India’s ‘Rexit’: central bank uncertainty raises risk

Key messages

• India is a significant player in the global financial system, given its large and liquid markets. It is a concern at the present moment of global uncertainty because its macroeconomic policy leadership is in transition.

• Outgoing Reserve Bank of India (RBI) Governor Rajan had started to address key challenges, such as inflation and non-performing loans in the Indian banking system. But there is more to do.

What does India think?

India is changing, and Europe is missing out. India is now the world’s fastest-growing economy, ahead of China, and the European Union is both its biggest market and biggest trading partner. The two unions share common values and democratic political systems. Yet Brussels has not found time to meet Prime Minister Narendra Modi, and trade talks are deadlocked.

Europeans are frustrated by India’s complexity, fragmentation, and changing rules. But, while European firms complain about the difficulty of doing business across the diverse Indian subcontinent, few realise that Indians feel exactly the same about Europe. Indians tend to approach Europe through bilateral relationships with each member state, rather than treating it as a whole.

Anti-Submarine Operations in the Indian Ocean

Malabar 2012

Image Credit: Official U.S. Navy Page

As India and Australia prepare to embark on their first-ever bilateral naval interaction in the Bay of Bengal this month, reports suggest the exercises will focus on anti-submarine warfare (ASW). This is being seen as evidence of a growing regional consensus on the threat posed by Chinese undersea operations in the Asian littorals. Australia is reported to be sending a Lockheed Martin’s P-3 anti-submarine reconnaissance aircraft, a Collins-class submarine, and ASW frigates, while India will be deploying a P-8 long-range anti-submarine aircraft, along with other surface assets.

At the merci of the water mafia

Down by the sandy banks of the Yamuna River, the men must work quickly. At a little past 12 a.m. one humid night in May, they pull back the black plastic tarp covering three boreholes sunk deep in the ground along the waterway that traces Delhi’s eastern edge. From a shack a few feet away, they then drag thick hoses toward a queue of 20-odd tanker trucks idling quietly with their headlights turned off. The men work in a team: While one man fits a hose’s mouth over a borehole, another clambers atop a truck at the front of the line and shoves the tube’s opposite end into the empty steel cistern attached to the vehicle’s creaky frame.

India & the One Belt One Road paradigm

One Belt One Road (OBOR) is an initiative the Chinese envisioned in 2013 and are taking progressive steps to bring it to fruition. Execution of the plan will depend on how China is able to engage the countries involved in this perimeter, mainly in what it calls the Silk Road Initiatives. The OBOR has following two key components:

1. New Silk Road Economic Belt that links China and Europe, through Central and Western Asia
2. Maritime Silk Road (MSR) that will connect China and Southeast Asian countries, Africa and Europe.

Modi’s tax reform: revolution by attrition

For companies looking to tap into one of the world’s largest consumer bases, it’s no secret that tax in India has long been a concerning grey area, and has served as a deterrent to free-flowing business. Rates differ from state to state, as each seeks to undercut each other as the most attractive route.

Described as potentially the biggest change in Indian taxation since independence, the Goods and Services Tax (GST) aims to simplify the colossally complex Indian tax system. Prime Minister Narendra Modi’s proposition aims to replace local taxation with a uniform federal tax, creating a single accessible market with the revenue losses to local bodies being offset by federal funds.

Welcome to Modicare: India spends next to nothing on public health, and its new prime minister is cutting even deeper. Can the rural clinics that serve the country's poorest survive?

It was 8 p.m. on January 12 at the Jan Swasthya Sahyog (Health Care for the People) clinic, and Dr. Yogesh Jain was examining one of the last patients of the day: a strikingly gaunt man stricken by malnutrition and diabetes. The patient, Jawaal Singh Gondh, is a construction laborer in Ganiyari, a rural town in Chhattisgarh, one of India’s poorest states, and one of the dozens of acutely sick people whom Jain sees every day at the charitable clinic. As Jain tended to Gondh, his knees jutted through too-large pant legs, like a child in his father’s clothes.

Indian Reform Stumbles on Corruption Crisis

The administration of Indian Prime Minister Narendra Modi finds itself in the middle of another major political crisis. Several reports surfaced in mid-February revealing details about investigations into possible corporate espionage. Suspects have been charged with stealing documents and bribing officials to obtain information, a marked escalation in illegal clandestine tactics that have been an inherent part of Indian business culture for decades.

Unlike previous wrongdoing, however, the latest scandal involves the central government. In recent days, a number of high-profile Indian energy firms — several with links to the prime minister and his ruling Bharatiya Janata Party — have been implicated. As a result, the executives of some of India's largest companies have been arrested. The scandal comes at a time when the central government is facing backlash over the unpopular executive order to reform the country's convoluted land acquisition policies. The espionage charges further damage the political will for land reform ahead of a contentious month of wrangling to pass a national budget that will increase investment in India's aging rail networks. These major obstacles serve as another reminder of the significant domestic impediments to reforming the Indian economy.

To Beat China, Be China: For years, economists have argued that the Indian economy should grow faster than China’s. Is it finally on track to do so?

 

In 2003, MIT’s Yasheng Huang and Tarun Khanna of Harvard Business School argued in Foreign Policy that India would eventually overtake China. It was a case of fundamentals: Driven by fickle and unreliable foreign investment and technology, the Chinese economy would peter out while India, buoyed by more reliable drivers such as domestic savings and entrepreneurship, would one day thrive — and at China’s expense. Huang and Khanna’s controversial argument made a big splash at the time. To many then and now, suggesting that India could overtake China seemed outlandish.

India is the world’s largest arms importer. It aims to be a big weapons dealer, too.

For more than a decade, India shopped around the world for more than $1 billion worth of helicopters to replace about 200 of its military’s aging light-utility aircraft.

Indian naval officers hoists the navy flag during a ceremony to induct the largest indigenously built warship INS Kolkata in Mumbai. (Rajanish Kakade/AP)

But in August, the new nationalist government surprised many when it abruptly scrapped the request for global bids to buy the helicopters in favor of manufacturing them in India instead.

Why is Chinese investment in India so low?

Among Delhi policy circles, the dominant response to Xi Jinping's recent India visit was one of disappointment. Dissatisfaction at Chinese military provocations along the Indian border was certainly understandable. Disappointment at the 20 billion dollars of investment that Xi announced...

...however, seems harder to justify.True, the figure is substantially less than many had expected. In the run up to the visit, Indian media speculated that Xi might announce a figure of 100 or even 200 billion US dollars. These expectations were stoked by the speculative and apparently ill-informed comments of China's Consul General in Mumbai, Liu Youfa, that China would invest as much as 100 billion dollars. Dissatisfaction at the actual number was certainly acute. The Times of India's headline writers complained that the figure was "much less than Japan's offer of $35 billion." More effusively, The Business Standard led with, "China dashes $100-bn hope." Firstpost went simply with "Gypped by Xi."

India and Southeast Asia – Maritime Issues

Despite its historical and cultural links with Southeast Asia, India in its post-independence foreign policy largely tended to ignore the region. It was the end of the Cold War that brought this region back to the forefront of India’s foreign policy horizons. Since then, India’s “Look East” policy, which originally was primarily focused on trade and economics, has now attained a distinct security dimension.

As India’s economic linkages with various countries in the region have become more extensive, demands have grown for a gradual strengthening of security ties at a time of China’s rapid rise. Smaller states in the region could now look to India to act as a balancer in view of China’s growing influence amidst a broader leadership vacuum in the region, the Obama administration’s “Asia-Pacific pivot” notwithstanding. 

Will India's Next Leader Be Banned From America?

John Hudson

A series of elections in India last week has exposed a major diplomatic problem for the U.S. State Department: The man expected to lead the world's largest democracy in 2014 is not legally allowed to enter the United States. The reason: his involvement in anti-Muslim riots that killed more than 1,000 people. The travel restriction is insulting to many Indians and threatens future U.S.-India relations, but the State Department has few workable options, if any. 

India, China sign defense accord, but problems persist even as economic ties grow

Six months after a military standoff on their disputed border, the leaders of China and India met Wednesday and signed a defense cooperation agreement Wednesday to limit the risk of further confrontations.

Reuters - India's Prime Minister Manmohan Singh, left, and Chinese Premier Li Keqiang attend a signing ceremony at the Great Hall of the People in Beijing October 23, 2013.

A day of talks in Beijing between Chinese Premier Li Keqiang and Indian Prime Minister Manmohan Singh resulted in small pacts on river cooperation and counter terrorism but made little inroads into the deeper issues dogging the two Asian powers, such as the trade deficit, concerns about Pakistan and regional security.

Many Doubt Death Sentences Will Stem India Sexual Attacks

There was no mistaking the whoop of joy that rose outside Saket District Court on Friday, when word got out that four men convicted in last December’s horrific gang rape and murder had been sentenced to death by hanging. People burst into applause. They hugged whoever was beside them. They pumped the air with their fists.

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A Sense of Insecurity: The brutal rape of a young woman in New Delhi last year has led Indians to ask why are women so unsafe in public spaces. Daily travels are often filled with a sense of insecurity.

“We are the winners now,” said a woman holding a placard. Sweat had dried into white rivulets on her face, but she had the look of a woman who had, finally, gotten what she wanted. And it was true: A wave of protests after the December rape have set remarkable changes in motion in India, a country where for decades vicious sexual harassment has been dismissed indulgently, called “eve-teasing.”

What’s Troubling India?

CAMBRIDGE – India’s recent fall from macroeconomic grace is a lamentable turn of events. After many years of outperformance, GDP growth has slowed sharply. Annual output will most likely rise by less than 5% this year, down from 6.8% in 2011 and 10.1% in 2010.

Illustration by Chris Van Es

Reform has stalled amid profound political paralysis. All of the major emerging economies face weakening external demand, but India’s slowdown has been exacerbated by a drop in investment that reflects a deeper loss of official direction and business confidence. Even the International Monetary Fund’s forecast of a modest improvement in 2013 is predicated on the government’s ability to breathe life into a spate of stalled economic reforms.

After border killings, India says it cannot go back to ‘business as usual’ with Pakistan

Nine days after a fatal cross-border incident involving Pakistan, Indian Prime Minister Manmohan Singh said ties between the two neighbors cannot be “business as usual” and described the reported beheading of an Indian soldier “unacceptable.”

JAIPAL SINGH/EPA - Indian border villager children study in a school at Dhallan village near the Line of Control in Pakistan occupied Kashmir (PoK) near Poonch, India on Jan. 15, 2013. India's army chief General Bikram Singh accused Pakistan of planning a recent clash in which two Indian soldiers died and directed his commanders to respond aggressively to any provocation from Pakistani troops in the disputed region in 

Army officials say Pakistani troops crossed the border into Indian territory in the disputed Himalayan region of Kashmir and killed two Indian soldiers, mutilating the body of one and cutting off the head of another.

10 reasons why India has a sexual violence problem

The case of a 23-year-old medical student who died Saturday after a brutal gang rape on a bus in New Delhi has seemed to snap India to attention about its endemic sexual violence problem. Hundreds of Indians poured into the streets of New Delhi to mourn the young woman, and police announced that the six men arrested in connection with the attack had been charged with murder.

In recent years, New Delhi has earned the title of “rape capital” of India, with more than 560 cases of rape reported in the city, but violence against Indian women is widespread and has deep roots. Here’s a look at some of the reasons behind the issue that’s bringing Indians into the streets:

View Photo Gallery —The brutal assault of a 23-year-old student who was riding a bus in New Delhi brought a wave of protests. She died early Saturday.

India and China quarrel over their maps on passport and visa stamps

India and China fought a month-long war fifty years ago that did not resolve their mountainous border dispute. Since then, the two Asian rivals have found many ways of reminding each other about the frozen state of their disagreement.

A Chinese soldier gestures as he stands near an Indian soldier on the ancient Nathu La border crossing between India and China. (Diptendu Dutta / AFP/Getty Images)

In the latest row, their quarrel over each country’s maps actually shows up on the images of their passports and visas.

UK to end financial aid to India by 2015

The UK is to end financial aid to India by 2015, international development secretary Justine Greening has said.

Support worth about £200m ($319m) will be phased out between now and 2015 and the UK's focus will then shift to offering technical assistance.

Ms Greening said the move, which will be popular with Tory MPs, reflected India's economic progress and status.

Giving his reaction, India's foreign minister Salman Khurshid said: "Aid is the past and trade is the future."