economic system. The chapters dealing with Ghana, India, and countries in Latin America ably discuss the different roads taken in these countries. China's transformation since the early 1980s is also well covered, as is the rise of the now-tarnished Asian miracle countries.
Why were these systems discarded? Yergin and Stanislaw argue that countries have shed economic systems that were underpinned by heavy government intervention because these systems utterly failed to deliver what they had promised—growth and a better life for their populations. As the authors note, "Instead of market failure, the focus was now on government failure—the inherent difficulties that arise when the state becomes too expansive and too ambitious."
What comes next? Can we definitively crown market economics, with a minimal role for government, as the ruling economic system? Yergin and Stanislaw wisely hedge their bets, responding that this will depend on how a number of key factors turn out. Just as countries rejected the excesses of government intervention, free market economics will also be rejected unless it delivers the goods in terms of economic growth, employment, and higher living standards. Although the dramatic redefinition of the market and the role of the state has brought with it rising living standards in many countries, it has also brought anxiety about the effect of competition on jobs and incomes. Globalization and technological innovation are proceeding at such a pace that countries must take great care that the inevitable hiccups, in the form of economic crises, do not derail their progress under the current brand of market economics.
The Commanding Heights provides a sweeping vision of where government and the market have come from over the past century. Although the book cannot tell us where government and the market will be heading over the next century, it is a great read and highly recommended.
Marcello De Cecco, Lorenzo Pecchi, and Gustavo Piga (editors)
Managing Public Debt
Index-Linked Bonds in Theory and Practice
Edward Elgar, Cheltenham, United Kingdom, 1997, xviii + 221 pp., $85.00 (cloth).
Price-index-linked bonds have had a checkered history since their introduction in 1782 in the U.S. state of Virginia; several countries have introduced the instrument, but not all have persevered with it. Why haven't price-index-linked bonds or real bonds become universally accepted in sovereign debt-management strategies, even though real assets figure prominently on most sovereign countries' balance sheets? Arguments for and against index-linked bonds, and suggestions as to why the private sector and many governments have been reticent to issue these securities, can be found in Managing Public Debt.
This book comprises a collection of nine papers presented at an international conference on "Index-Linked Bonds in Theory and Practice," which was held in Rome in October 1995. One group of contributors discusses the theoretical case for price-index-linked bonds, including whether these instruments have any role in macroeconomic hedging in the face of various types of exogenous shocks. These authors are strong advocates of index-linked bonds. Inevitably, given the makeup of the book, many of the arguments are repeated. A second group of papers explores whether price-index-linked bonds have lowered debt-servicing costs in individual countries. While most of the authors in this group conclude that this has been the case, measurement difficulties—particularly with respect to quantifying risk premiums—can be considerable. Conceptually, the challenge is much simpler. An issuer will achieve lower debt-servicing costs through price-index-linked bonds if inflation turns out to be lower than what investors had originally priced into nominal bonds—assuming that these represented the alternative financing mechanism. Putting aside the question of possible differences in tax treatment, investors will be prepared to accept lower real returns on price-index-linked bonds than those expected on nominal bonds when the lower real yield investors are prepared to accept for inflation certainty more than offsets the additional return required to compensate them for the relative illiquidity of these instruments.
This trade-off has encouraged some advocates of price-index-linked bonds to suggest that if a government believes that financial markets are underestimating its resolve to maintain price stability, then issuing these securities will lower its debt-servicing costs. Governments, however, change regularly and tend not to have superior information about the medium- or long-term paths of inflation. It is perhaps not surprising that some of the strongest advocates of these instruments are the more independent central banks—such as the U.S. Federal Reserve, the Bank of England, and the Reserve Bank of New Zealand—that are arguably confident of retaining independence and maintaining price stability or low and stable rates of inflation. These institutions feel that issuing such instruments provides a signal that can further strengthen their credibility in pursuing anti-inflation objectives.
While many sovereign debt managers will find Managing Public Debtvery useful, it is unfortunate that the book does not deal more comprehensively with the practical issues that confront managers. Issuers of price-index-linked bonds confront considerable challenges in designing and introducing these instruments. Given that index-linked bonds are not risk-free instruments, how does the interplay of taxation and inflation affect overall investor returns? What is the best way to sell these bonds? Should they be tapped, or should they be auctioned through discriminatory price or uniform price auctions? Is it necessary to use primary dealers? How does one establish critical mass for these instruments, given the reticence of the funds management industry to establish separate asset classes and benchmarks? How can governments best assist secondary trading in these instruments? How can a sovereign-debt-management agency protect itself from a central bank that might wish to see reservation prices exercised in auctions in an attempt to signal information on real interest rates and inflation expectations?
More discussion on these types of practical issues would have enhanced the book's value for sovereign liability managers who, after all, usually manage the largest liability portfolio in each country and carry the government's reputation in financial markets.
Louis W. Pauly
Who Elected the Bankers?
Surveillance and Control in the World Economy
Cornell University Press, Ithaca, New York, 1997, xiv + 184 pp., $25.00 (cloth).
Under the catchy title Who Elected the Bankers? Louis W. Pauly traces the evolution of international monetary arrangements since the 1920s, with emphasis on the development of mechanisms for coping with what he sees as the inevitable tension between the logic of increasingly integrated global markets and the politics of sovereign states. In so doing, he focuses the book on the role of the IMF, which he views as symbolizing today's machinery of economic policy coordination and crisis management. Certainly, its nearly global membership, legal mandate, and significant financial resources place the IMF at the center of the mechanisms for multilateral oversight of the actions of states that, though politically independent, accept accountability for the external implications of their economic policy decisions. The reader interested in the evolution of the international monetary system in the postwar period will find in Pauly's book a very readable description, and an often insightful interpretation, of events, supported by detailed notes and references.
Pauly argues that the IMF's work was foreshadowed in that of the League of Nations. Indeed, even in the absence of a legal foundation and without any lending capacity of its own, the League was involved in restoring the financial position of several countries in Central Europe in the 1920s through the design and monitoring of stabilization programs that in many ways presaged the IMF's application of conditionality. Pauly's case for the view that the League prefigured more generally the surveillance work of the IMF is less compelling, however. To be sure, a succession of international economic conferences, some sponsored by the League, sought to establish a broad consensus on the appropriate principles to guide national policies, and, in Pauly's view, the seeds of multilateral economic oversight were sown in the Brussels conference of 1920. But the fact is that—in the divided political world of the interwar years—these seeds did not take root. With the Great Depression in full swing, the London World Economic Conference of 1933 ended in disarray, as governments—led by the United States, which had just abandoned the gold standard—moved in directions contrary to the recommendations of the experts. The most significant cooperative initiative in the remainder of the 1930s—the tripartite agreement of 1936 between the United States, the United Kingdom, and France, to which Belgium, the Netherlands, and Switzerland also adhered—is not even mentioned. Pauly emphasizes, instead, the League's technical analysis, which was conducted by both its secretariat and outside experts. For all its excellence, however, this work can hardly be defined as an exercise in surveillance. The plain fact is that the League did not do surveillance because governments were not ready to undergo it and the League lacked organs where agreement on financial matters could be reached.
Who Elected the Bankers? goes on to describe the negotiations leading to the creation of the Bretton Woods institutions and the subsequent evolution of the IMF. Pauly traces the origin of IMF surveillance to the consultations with countries that initially availed themselves of the transitory arrangements of Article XIV of the IMF's Articles of Agreement. He explains both how the annual consultation process was extended to all members in the early 1960s and how—following the breakdown of the par value system—the second amendment of the Articles formally enshrined in 1978 the surveillance role of the IMF in the new Article IV. That role has been enhanced further by events of the past two decades, including the increasing acceptance of market principles by developing countries and the demise of central planning, which have increased the scope for consensus among countries on economic policies and aims. The way was thus opened for the current efforts to codify "best practices," which provide standards against which countries' actions can be assessed.
The book's historical coverage ends with the IMF's response to the Mexican crisis of 1994–95. As lessons are beginning to be drawn from the Asian crisis, another chapter in the annals of surveillance is being drafted, with greater attention being paid to the soundness of financial systems and capital account issues. The crises of the 1990s have been quite properly defined as capital account crises, which ties in with Pauly's view that international surveillance is needed to reconcile the requirements of freedom of capital movements with those of legitimate governments. Indeed, the IMF's role in the process of capital liberalization is currently the focus of the debate on an amendment to the Articles to extend the IMF's jurisdiction over the capital account.
Pauly may go too far, however, in arguing that the expansion of international capital markets has raised significant legitimacy issues for states. Free capital movements certainly limit governments' freedom of action, but since worldwide prosperity is not a zero-sum game and capital liberalization, with adequate safeguards, is welfare enhancing, the tension between the two imperatives need not be insurmountable. There is certainly much evidence of this tension around the world, in both industrial and developing countries, but there are also examples of governments rising to the challenge. It would be too pessimistic to assume that governments subject to the electoral process cannot take the high road.
Joaquín Ferrán
IMF AND THE WORLD ECONOMY
Three Ways to Unlock Strong, Stable, Balanced Growth
IMF Survey online
July 26, 2011
- Global recovery set to post reasonable near-term growth but remains unbalanced
- Essential that eurozone, U.S. debt problems be addressed quickly
- Middle East events show effects of socially imbalanced growth on politics
Three major challenges—sovereign debt, growth, and social instability—currently confront the world economy, IMF Managing Director Christine Lagarde told a New York City audience.
These challenges are intimately intertwined, and only by solving all three can the world unlock strong, stable, and balanced global growth, she said.
In a July 26 speech at the Council on Foreign Relations, Lagarde stressed that for sovereign debt to be sustainable, economic growth needs to be strong, but in a sustainable way. "And for economic growth to be sustainable, it needs to deliver the stable social chemistry that holds societies together."
On sovereign debt, Lagarde said fiscal problems in the periphery of Europe had revealed the risks posed by an incomplete economic and monetary union. She noted that eurozone leaders had reached an important agreement, including a commitment to finance program countries until they can regain market access, as long as those programs are implemented effectively. This means that for Greece and other program countries the main priority is "implementation, implementation, implementation."
"The agreement shows that European leaders believe in the eurozone, and will do what it takes to secure its destiny," Lagarde said. "It has been welcomed by financial markets, as reflected in the stronger euro and lower peripheral bond spreads. But turbulence could easily resurface. For this reason, it is essential that the summit's commitments should be implemented quickly."
Lagarde said she hoped for bold fiscal action in the United States. "On the debt ceiling, the clock is ticking, and clearly the issue needs to be resolved immediately. Indeed, an adverse fiscal shock in the United States could have serious spillovers on the rest of the world. But more fundamentally, a credible fiscal adjustment plan is needed sooner rather than later." The less urgent situation in Japan also needed ambitious measures to deal with the very high level of public debt, she said.
Unbalanced recovery
On growth, Lagarde said the global recovery is set to post reasonable near-term growth but remains unbalanced, with signs of overheating in emerging economies, surging commodity prices hitting low-income countries, and deep and long-lasting crisis effects in advanced economies.
"Boosting growth in these economies is no small task. And the goal can't simply be any growth—we need the right kind of growth, that creates jobs and lifts people across the socioeconomic spectrum," Lagarde said.
On social instability, Lagarde said events in the Middle East and North Africa had shown how socially imbalanced growth contributed to the political upheaval. In many emerging and developing economies, rising commodity prices were exacerbating social problems associated with high joblessness.
"Social problems are of major concern to advanced economies too," Lagarde stated. "The young in particular are having a hard time finding work—with potentially lifelong implications in terms of employability and income. At the same time, the older generations are fighting to protect their health and pension benefits."
These trends raised the prospect of intergenerational conflict, Lagarde observed. "This is why focusing on the right kind of growth is so important."
An even more effective IMF
The IMF had been an intellectual leader during the global economic crisis, with its early call for coordinated policy stimulus, Lagarde stated. "It has been a flexible financial partner, reforming its lending instruments and making available a record amount of support, totaling about $330 billion. And it is helping build a stronger global economy, through its policy advice and technical assistance efforts."
But the IMF had to adapt to the changing needs of its members, Lagarde stated. She set out four organizing principles for an IMF that is even more effective, noting that they each begin with the letter C.
• The IMF must be client focused, preserving the stability of arguably its most important client, the international monetary system. But member countries are also the IMF's clients. "And so by focusing on the policies needed to stabilize the system as a whole, the IMF can help its members find the policies best suited to deliver strong and stable growth over the long run," Lagarde said.
• The IMF must understand better the connections both between and within countries. IMF staff are just completing a study of how policies in the world's five most systemically important economies—China, the euro area, Japan, the United Kingdom, and the United States, affect stability in others. Within countries, the IMF must better understand connections such as macrofinancial linkages.
• The IMF must be comprehensive. "When evaluating the strength of an economy, we need to look beyond the standard economic and financial criteria to make sure that we don't miss other factors—such as social concerns, or political economy issues—that may threaten macroeconomic stability," Lagarde said.
• The IMF must be credible in how it works and how it is governed. "All countries should get fair treatment from the IMF—fair in listening to their views, fair in evaluating their policies, and fair in reporting them to the world," Lagarde said. Credibility of the IMF's governance is also essential for the institution to be effective. "For too long, the IMF's voting structure reflected the economic realities of bygone days. But this is changing." Last year, Lagarde noted, IMF members agreed to boost the voting power of the world's fastest-growing economies.
http://www.imf.org/external/pubs/ft/survey/so/2011/NEW072611A.htm
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