Magic Realism of Indiscriminate Industrialisation : Growth Means Consumer Durables and Capital Goods as Nano Dream Meets Dead End in Singur , Tata Seeks Another Slot and Gandhigiri Fails Miserably
Troubled Galaxy Destroyed Dreams: Chapter 64
Palash Biswas
Rediff | Misery and death on West Bengal's tea estatesRediff, India - 12 Sep 2008If you drive 100 km due east from the dusty, overpopulated town of Siliguri, located in the scrawny chicken's neck of northern West Bengal, a three-hour ... | India begins talks with US companies NEW DELHI, Sept. 11: With the NSG having given India a waiver to have nuclear commerce, the government has begun the exercise of finalising bilateral agreement with friendly countries like France and Russia though it would become operational only after the US Congress approves the 123 Agreement, said an official spokesman. "There had been growing public interest in developments regarding civil nuclear initiative and therefore this exercise has been undertaken "following the NSG statement which enables civil nuclear cooperation by NSG members with India," he said. n SNS | http://www.thestatesman.net/page.news.php?clid=1&theme=&usrsess=1&id=222194 Ration Riot in Hegemony Polity ruled by Regemented Gestapo in West ... The indiscriminate industrialisation and urbanisation drive by Hegemony Polity ..... Some questions about agrarian structure in contemporary India - Blog ...indiainteracts.com/members/2007/.../Ration-Riot-in-Hegemony-Polity-ruled-by-Regemented-Gestapo-in-West-Bengal... - 101k - Cached - Similar pages - Note this |
With talks to resolve the the Singur deadlock failing to make any headway, Governor Gopalkrishna Gandhi stepped in for the second time today saying a solution can still be found and asked all sides to show a "spirit of accomodation". "I believe, given the will, a solution can still be found in a manner that accords with the law, safeguards the interests of farmers, of the small car factory and, going beyond, help in establishing the farm-factory balance that we so vitally need," he said.
The Governor's fresh bid comes a day after West Bengal Chief Minister Buddhadeb Bhattacharjee's efforts to resolve the Singur tangle failed to make any breakthrough.
America tried a surveillance system as custodian to classified information to save President Ronald Reagan during Water Gate Era. The technology is back with Boom to kill whatsoever democratic space created by Information Explosion and Internet. Sting Operations may be nullified now. Swiss Bank Accounts details may save sanctity as well! RTI could be irrelevant! We never know whether Indian Ruling Hegemony is going to try it as NSG agreement denies India the supply of sensitive technology!Industrialisation has been championed by economists as a way to pull millions out of poverty. But across India, land for factories have turned into battleground!India's industrialisation strategy has come under the spotlight.There has also been violence in Orissa state over South Korean steel giant POSCO's plans for $12 billion steel plant, and clashes over plans for other Special Economic Zones, a part of the big push for industrial expansion.The fight at Tata's $350 million Singur plants is now being projected as a test case for India's industrialisation.The challenge to balancing industrial growth with the needs of farmers is in giving displaced farmers new skills and sources of revenue, economists say.Whatever the outcome of the Singur battle, industry groups say India desperately needs fast industrialisation to create more jobs for its population of more than 1.1 billion.indiscriminate industrialisation, dumping of hazardous industries that were. and are being phased out of Europe and the US, in Gujarat and all over.
While supporting the Magic realism of Indiscriminate Industrialisation defending Ruling Hegemony interests intact, it is the logic of mainstream Media as well as Economists that Going by the volume and intensity of India Inc's support for Ratan Tata, West Bengal would be in deep trouble if the Nano doesn't drive out of Singur! With the talks between West Bengal Chief Minister Buddadeb Bhattacharjee and Trinamool Congress chief Mamata Banerjee failing to make any headway, Governor Gopalkrishna Gandhi on Saturday called for a "spirit of accommodation" that was evident during the talks he presided over to break the Singur deadlock. While,Trinamool Congress chief Mamata Banerjee lashed out at West Bengal government on Saturday alleging that it broke the terms of agreement with her party, leading to the Singur standoff. She alleged that Chief Minister is taking all the decisions on his own without consulting Trinamool Congress. Finally, it appears like it's curtains at Singur. At the end of the late-night talks between West Bengal chief minister Buddhadeb Bhattacharjee and Trinamool Congress leader Mamata Banerjee on Friday, it was finally a dead end. Mamata Banerjee may be gunning for 300 acres inside the complex, but the Nano vendors are determined to spoil her party. Homegrown auto major Tata Motors has convened an annual meeting of its vendors in Mumbai on October 16, but the company said it is not related to the Singur issue.
The Marxist state government in West Begal, which in the past had opposed industrialisation, wooed the Tatas to set up the plant to create jobs in the desperately poor state.
Tata Motors, in turn, "came to West Bengal hoping we could add value, prosperity and create job opportunities in the communities in the state," a Tata spokesman said.
Tata Motors has said it could have built the Nano plant in other parts of India with better infrastructure, but wanted to develop under-industrialised West Bengal "as our gift."
What Industrialisation means in India noadays? Auto Hype, Chemicals, Construction, Banks, Retail Chain, SEZ, Nuclear parks, Infrastructure, IT, entertainment, Realty an so on! Highly dependent on Plastic money and Sensex related Public Issues targeting the Resurgent Middle Class and rural sector to expand the Consumer market.Magic Realism of Industrialisation sustains with a Big Bang of Consumer durables and capital goods particularly during this Festival Season all over this diveded geopolitics bleeding!
Meanwhile, BJP opts for the best Super Highway of US Corporate Interests , the age old Hindutva Road! Amarnath Shrine Land dispute was the first sign. now RSS demands to divide Jammu and kashmir. Nuke Deal has rescued US Economy struck with sub prime crisis and recession now the Zionist Weapon Economy depends on strategic re alliance most to wage War and Civil War across political borders. 9/11 tremors and War against Terrorism gets newer dimensions with serial blasts in India. Bangalore, Ahmadabad and now New Delhi blasts justify the US unilateral Military interference in Pakistan. Big shopping in Washington may just be justified with a full scale War! Now see, Hindutva forces puts the issue of rehabilitation of kashmiri Pundits along with the demands of nationalisation of entire Amarnath route!
The main drivers of industrial growth, as measured by the Index of Industrial Production (IIP), were capital goods and consumer goods. The manufacturing sector, which has a weight of 79.4% in IIP, grew 7.5% in July 2008 against 5.9% in June 2008 but lower than 8.8% in July last year. Buoyancy in the production of consumer durables and capital goods helped industrial growth bounce back to 7.1% in July, from 5.4% in the previous month. However, the rebound was not enough to prevent slower industrial growth of 5.7% during the first four months of 2008-09 compared with 9.7% in the corresponding period last year. Slower industrial production growth indicates that economic expansion is moderating due to the Reserve Bank's tight monetary policy. In view of strong growth in consumer goods and 12.1% inflation, economists expect interest rates to harden further.
Setting the stage for fast track approval of the 123 Agreement by the US Congress, the Senate will take it up for hearing on Thursday with both sides hoping to wrap up the Indo-US nuclear deal during Prime Minister Manmohan Singh's visit here on September 25. Under Secretary of State for Political Affairs William Burns will testify on Capitol Hill before the Senate Foreign Relations Committee headed by Chairman Joseph Biden, who is also the Democratic Vice Presidential nominee, during the hearing on September 18.
The Centre for Monitoring Indian Economy (CMIE) data reveals that in case of outstanding investment proposals too, West Bengal has seen a quantum jump. The state has, for instance, registered a 76 per cent growth for 2007-08, to Rs 4,77,370 crore worth of outstanding proposals. In manufacturing alone, investments have risen sharply from Rs 96,810 crore in 2006-07 to Rs 1,94,032 crore in 2007-08. "Unlike the late '90s, when many of the proposed projects fell through, since 2004-05 there has been almost zero dropping of projects," says Mahesh Vyas, CEO, CMIE. While it's hard to say how many planned projects will fructify finally, it can be safely assumed that West Bengal isn't doing too badly.
Of course, the haste to push through industrialisation has its costs. It is not just the aggrieved displaced farmers in Nandigram and Singur who have joined forces with opposition leaders in voicing protests about the lack of adequate rehabilitation packages, or alternate livelihood. The discontent in this populated state has already found political reflection in the local panchayat elections earlier this year, with the ruling CPI(M) faring poorly.
"Through the Singur discussions on September 5, 6 and 7, I saw earnest participants showing a rare spirit of accommodation. That spirit needs to be operationalised," a Raj Bhavan release said.
Gandhi said, "Reason can be reasonable; passion dispassionate. I believe, given the will, a solution can still be found in a manner that accords with the law, safeguards the interests of farmers, of the small car factory and, going beyond, help in establishing the farm-factory balance that we so vitally need."
Invoking Rabindranath Tagore, the Governor said, "Jiban jakhan shukai jai koruna dharai esho (when the heart is hard and parched up, come upon me with a shower of mercy."
The Chief Minister had offered 70 acres in lieu of the Tata Motors project site at Singur to "unwilling farmers" and monetary compensation to those whose land fell outside, but was rejected by Mamata Banerjee at a face-to-face meeting with him on Friday evening. The agreements of September 7 did mention the fact that 'maximum' land from inside the project area would be given back. There were, however, no numbers quoted officially in the agreement.
Mamata Banerjee had, subsequently, broadcast the 300-acre figure loudly. Whether the CM had agreed to giving 300 acres from inside the project area even unofficially, will never be known.
Tata Motors is all set to manufacture 1,000 Nanos at its Pune plant. The vendors have released their last lot of components for Nano on Thursday, which will be delivered to Pune within a day or two.
Mamata said, "West Bengal government doesn't respect us. It has broken the terms of agreement. We are not ready for any more talks."
"We will announce a final decision on September 19," Mamata said.
The Trinamool chief called for 'march to Singur' on September 16 and threatened agitational programme after September 19.
Mamata's statement has come barely hours after Governor Gopalkrishna Gandhi called for a "spirit of accommodation" that was evident during the talks he presided over to break the Singur deadlock.
Mamata did not budge from her stand that the West Bengal government should honour the agreement it had signed for giving up 300 acres inside the Nano complex. Buddhadeb could not go more than 70 acres, because he said the Tatas wouldn't agree to it.
Reports coming in from the CM's office indicate that a formal letter would now go on behalf of the state government to the Tatas, saying that all efforts to break the stalemate have failed, and that it can do no more. The onus will then be on the Tatas to do whatever it wants to do. Mamata Banerjee has started questioning the credibility of agreements to which the state government and chief minister were party.
"Tata Motors, which is keenly watching the developments at Singur, is getting itself ready to rollout Nano in October. If the Singur logjam is not resolved within a fortnight, then they have to make some arrangements to roll out Nano from any of its plants. As of now, this does not look to be a part of the much-speculated Plan B," Tata circles indicated.
Incidentally, Tata Motors had informed its 55-odd vendors of Nano to supply components for 1,000 Nanos by September 8 to the Pune factory. This was also confirmed by a leading vendor, who had invested in the Singur vendor park, and will be supplying sheet metal for Nano chassis.
Incidentally, nearly 3,000 components are required to manufacture a Nano. However, the vendors also feel that the Pune plant will not be able to meet the volumes that Tatas are looking at for Nano in the next two to three years time.
"Yes, the company (Tata Motors) has informed us about the meeting and we will attend it," one of the leading vendors of Tata Motors told reporters.
The meeting is a regular annual event and Singur may be a prominent point of discussion, he added.
When contacted, Tata Motors spokesperson confirmed the development and said: "We will have the annual vendors convention on October 16 and it is a routine yearly meet."
Asked if the meeting is meant to discuss the impasse regarding Nano project in West Bengal, he categorically denied saying: "This is not at all related with Singur issue and we are meeting as part of our regular meet with all stakeholders of Tata Motors, like dealers meet".
Land for vendors of the Nano car has become the major point of contention in West Bengal, where the main opposition Trinamool Congress has been demanding that they be set up away from the mother plant.
In the meantime, Tatas themselves are considering alternate options like manufacturing Nano from other facilities of the company, but it is not clear if the original vendors would move with them.
Tata Motors suspended work at Singur late last month after its employees were intimidated by protesters.
Economic times reports:
Tata Motors is on the lookout for a new location to house the main manufacturing facility for its Rs 1 lakh car Nano. According to sources in the automobile industry , while the fortnight-long work suspension at Singur continues, the company is scouting for a new piece of land preferably somewhere in central or south India.
The company feels it cannot pull out of Singur entirely, because of the emotional and financial involvement at that site. But increasingly, Singur is being looked at as a satellite plant option along with Pune and Pantnagar. Tata Motors component suppliers say the company is toying with Madhya Pradesh (Indore being a favourite) or Gujarat or down South (Chennai being a favourite) as a possible location for the new mother facility. Pune in the west, Pantnagar in the North and Singur in the East could end up being the three regional manufacturing sites.
As the company gears up for the promised Diwali launch of the Nano, the vendors have been told to supply "anywhere" and the production targets have been cut to 10,000 from the earlier 60,000, say industry sources. The Nano will likely be available in fewer variants and colours and will probably be up for test drives in most markets before becoming available for retail sales countrywide.
At the production end, Tata Motors has decided to have five plants including one mother facility which will support four satellite plants where the car will be assembled from CKD kits. "The company may shift the mother plant (from Singur) to the closest possible location, which will also serve as the main production hub for the Nano. While Singur is a remote possibility now, the company is likely to freeze its plans in central India or down south soon," said a Delhi-based Nano vendor.
http://economictimes.indiatimes.com/News/News_By_Industry/Auto/Automobiles/Tatas_eye_new_mother_house_for_Nano/articleshow/3478592.cms
Tatas get court gag on car agreement |
OUR LEGAL REPORTER |
Calcutta, Sept. 12: Calcutta High Court today restrained the state government and the West Bengal Industrial Development Corporation from making public the agreement signed with Tata Motors on the Singur project. "The stay will be operative for 15 days and the case will come up for hearing on September 19," Justice Dipankar Dutta said in an interim order on a Tata Motors petition. The company demanded the stay after the WBIDC posted the text of the agreement on its website on a direction from the state information commission, which had received a Right to Information (RTI) Act plea for such disclosure. Section 11(1) of the act, however, says that when a third party — other than the RTI petitioner and the government — is involved, a submission from it is needed before any information can be revealed, said legal expert Satadal Chatterjee, who specialises on the RTI Act. The legal action by the Tatas, the third party in this instance, suggests they were not consulted before the text was made public. There was, however, no confirmation from either side. Tata Motors lawyer Samaraditya Pal argued before the court that the state information commission had violated the RTI Act by asking the state to display the agreement. "According to the act, my client has the right to keep the agreement secret because it is related with its trade," Pal said. Other than the state information commissioner, the state government and the WBIDC have been made respondents in the case. Pal said: "The agreement was signed on March 9, 2007. It was decided the copy of the agreement would not be made public. But the state information commission, in an order dated September 8, asked the government to display the agreement." The court asked the lawyer what good it would do to have the text withdrawn now, since it had already been on display. Pal replied that the WBIDC had not displayed the "secret part" of the agreement yet. "But it is our apprehension that this part of the agreement will be displayed, too." Industries secretary Sabyasachi Sen said he was not aware of the court order. The government had read out the agreement to a House standing committee on August 27. Industries minister Nirupam Sen had then said a copy could not be handed over without the Tatas' consent. "According to the RTI Act, a document where a third party is involved can't be made public without their consent," Sen had said. The RTI petition was moved by Amitava Chowdhury, a Calcutta resident. |
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Tatas get court gag on car agreement | Calcutta High Court today restrained the state government and the West Bengal Industrial Development Corporation from making public the agreement signed with Tata Motors ... | Read.. | |
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Meanwhile, the US remained silent over the controversy in India triggered by President George W Bush's assertions that nuclear fuel supply assurances to New Delhi were only political commitments and not legally binding.
"It's a letter from the President to the Congress, I'll refer you over to the White House for an answer," State Department spokesman Sean McCormack said on Friday when queried about Bush's communication to the US Congress on nuclear fuel supplies issue that has kicked up dust in India.
"...We've had good discussions with the Indian government on this matter, the 123 agreement, as well as a number of other issues. And we're going to be providing quite a bit of information there. We have to the US Congress. And there's going to be testimony during that process. I'll let that testimony and the information that we've provided the Congress speak for itself," McCormack maintained.
In his message transmitting the 123 agreement to the US Congress for its approval, Bush had said " In Article 5(6), the Agreement records certain political commitments concerning reliable supply of the nuclear fuel given to India. The agreement does not, however, transorm these political commitments into legally binding commitments because the Agreement, like other US agreements of its type, is intended as a framerwork agreement."
"If President Bush sends a letter, a cover letter on the deal, and says something, is that binding on the deal? Like, does it hold?" the spokesman was asked.
"It's all a matter of the public record," he replied. Asked if the administration had a target date for ratification of the nuclear deal, he said "we'd like it as soon as possible".
With the Indo-US nuclear deal waiting to get the Congress approval, the State Department has said the initiative will help meet India's growing energy requirements and strengthen the non-proliferation regime by welcoming India into internationally accepted nonproliferation standards and practices.
Issuing a fact sheet on the civilian nuclear initiative, the Bureau of South and Central Asian Affairs also expressed hope to get the deal approved by the US Congress.
"This initiative establishes a firm foundation for additional nonproliferation and counter proliferation cooperation, areas we fully intend to advance through the course of our strategic partnership," the State Department said.
"Congressional approval would be the culmination of an unprecedented three-year effort by the US and India, in a way that deepens our strategic partnership and strengthens global nonproliferation principals while providing trade and investment opportunities that will assist India to meet its energy requirements in an environmentally responsible way," it said.
Calling the decision of the IAEA of August 1 and that of the NSG of September 6 as 'historic events' the State Department has said that these events 'have welcomed India into the nonproliferation regimes and formed a firm foundation for the US and India to strengthen our efforts in the future to prevent WMD proliferation and to combat terrorism'.
On home front , kashmir Conflict takes a dangerous twist as the Mainstream hindutva force RSS demands to divide Jammu and Kashmir!
Firmly ruling out any division of Jammu and Kashmir, Congress President Sonia Gandhi said on Saturday that there was no question of pandering to separatists.
"I unequivocally reject the notion of a further division of Jammu and Kashmir which has been advocated by the RSS. There is also no question of pandering to or being soft on the separatists," she said in her address at the meeting of the Congress Working Committee here.
"Let me categorically state that the people of all regions of Jammu and Kashmir are part of India. If any section feels alienated, it is incumbent upon us to deal with it most sensitively," Gandhi said.
Expressing hope that the recent settlement on the Amarnath land row would lead to return of peace in the state, she said it was a matter of "deep anguish" that the earlier normalcy and peaceful situation should have taken "such a painful turn".
Gandhi said there had been a marked improvement and development in the state in recent years and the Prime Minister's Reconstruction Package and programmes and initiatives at the state level "were making a decisive impact."
"Normalcy had returned, a fact borne by the strong revival in tourism, for instance," she said.
Fuel supply not legally binding: Bush
13 Sep, 2008, 0216 hrs IST, ET Bureau
NEW DELHI: In what could give credence to the charge that the original terms of the Indo-US nuclear deal have changed, US President George Bush, in a letter, has made it clear to the US Congress that the fuel supply assurances given to India, in the eventuality of a nuke test, are not legally binding on America.
"In Article 5(6) the Agreement records certain political commitments concerning reliable supply of nuclear fuel given to India. The Agreement does not, however, transform these political commitments into legally binding commitments because the Agreement, like other US agreements of its type, is intended as a framework agreement," said President Bush.
The critics of the deal said it was a vindication of their positions. BJP leader Arun Shourie as well as strategic experts like Brahma Chellaney have been maintaining that just as the Hyde Act bars the transfer of civil reprocessing, enrichment and heavy-water technologies or equipment to India, except for a multinational or US-supervised facility, the NSG waiver, too, is based on an understanding against exports of similar technologies to India.
"That is no surprise in view of the Hyde Act? Section 103(a)(5) asking the administration to do the following: Given the special sensitivity of equipment and technologies related to the enrichment of uranium, the reprocessing of spent nuclear fuel, and the production of heavy water, work with members of the NSG, individually and collectively, to further restrict the transfers of such equipment and technologies, including to India. Such restrictions, however, flout the July 18, 2005, US commitment to adjust US laws and policies, and work with friends and allies to adjust international regimes to enable full civil nuclear energy cooperation and trade with India," said Mr Chellaney.
In Washington, US officials still maintained that the deal was "fully consistent" with the requirements set out by the Congress. "We have presented a very strong package fully consistent with the requirements that the Congress set out," assistant secretary of State for South and Central Asian Affairs Richard Boucher said.
"We understand how tight the Congressional calendar is this fall. But we look forward to continuing with Congress on the initiative and we hope the legislation can be passed before Congress adjourns for the year," he added.
The Congress, which opened on September 8, will be in session till September 26. It is, therefore, being asked by administration to do away with the mandatory 30-day period before it can take up the Agreement for a simple yes-no vote without a debate. Mr Boucher also said that the agreement, which enjoyed great support at the Capitol Hill, is likely to generate a fair amount of discussion and a lot of questions in the House.
Meanwhile, welcoming the "substantial" submission made to the Congress on the US-India civilian nuclear agreement, Speaker of the House of Representatives Nancy Pelosi hoped that the Congress will waive the 30-day rule for the legislation to be considered. "...the submission we received last night — and it's very — it's quite substantial. It will require a waiver of our rules, because you need 30 consecutive legislative days to pass before you could take up such legislation," reports quoting Pelosi said.
http://economictimes.indiatimes.com/PoliticsNation/Fuel_supply_not_legally_binding_Bush/articleshow/3477891.cms
Industrialisation In India
Jana Hambrock and Sebastian Hauptmann - Socrates
The development of India into a modern industrialised country is a slow but continuing process. Jana Hambrock and Sebastian Hauptmann provide a detailed analysis of the Indian economy, referring to its historical and theoretical context, as well as to its future prospects. |
Introduction
To discuss the topic "The Indian approach to industrialisation", this essay is divided into several parts. Firstly, the reasons for, and policies of industrialisation are discussed. The theoretical framework is finished by identifying indicators to be used in the evaluation of the success of such policies. The second section gives a rough overview of the development of industrialisation in India since independence. The third section goes into more detail and provides information about some specific and important areas for industrialisation. The fourth section uses the defined indicators to measure the success of India's two main approaches to industrialisation and evaluates the results. The fifth section describes the main problems India faces today and in the future. Last but not least, the sixth section informs about current trends in Indian policy.
Theoretical Framework for Industrialisation
Before analysing the Indian approach, we want to introduce the aims of industrialisation, give a rough overview of the industrialisation strategies for Less Developed Countries (LDCs) and identify indicators for the evaluation of the success of industrialisation policies.
Why Industrialisation?
What are the ultimate objectives of economic development? Different governments may have different objectives in mind. Generally, however, they will include a faster growth of national income, alleviation of poverty, and reduction of income inequalities.
But how is industrialisation expected to contribute to these goals? The experience of industrial economies shows a close association between development and industrial expansion. But industry is also thought to provide certain spillovers which would benefit other activities: enhancement of skills, training of managers, dispersion of technology, etc. Moreover, pessimism about the prospects of food and raw materials made the substitution of domestic for imported manufactured goods seem the most promising route to development for many countries.
Industrialisation and foreign trade
Economists and policymakers in the developing countries have long agreed on the role of government in providing infrastructure and maintaining stable macroeconomic policies. But they have disagreed on policies toward trade and industry. The form of government intervention in this area is the distinguishing feature of alternative development strategies.
A convenient and instructive way to approach the complex issues of appropriate trade policies for development is to set these specific policies in the context of a broader Less Developed Countries strategy of looking outward or inward. Outward-looking development policies encourage not only free trade but also the free movement of capital, workers, enterprises, the multinational enterprise, and an open system of communications. By contrast, inward-looking development policies stress the need for LDCs to evolve their own styles of development and to control their own destiny. Within these two broad philosophical approaches to development, a lively debate has been carried out between the free traders, who advocate outward-looking export promotion strategies of industrialisation, and the protectionists, who are proponents of inward-looking import substitution strategies .
The advocates of import substitution (IS) – the protectionists – believe that LDCs should substitute domestic production of previously imported simple consumer goods and extend this later to a wider range of more sophisticated manufactured items – all behind the protection of high tariffs and quotas on imports. In the long run, IS advocates cite the benefits of greater domestic industrial diversification and the ultimate ability to export previously protected manufactured goods, as economies of scale, low labour costs, and the positive externalities of learning by doing cause domestic prices to become more competitive with world prices.
By contrast, advocates of export promotion (EP) of both primary and manufactured goods cite the efficiency and growth benefits of free trade and competition, the importance of substituting large world markets for narrow domestic markets, the distorting price and cost effects of protection, and the tremendous success of the East Asian export-oriented economies of South Korea, Singapore, and Hong Kong .
The balance of the debate has swung back and forth, with the protectionists predominating in the 1950s and 1960s, and the export promoters gaining the upper hand in the late 1970s and in the 1980s and 1990s, especially among Western and World Bank economists.
Indicators for measuring economic development
Of course, any development policy has to be assessed by measuring the economic development it effects. India's first Prime Minister Jawaharlal Nehru declared on the eve of the departure of the British, on 14 August 1947, that India's task in the future included "the ending of poverty and ignorance and disease and inequality of opportunity".
These measures will be used to determine the success of the inward-looking policies he initiated, as well as to compare their success with the success of the reform policies. Therefore, growth of income per capita, alleviation of poverty and reduction of income inequalities are amongst the most important indicators.
To measure advances regarding inequality of opportunity and ignorance, several indicators pertaining to education and health will be used. These are two important public goods to which every individual is entitled; both for their intrinsic importance and for their enhancement of instrumental personal, social and process roles, and also empowerment and distributive roles.
History of Industrialisation in India
This section gives a rough overview of the history of industrialisation in India. Several areas will be discussed in more detail in the following section.
Colonial rule
Under colonial rule, India, as with most other developing countries, followed a non-industrial model. But many Indians believed that progress was retarded by this. It was believed that true economic progress lay in industrialisation; Smith's and Ricardo's ideas of international specialisation and mutually advantageous free trade were rejected, at least until India became an exporter of more sophisticated goods.
Industrialisation since Independence
India's first Prime Minister, Jawaharlal Nehru, Premier from 1947 to 1964, saw industrialisation as the key to alleviating poverty. Industrialisation not only promised self-sufficiency for his nation that had just regained political sovereignty, but also offered external economies accruing from technical progress. Believing the potential of agriculture and exports to be limited, Indian governments taxed agriculture by skewing the terms of trade against it and emphasising import substitution, thus giving priority to heavy industry.
Nehru believed a powerful state with a centralised planned economy to be essential if the country was to industrialise rapidly. The Industries (Development and Regulation) Act (IDRA) in 1951 laid the foundations for this administrative control on industrial capacity. But, over time, the licensing requirements became increasingly stringent and were accompanied by a gamut of procedures that required clearance by a number of disparate and uncoordinated ministries.
In order to pursue IS, the Import Trade Control Order of 1955 subjected almost all imports to quantitative restrictions in the form of import licenses. These were supplemented by tariffs at rates that were among the highest in the developing world.
Indian state intervention in industrial development has been extensive. Unlike many East Asian countries, which used state intervention to build strong private sector industries, India opted for state control over key industries. At different times, nationalised industries included chemicals, electric power, steel, transportation, life insurance, portions of the coal and textile industries, and banking. To promote these industries the government not only levied high tariffs and imposed import restrictions, but also subsidised the nationalised firms, directed investment funds to them, and controlled both land use and many prices.
Under Prime Minister Indhira Gandhi (1966-77), two major shifts took place in the role of the state. First, the neglect of agriculture was reversed through state activism in subsidising new seeds and fertilisers, agricultural credit, and rural electrification. The green revolution took off and by the mid-1970s India was self-sufficient in grain. The second shift was the further tightening of state control over every aspect of the economy. Banks were nationalised, trade was increasingly restricted, price controls were imposed on a wide range of products, and foreign investment was squeezed.
In 1973, dealings in foreign exchanges as well as foreign investment came to be regulated by the Foreign Exchange and Regulation Act (FERA). The act virtually shut out the inflow of new technology from abroad in the 1970s and 1980s, particularly when these involved large equity participation.
The Indian system of state planning went far beyond the usual inward-looking industrialisation policies that most developing countries pursued after World War II. The government regulated the most basic business decisions for all firms above a certain size: borrowing, investment, capacity utilisation, pricing and distribution.
The over-restrictive, and often self-defeating nature of the regulatory framework, began to become evident by the late 1960s and early 1970s. Comprehensive planning was increasingly criticised as planned targets were not met and many plans were not even implemented. The lack of success in some dimensions led to a new and more restrictive set of regulations. One example is the attempt to reserve sectors for small industries and to restrict the growth of large firms.
Beginning in the early 1980s, a mild trend towards deregulation started. Economic reforms were introduced, starting to liberalise trade, industrial and financial policies, while subsidies, tax concessions, and the depreciation of the currency improved export incentives. These measures helped GDP growth to accelerate to over 5% per year during the 1980s, compared to 3.5% during the 1970s, and reduced poverty more rapidly. However India's most fundamental structural problems were only partially addressed. Tariffs continued to be among the highest in the world, and quantitative restrictions remained pervasive.
Moreover, a significant government influence continued in the allocation of credit to firms and a discouragement of foreign investment. Relatively inefficient public enterprises, controlling nearly 20% of GDP, remained a drag on economic growth.
The government expanded antipoverty schemes, especially rural employment schemes, but only a small fraction of the rising subsidies actually reached the poor. Competition between political parties drove subsidies up at every election. The resulting fiscal deficits (8.4% of GDP in 1985) contributed to a rising current account deficit. India's foreign exchange reserves were virtually exhausted by mid-1991 when a new government headed by Narasimha Rao came to power.
In July 1991, India launched a second major economic reform program. The government committed itself to promoting a competitive economy that would be open to trade and foreign investment. Measures were introduced to reduce the government's influence in corporate investment decisions. Much of the industrial-licensing system was dismantled, and areas once closed to the private sector were opened up. These included electricity generation, areas of the oil industry, heavy industry, air transport, roads and some telecommunications. Foreign investment was suddenly welcomed.
Greater global integration was encouraged with a significant reduction in the use of import licenses and tariffs (down to 150% from 400%), an elimination of subsidies for exports, and the introduction of a foreign-exchange market. Since April 1992, there has been no need to obtain any license or permit to carry out import-export trade. As of April 1, 1993, trade is completely free, barring only a small list of imports and exports that are either regulated or banned. The WTO estimated an average import tariff of 71% in 1993 which has been reduced to 40% in 1995. With successive additional monetary reforms, the rupee, since 1995, can nearly be considered a fully convertible currency at market rates. India now has a much more open economy.
Special areas of economic policy
After giving a rough overview of the history of industrialisation, this chapter provides more detailed information about the areas of human factors for industrialisation, structure of foreign investment, and the process of privatisation.
Human Factors for industrialisation
A very necessary ingredient for promoting industrialisation and technological change is the investment in human capital. India's current average adult literacy rate is low at 52%. There are large inequalities between males (literacy: 64%) and females (literacy: 39%), between urban and rural areas, and between different social classes. Low levels of female education in India are due to the gender division of labour. Females are expected to spend most of their life in domestic work and child rearing. Secondly, the practice of dowry and the ideology of hypergamous marriage can turn female education into a liability. An educated girl is likely to be more expensive to marry off, thus female education tends to be a threat to the social order. Illiteracy is widespread not only in older groups, but also among young boys and girls, particularly in rural areas.
The remarkable neglect of elementary education in India is all the more striking given the widespread recognition, in the contemporary world, of the importance of basic education for economic development. Primary education in India is not compulsory. However those who receive primary education and make it through secondary school have an excellent chance of getting a high-class University education. India has a huge supply of people with more education than they can use.
Amartya Sen argued that there were deep-seated class biases in the pressures that have determined Indian educational priorities, and that the inequalities in education are, in fact, a reflection of the inequalities of economic and social powers of different groups in India. India's hierarchical, brahmin-dominated society has been noticeably casual about primary education; resources have been poured into the higher education that benefits the upper class.
The persistence of endemic illiteracy and educational background in India generally limits the freedom and well-being of the Indian masses and has a direct role in the relative deprivation of women in particular. Elementary education is extremely important for a successful integration in the world market and if the process of growth were more 'participatory' it could raise the income-earning power of large parts of the nation. Even if India's high technology industries, such as modern computer software or engineering products had an accelerated growth, the bulk of the Indian population would benefit only marginally.
Foreign Investment Policy Instruments
Since independence, new foreign investment has been rigidly controlled in line with established development thinking. Investment was mostly restricted to industries where it was felt that the acquisition of foreign technology was important, or where the promise of exports was convincing. The FERA was a landmark. In most industries, foreign shareholdings in rupee companies had to be reduced to 40%. The relative importance of foreign ownership in the private corporate sector fell significantly in the next decades. The attitude towards foreign investment began to change in 1985 as a part of Ghandi's drive for advanced technology. Despite this, looking at 1988 shows how poorly India fared in attracting private foreign investment. Net Private Foreign Investment to India (in million US$) was $280. This is compared to her Asian competitors with figures of $2344 (China), $1093 (Thailand) and $986 (Philippines).
Since the liberalisation in, mid-1991 India has become a magnet for foreign investment. A noteworthy feature is the dramatic speed of approvals, some taking only a week. Automatic approval of projects in 34 industrial sectors is permitted. The constraint that foreign investment should reach only 40% was relaxed to 51%. In certain sectors, such as infrastructure and computer software, the ownership can also be as high as 74%. In some sectors such as transport infrastructure, full foreign ownership is permitted and even encouraged.
Foreign direct investment rose from $170 million in 1991-92 to $1.3 billion in 1994-95. India is targeting foreign direct investment of at least $10 billion annually by the turn of the century. It attracted a total of $2.4 billion in 1996-97 and $3.4 billion in 1997-98. Foreign direct investment is nearly 25 times higher than it was before the economy was liberalised.
The government in New Delhi is continuing to work toward reforming long-standing policies to make the country more "investor friendly"; a move that continues to heighten US interest in the country. A growing number of US companies, motivated by an increasingly favourable investment climate and the country's huge reserves of both human and natural resources, have seriously begun to consider investing there. US investment has been more than 24% of the total investment since 1991. In 1995 approximately $3.5 billion of US foreign investment flowed into India.
The US continues to be the leading investor in India. The US is followed by other more 'traditional' investors like the U.K. (6.4%), Israel (5.9%), Mauritius (4.6%), Japan (4.2%) and Germany (4.1%). Most of the investment interest has been in the telecommunications, oil refining, automobile and transportation sectors, with other projects developing in the electronics, software and electrical equipment industries.
Revitalisation of the Indian Private Sector
India has always been a trading nation. Centuries of alien rule and decades of socialism did not stamp out the Indian entrepreneurial spirit. The Statement of Industrial Policy 1991 reduced the list of industries reserved for the public sector from 17 to 6. In 1992/93, 104 out of a total of 237 central public sector enterprises made losses. With few exceptions, the inefficiency of public enterprises, which generate 17% of GDP, has continued to be a serious issue. It is clear that there is a prima facie case for privatisation on grounds of efficiency. However, the strength of the case for privatisation varies with the type of industry.
Now exposed to international competition, Indian companies are forming alliances with each other to face the challenges of the future. It is now even possible for Indian firms to merge with other companies. Procter & Gamble merged its operations with Godrej Soaps. Coca Cola acquired Parle, its erstwhile competitor, thus extending the cola wars to new exotic lands. Companies are enjoying the benefits of economies of scale and synergy. As larger and stronger groups emerge, they will have the resources necessary to invest in upgrading technology and will become more competitive.
Evaluation of Industrialisation in India
The indicators named above will be used to evaluate the success of Indian industrialisation policies. A distinction will be made between the period from Independence until 1980, characterised by inward-looking policies such as IS, and the period from 1980 until today, characterised by reforms and the opening up of the Indian economy. The following analysis with indicators compares the achievements of these two periods only. Absolute statements of Indian achievements follow later on.
It must be emphasised that the analysed data conceals sharp disparities within India between development-oriented states and laggards, between women and men, between adults and children, and between city and countryside. Different states have progressed at differing paces and, even within states, different regions have achieved markedly varied results. Even more noticeable than geographic differences in poverty reduction are the inequalities that persist across gender, caste and ethnic groups. Social indicators for women – literacy, for example – are distinctly lower than for men, and the level of scheduled castes and tribes in both economic and social achievements is still well below the national average.
Growth of national income
Growth of national income in GNP per capita in India was about 1.4% in the years from 1960 to 1980. The effects of the reforms of the 1980s are reflected in growth figures: the average GNP per capita growth increased to 3.25%. And with further opening up in the 1990s, the GNP per capita reaches new heights with 3.8% average growth in the period from 1987 to 1997.
Alleviation of poverty
In the early 1950s, about half of India's population was living in poverty. Since then, poverty has been declining slowly. The poverty reduction was given new impetus by the reforms: falling from around 55% in 1974 to just under 35% in 1994 by a headcount index. In the 1980s and 1990s, poverty reached historically low levels. Still, because of India's rapid population growth rate, the relative reduction of poverty has not been sufficient to reduce the absolute number of poor which increased from about 164 million in 1951 to 312 million in 1993-94.
Reduction of income inequalities
The reduction of income inequalities has only made slight advances. The biggest advances were made mostly before the reforms. On the other hand, one of the biggest increases in inequality happened in the late 1970s, and the developments for the late 1980s / early 1990s in Figure 1 look promising. Compared to other low-income economies, the inequality is relatively low.
Education
From 1960 to 1977 the reduction of illiteracy was only 11%. From 1978 to 1995, it was 25%, thus much higher. Of course, there are also long-term developments involved here, so that the higher reduction in the second period might be partially due to actions taken in the first period.
Health
Life expectancy, used as an indicator of health, has increased constantly since independence. During the period from 1960 to 1980, it increased from 43 years to 52 years, which is an increase of 21% in 20 years. From 1980 to 1995 it grew to 62 years, which is a 19% increase in only 15 years. This means that the growth of this indicator has increased by a rate of 24% compared to the previous period.
Even clearer is the improvement in the reduction of infant mortality. This was reduced by 25% in the period 1960 to 1995 and a further reduction of 45% took place from 1980 to 1995. This is partially due to better education of mothers, as well as to an improved economic situation of parents.
Summary
Independence - 1980
The system of state planning constrained growth of the private sector by allowing it to expand only with government permission. But despite the massive interventions, economic progress was made during the period following independence. The per capita GDP grew at a respectable rate of 1.4% per annum from the late 1940s into the 1970s. Both famine and poverty were significantly reduced during this period. Nevertheless, most economists argued that the interventions lowered India's economic growth rates to a level which was not adequate for a country that saved and invested over one-fifth of its GDP. With few major producers of many key industrial products, the concentration of domestic production was very high, inviting monopolistic pricing. Moreover, as the world economy grew and as beneficial opportunities for growth through trade expanded, India paid an increasing price for its economic isolation.
The Indian system of state planning has been described as combining "the worst of socialism and capitalism, by suppressing growth while failing even to deliver the social welfare that communist systems provided".
1980 – mid-1990s
The liberalisation that started in the 1980s and gained further momentum in mid-1991 proved the critics of the old system right.
Per capita GNP reached historically high growth rates; industrial output-growth averaged 8.4% in 1994-95; exports were up by 27%; inflation dropped below 10%; the current account deficit is below 1% of GDP; foreign-exchange reserves are high at $20 billion; and food stocks have hit an all-time high of 37m tonnes.
The long neglected private sector today generates two-thirds of India's GDP. The World Bank describes the change of the state's role from that of principal investor to that of facilitator of entrepreneurship. Thus, over the course of a few years, the old national consensus on socialism has given way to a new consensus on liberalisation.
India – a perspective
It should not be forgotten, that despite all mentioned advances, India is still a low-income, developing country. It has an economy slightly smaller than Belgium's with a GNP per capita of $390. Only about half of its 960 million people can read. Only 14% of the population has access to clean sanitation - a lower proportion than anywhere else except for parts of Sudan and Burkina Faso. According to the World Bank, 63% of India's under-five-year olds are malnourished. The infant mortality rates of two Indian states is above the sub-Saharan average. About 40% of the world's desperately poor live in India.
India's progress in fighting poverty is modest when compared with some of its Asian neighbours. Between 1970 and 1993, the proportion of Indonesia's population living in poverty dropped from 58% to 8% – a greater decline in a shorter period of time. According to the World Bank,
"it is through rapid growth that India will be able to reduce poverty and generate the resources to invest in the health and education of its people who will in turn sustain this growth, [as] overall growth accounted for the lion's share of poverty reduction: 80% of the decline in the number of households below the poverty line between 1951 and 1970, and almost 100% since 1970".
But India, like many developing countries that adopted a philosophy of government intervention with import substitution policies, is finding that economic reform can often be a slow, incremental process. Complications continue. Domestic producers will resist tariff reductions that subject them to increased competition. Government bureaucrats will try to maintain the power and influence they acquired during periods of substantial government involvement in economic decision making. The reforms so far are a positive step but must be extended and accelerated if India is to catch up with the East Asian tigers.
It is not possible to condemn the inward-looking policies as totally wrong. Some advances were made and no one can say what would have happened if India had followed another strategy. In our opinion, the idea that industrialisation was important for India in the 1950s was right, as the share of commodities in world trade is constantly decreasing. However, the view that exports are not important and that India could go its own way was wrong. By protectionism and interventions, India fostered the establishment of industries. India didn't create an efficient private sector but a huge, inefficient public sector, and protectionism lowered the competitiveness of India's economy. Furthermore, the neglect of exports led to the fact that India's share of world trade decreased from 2% in 1950 to 0.5% in 1990.
In our opinion, India should have followed an EP-strategy as the Asian tigers did and shouldn't have created the system of state planning and such a large public sector; both of which led to huge inefficiencies. The success of the recent opening up of the economy illustrates the potential India has. Therefore, India should proceed in this direction to encourage further economic growth.
Still, economic growth alone is not enough. Amartya Sen emphasises that growth must be "high and participatory". But even today, India's "have-nots are treated virtually as are-nots" due to the caste-system and are neglected. Sen toured India in January 1999 to communicate his message that Indians are woefully underfed, undereducated and sickly, even by the standards of poor countries. The impact remains to be seen. India's biggest current problems will be covered in the following section.'
India's current problems regarding industrialisation
After evaluating important indicators for industrialisation and giving a summary of industrialisation since independence, we will now take a more detailed look at some specific areas for future industrial development in India.
Infrastructure
Perhaps the biggest problem for doing business in India is the woeful state of its infrastructure. Consider this: it takes four days for a truck to travel the 900 miles between India's national capital New Delhi and its commercial capital Bombay. It takes months to get connected to the power supply in any Indian city, and several years to get a telephone connection in large cities.
Poor infrastructure is acting as a drag on the Indian economy, and the Indian government is now attracting private domestic and foreign investment to build the backbone of a modern economy. A recent report estimated that investment in infrastructure would rise from 5.5% of GDP in 1997, to about 7% in 2000/01. This includes massive improvements in telecommunications, power, energy, and transport.
India has recognised the vital role telecommunications play in the growth of the economy. The Indian telecom sector was wholly under government ownership and control until recently and was characterised by under-investment and outdated equipment. There is vast potential for extending these services in India, which has one of the world's smallest telephone densities of 1.3 per 100 people, compared with the world average of 10 per 100. Advanced communication services such as fax, data transmission, and leased circuits are becoming increasingly common. Foreign collaboration is also being encouraged in cellular phones and paging systems. In the telecommunications sector, estimates for regional investment needs range from $40 billion a year, to as high as $70 billion a year by the end of the century.
The power problems are severe in India with three-hour-a-day power cuts and damaging voltage fluctuations that require companies to generate their own power. Investment in energy is a sound way of increasing manufacturing activity. If all 49 proposed private sector power projects are implemented, these would add a total of 20,000 megawatts to India's current capacity of 66,000mW. However it should be noted that India's energy demand is growing at 8-10% a year.
As part of India's liberalisation efforts, the transportation sector has been opened to private investment. The government is offering incentives to invest $4.7 billion to construct and operate bypass roads, highways, bridges, railways, and ports.
Health and Education
HIV/AIDS is a newly emerging threat to India's public health. About 3 million people in India may be affected. Malnutrition also continues to impede India's development. Prejudices against women and girls are reflected in the demographic ratio of 929 females for every 1,000 males.
To support India's goal of achieving universal primary education, the World Bank is supplementing increased state government expenditure. This has boosted school enrolment, particularly among girls and disadvantaged children, and is improving the quality of instruction and learning achievement.
Amartya Sen reckons that India could enrol all its children in primary school by spending an additional 0.5-1% of GDP. Providing basic health and education is not expensive where labour is cheap. But health and education indicators, while showing some progress, still remain among the world's lowest.
Public sector
Another big problem is India's notoriously bloated and inefficient public sector. The World Bank has turned down applications for power loans worth $750 million for projects in some states because of mismanagement in their government. Many electricity boards have become insolvent as a result of providing electricity at extremely subsidised rates and ignoring large-scale thefts of electricity. State governments have been unable or unwilling to take the politically unpalatable decisions needed to make their electricity boards viable.
The most telling evidence of the cost of delaying reform is the sheer effort companies have to expend to cope with the country's labyrinthine bureaucracy. For example, foreign investors continue to seek permission from the Foreign Investment Promotion Board, even though their plans are covered by the automatic approvals system.
Corruption
An immediate threat to India's governance is not the tottering coalition governments or the BJP, but corruption. The combination of a state-run economy and weak political institutions created all too many opportunities for crooked politicians and bureaucrats.
Worse still for the business community is that the government itself is the fountain-head of corruption. This is particularly serious in view of the huge importance of the government sector in India's economy.
Corruption has become ubiquitous at all levels and is accepted by everyone. Many Indian businessmen feel that liberalisation of the economy will have no impact on reducing the corruption that has become so well entrenched. The influx of foreign companies is already unleashing a new wave of even greater corruption. A survey of 183 US firms conducted by the US embassy in 1995 revealed that US investors rated corruption in India as the third worst problem they faced after red tape and a lack of electric power.
The blame for the deluge of corruption in India lies in the lack of transparency in the rules of governance, extremely cumbersome official procedures, excessive and unregulated discretionary power in the hands of politicians and bureaucrats, who are prone to abuse it, and a lax judiciary.
Tax Problems
Tax reforms have been seeking to transform India's tax system from one with high differential tax rates falling on a narrow base, into one with tax rates at moderate levels falling on a broad base. The 1995 fiscal budget reduced taxes on corporate income, and a major reform of excise taxes has been implemented to make it resemble a value-added tax more closely.
But the government's income is also constricted by an inefficient taxation system. Rural areas are not taxed because they contain such a large pool of voters and no government has had the political will to change this. Income tax is skilfully dodged. This leaves the government with excise and customs duties, which represent two thirds of all taxes.
Labour market
India needs greater labour market flexibility to make its companies more competitive and its economy more productive. Politically powerful labour unions have stifled most efforts at serious reform or privatisation of India's largest public sector enterprises, including most banks, all insurance companies, and many major industries, even though privatisation would probably cost the jobs of no more than 1.1% of the urban labour market. India's labour laws hinder efficiency and growth.
Financial sector
India's financial sector still cannot effectively mobilise and mediate capital to respond to economic changes. The resulting high cost of capital makes Indian industry and exports less competitive. In spite of recent improvements, India's equity markets are still too thin and volatile to inspire great confidence on the part of domestic or foreign investors. Bond markets are practically non-existent. Liberalisation of the insurance industry, which would greatly improve the investing of India's substantial savings, now 26% of GDP, has been stymied. India's banking system remains flawed, with the dominant state-owned banks still carrying bad loans amounting to 15 to 25% of their total.
Outlook
The arrival of a BJP-led government in March looked like a setback for freer trade. It took two steps away from trade liberalisation. Firstly, India's anti-dumping procedures were tightened. Secondly, the Finance Minister imposed an extra tariff of 4% in June. However, it is too early to conclude that India is returning to protectionism. The government insists that tariffs were increased to raise revenue, not to protect Indian business.
BJP strategy regarding foreign investment
BJP party leaders seem keen to limit foreign investment in all areas other than infrastructure. They are worried that Indian culture will be eroded by western consumerism such as food habits brought in by Kentucky Fried Chicken or McDonald's. Such sentiments cause alarm.
"Foreign investors are not exactly queuing up to enter India, and this attitude will scare away those who are weighing up the possibilities of doing business here," cautions a top executive with a foreign investment bank in Bombay. In its defence, the BJP says that while it seeks to protect domestic industry and reserve "India for Indians", it does not intend to take back the reforms. But approved and actual foreign direct investment already shrank between January and July 1998. Approvals totalled only $4.7 billion, compared with $7.1 billion in the same period in 1997 and actual inflows slid to $1.6 billion from $1.9 billion.
Furthermore the BJP's decision to conduct five nuclear tests in May 1998 underscored India's reputation for unpredictability and highlighted the vulnerability of infrastructure investment to international and domestic political pressures. The sanctions imposed by the US on India include bans on private banking assistance to the Indian government and pressure on multinational lenders such as the International Monetary Fund to withhold loans. The sanctions hit the Indian economy and Indian companies generally, and were potentially very onerous for foreign developers.
On the other hand, the government recently encouraged foreign direct investment. In July 1998 it put forward a plan allowing foreign companies to take stakes of up to 26% in Indian insurance companies, having resisted opening the insurance market to foreigners in the past. "Automatic" approval of foreign investment of up to 100% was extended to more sectors of industry.
Recent development of the macroeconomic situation
The macroeconomic situation is also causing concern. After a year of patting itself on the back for escaping the Asian crisis, the Indian government is now sitting up at some spine-chilling signs that the economy hasn't been unscathed after all.
India's gross fiscal deficit will rise to 6.6% of GDP from a planned 5.7% in 1998, forcing the government to keep borrowing and pushing up interest rates. But the government's infighting and inability to push through much-touted economic reform bills raises doubts as to whether it can tackle these problems.
The ballooning trade deficit comes on top of sluggish industrial production, high inflation (a 9% annual rate in the first half of November), and an expanding budget deficit. Currency devaluations in the rest of Asia have made Indian exports even less competitive than they were previously.
The current deficit of $2 billion has been pushed to the highest level since 1991. The rising deficit is financed by foreign-exchange reserves, and is expected to put upward pressure on the rupee .
On the other hand, GDP growth is forecast to move upwards to 6.4% in 1999. This follows a slowdown to 5.1% in 1998 due to a 1.5% decline in agricultural production, slowing exports, and industrial growth. Factor-cost GDP is forecast to expand by an annual average of 6.7% until 2002-2003.
Overall, it remains to be seen how entrenched the reforms are in India in the face of more difficult and troubled economic conditions.
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Setback to CBI in Aarushi case Statesman News service NEW DELHI, Sept. 12: The already embarrassed CBI sleuths received another jolt today after a special court in Ghaziabad today granted bail to the remaining two prime accused in SINGUR ROW: Continued from page 1 locating land. Mr Chatterjee complained to the Governor that the industries minister had adopted an inflexible attitude since the accord between the state government and the Tri Kashmir to have timely elections Agencies New Delhi, Sept. 11: Assembly polls in Jammu and Kashmir will take place "on time", the Election Commission spokesman said today. The spokesman said the poll panel would not want to wait for '25% of terrorism in India funded by drug money' JAMMU, Sept. 12: Pakistan's Inter Service Intelligence is using drug money to fund terrorism in India, particularly in Jammu and Kashmir, according to a senior Narcotics Control Bureau official. More 'Existing terror laws sufficient' Gandhinagar Sept. 12: "Existing laws are sufficient", Mr AK Mitra, Director General, BSF, said here today, when asked whether laws dealing with insurgents are sufficient, or should they b Prachanda visit from Sunday NEW DELHI, Sept. 12: When Nepal's first Maoist Prime Minister, Mr Pushpa Kamal Dahal 'Prachanda' (photograph left), arrives here on a five-day visit on Sunday, it would provide an opportunity for Indi Pranab meets Smith NEW DELHI, Sept. 12: India and Australia today agreed to take their relationship to the level of a "strategic partnership" while welcoming the increasing dynamism of the economic partnership. The e Kashmir burns again: 2 killed, 130 injured Press Trust of India Srinagar, Sept. 12: Two persons were killed and over 130 others, including JKLF chief Mr Yasin Malik, injured in firing and baton charge by security forces as fresh protests rocke Giving up land for water... Swati R Sharma DEHRADUN, Sept. 12: When government authorities failed to arrange for land to set up tube wells and water tanks in the outskirts of the capital to solve the severe problem of water sca Mid-day meals schemed to failure Shyam Sundar Roy MIDNAPORE, Sept. 12: The CPI-M leaders of Bengal are frequently heard clamouring for emancipation of women and reservation in legislatures so that female members may better fight for Singur focus of Citu meet DURGAPUR, Sept. 12: The Tata Motors project at Singur was the predominant topic of discussion at at the inaugural session of the Citu's 36th state council, held in Durgapur today. "Under any circumsta Raj Thackeray withdraws stir MUMBAI, Sept. 11: Normalcy returned in Mumbai as the Maharashtra Navnirman Sena president Mr Raj Thackeray withdrew his protests against the Bachchan family today. Amitabh Bachchan tendered a public SC extends ban on Simi by four weeks NEW DELHI, Sept. 11: The Supreme Court today further extended the Central government's ban on the radical Islamic outfit Students Islamic Movement of India (Simi) for four more weeks. The ban will rem India approves satellite navigation project Indo-Asian News Service NEW DELHI, Sept 11: The government today gave its approval to a satellite-based navigation system, which would meet the growing air traffic and strengthen aviation navigation s Safeguards for women in NRI liaisons NEW DELHI, Sept. 12: In a move aimed at protecting Indian women deserted by Indian husbands overseas, the government today announced a series of measures ranging from compulsory registration of marria Water-borne diseases strike flooded districts Manoj Chaurasia PATNA, Sept 12: They may have escaped floods and starvation so far but now flood victims might die of severe water-borne diseases which have begun striking the flooded districts of Bih briefs Amarinder CHANDIGARH, Sept. 12: The Punjab and Haryana High Court today extended former chief minister Mr Amarinder Singh's interim bail till 1 October in connection with the Ludhiana city centre sca CWC brainstorming session today Statesman News Service NEW DELHI, Sept. 12: Buoyed by its government's success in securing the NSG's historic waiver, ending India's 34-year nuclear isolation, the Congress party is all set to firm up Food and shelter, but clothing still lacking Manoj Chaurasia PATNA, Sept. 11: Flood victims crowding relief camps and dry places along the embankments now face another challenge ~ finding proper clothing. Reports said many of the victims had BJP national meet to prepare for polls Statesman News Service BANGALORE, Sept. 11: The BJP which is holding its national executive meet here from tomorrow is determined to do well in the elections to the Lok Sabha and a few of the state UPA govt a failure on all fronts, says BJP chief Statesman News Service Bangalore, Sept. 12: The BJP today lashed out at the UPA government for what it termed as its failure on all fronts including the tackling of terrorism, inflation, foreign polic BSP could field 30 candidates in Bihar Statesman News Service NEW DELHI, Sept. 11: After stealing the media limelight and provoking mixed reactions in political circles over her decision to donate a whopping Rs 11 crore from the UP gover IEA asks India to do away with fuel subsidies NEW DELHI, Sept. 11: International Energy Agency today asked India to remove subsidies on fuel to moderate demand in the country that had contributed to high international oil prices. IEA executive d Ansal brothers sent to jail Press Trust of India New Delhi, Sept. 11: Real estate barons Sushil and Gopal Ansal were today sent to jail by a Delhi court where they surrendered in compliance with a Supreme Court order cancelling N-cooperation to top PM-Sarkozy talks agenda Statesman News Service NEW DELHI, Sept. 12: With the Nuclear Suppliers Group (NSG) waiver clearing the way for nuclear commerce for India, Paris is ready to collaborate with New Delhi in this sector. Nandigram clashes hurt 6 TAMLUK, Sept. 11: Fresh violence flared up in different parts of Nandigram, Khejuri and BhagaSwanpur blocks of Midnapore East district today when CPI-M and Trinamul Congress workers clashed in these a BSP could field 30 candidates in Bihar Statesman News Service NEW DELHI, Sept. 11: After stealing the media limelight and provoking mixed reactions in political circles over her decision to donate a whopping Rs 11 crore from the UP gover Briefs Haywood returns MUMBAI, Sept. 11: American national Mr Kenneth Haywood who fled the country on 17 August under mysterious circumstances after the Mumbai Anti-terrorist Squad traced the Ahmedabad blast Searching for 'smart snacks' N Ravikumar CHENNAI, Sept 11: The sheer variety of snacks at the food market is mind boggling. But, since most of them only satisfy the taste buds and imagination of children, parents and dieticians a One drowned, 17 missing in Bihar boat mishap Sheikhpura, Sept. 11: One person was drowned and 17 others, mostly women and children, on board a boat were missing after it capsized in Harohar river near Bavgha village of Bihar's Sheikhpura distric Kandhamal improving, SC told NEW DELHI, Sept 11: The Orissa government today informed the Supreme Court that the situation in Kandhamal district, where violence broke out following the murder of VHP leader Swami Laxmananad Sarasw WBIDC owes Rs 59 lakh to state Rajib Chatterjee KOLKATA, Sept. 11: The agency which acquired land for the Tata Motors small car factory at Singur has upset the state land and land reforms department by failing to pay the required |
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