india - iuj.ac.jp · • increased spending on rural welfare, public-sector wages and fuel...

Country Report

India

January 2008

Economist Intelligence Unit 26 Red Lion Square London WC1R 4HQ United Kingdom

The Economist Intelligence Unit

The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For 60 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide.

The Economist Intelligence Unit delivers its information in four ways: through its digital portfolio, where the latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group.

London The Economist Intelligence Unit 26 Red Lion Square London WC1R 4HQ United Kingdom Tel: (44.20) 7576 8000 Fax: (44.20) 7576 8500 E-mail: [email protected]

New York The Economist Intelligence Unit The Economist Building 111 West 57th Street New York NY 10019, US Tel: (1.212) 554 0600 Fax: (1.212) 586 0248 E-mail: [email protected]

Hong Kong The Economist Intelligence Unit 60/F, Central Plaza 18 Harbour Road Wanchai Hong Kong Tel: (852) 2585 3888 Fax: (852) 2802 7638 E-mail: [email protected]

Website: www.eiu.com

Electronic delivery This publication can be viewed by subscribing online at www.store.eiu.com.

Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, online databases and as direct feeds to corporate intranets. For further information, please contact your nearest Economist Intelligence Unit office.

Copyright © 2008 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited.

All information in this report is verified to the best of the author's and the publisher's ability. However, the Economist Intelligence Unit does not accept responsibility for any loss arising from reliance on it.

ISSN 1473-8953

Symbols for tables �n/a� means not available; �� means not applicable

Printed and distributed by Patersons Dartford, Questor Trade Park, 151 Avery Way, Dartford, Kent DA1 1JS, UK.

India 1

Monthly Report January 2008 www.eiu.com © The Economist Intelligence Unit Limited 2008

India

Executive summary 2 Highlights

Outlook for 2008-09 3 Political outlook 5 Economic policy outlook 6 Economic forecast

Monthly review: January 2008 9 The political scene 10 Economic policy 12 Economic performance

Data and charts 15 Annual data and forecast 16 Quarterly data 17 Monthly data 19 Annual trends charts 20 Monthly trends charts

Country snapshot 21 Political structure

Editors: Anjalika Bardalai (editor); Gerard Walsh (consulting editor)

Editorial closing date: December 14th 2007

All queries: Tel: (44.20) 7576 8000 E-mail: [email protected] Next report: To request the latest schedule, e-mail [email protected]

2 India


Executive summary

Highlights

January 2008

• The government has avoided calling an early general election for now, but speculation about the timing of the next poll will increase again after an end-December deadline imposed by the Left Front parties has passed.

• Regardless of when the next general election is held, the result is almost certain to be another coalition government. Any conceivable alliance will be hindered by a number of personality and policy clashes.

• Bilateral relations with Pakistan could worsen again after years of rapprochement if the political turmoil in that country unseats its president, General Pervez Musharraf.

• Increased spending on rural welfare, public-sector wages and fuel subsidies leads the Economist Intelligence Unit to expect the government to miss its target for the budget deficit in fiscal years 2007/08 and 2008/09 (April-March).

• We forecast that real GDP growth will reach 7.9% in 2007/08 and 7.7% in 2008/09. Our expectation is that higher oil prices and continued tight monetary policy will have a negative impact on private consumption.

• Based on data for the second quarter of 2007/08, we have revised down our forecast for growth in both exports and imports of goods and services in the full fiscal year, to 6.1% and 10.9% respectively.

• In mid-December the Communist Party of India (Marxist) demanded that the government withdraw from negotiations with the International Atomic Energy Agency on the US-India nuclear deal by the end of the month.

• The Bharatiya Janata Party has nominated Lal Krishna Advani as its candidate for prime minister in the next general election. Narendra Modi, who is campaigning to be re-elected as Gujarat!s chief minister, was passed over.

• The comptroller and auditor general, Vijayendra Kaul, has released figures indicating that in the first seven months of 2007/08 the fiscal deficit had reached 54.5% of the target for the entire fiscal year.

• The World Bank!s Doing Business 2008 report notes that the ease of doing business in India varies greatly from state to state. India still ranks well behind its neighbours in the survey.

• The World Bank has agreed in principle to lend the state government of Maharashtra some US$6bn to fund infrastructure projects.

• Real GDP growth (on an expenditure basis) slowed to 8.8% year on year in the second quarter of 2007/08 from 9.2% in the first quarter. Net exports remained the weakest contributor to growth.

Outlook for 2008-09

Monthly review

India 3


Outlook for 2008-09 Political outlook

In December the Left Front parties, which support the ruling United Progressive Alliance (UPA) coalition but do not form part of it, delivered an ultimatum: unless the government withdraws from negotiations with the International Atomic Energy Agency (IAEA) on the India-US nuclear co-operation agreement by the end of the month, it will lose the support of the Left Front. The government depends on the Left Front to maintain a legislative majority, and the loss of its support would precipitate an early general election. The ultimatum represents an apparent policy reversal by the Left Front, which less than a month earlier had ostensibly offered a concession by allowing the government to begin negotiations with the IAEA. However, the Left Front, which is led by the Communist Party of India (Marxist), or CPI (M), did not give the government the authority to agree to the IAEA!s proposals for nuclear safeguards; instead, the government must present the proposals to a joint parliamentary commission, on which the Left Front sits, for its consideration. In effect, therefore, the Left Front has allowed the government to initiate negotiations with the IAEA in exchange for gaining veto power over their outcome.

The Left Front!s latest move leaves the prime minister, Manmohan Singh, with three options. The first is to hold an early election"as early as April 2008, and at the latest, by end-2008. (A general election must be held by May 2009.) As the economic environment is likely to become less favourable over the course of 2008, with accelerating consumer price inflation and an already slowing economy, the chances of re-election of the Indian National Congress party, which leads the governing coalition, will progressively diminish, providing a strong incentive to hold an early election. Another reason for an early election is that the boundaries of many constituencies are likely to change in 2009 to account for demographic changes. Politicians in both big parties"Congress and the Bharatiya Janata Party (BJP)"would prefer to contest the poll under the current delineation of constituencies.

The second, less attractive, option is for the UPA to run a minority government until the scheduled date for a parliamentary poll. The government would be reduced to passing legislation in the area of economic development, one of the few areas where it could still hope to get a parliamentary majority. But it would be seen as having lost the initiative, and would find it difficult to shift the blame for the political deadlock onto the Left Front. Notwithstanding this, it is likely that some of Congress!s regional allies would still prefer to cling to power until May 2009. On balance, however, this scenario is unlikely to come to pass because it would reduce Congress�s chances of getting re-elected.

The third option is for the government to abandon the nuclear deal and to keep the Left Front!s support in parliament. This scenario is undesirable from the government!s point of view, as it would cripple its credibility; Mr Singh!s main foreign policy plank has been a closer relationship with the US, epitomised by the nuclear deal.

Domestic politics

4 India


If an election were to be called early, opinion polls suggest that Congress could win seats from the BJP. The BJP has been in disarray since it lost power at the national level three years ago, and in recent months it has been riven by internal disagreements. However, people in rural areas are becoming increasingly dissatisfied with the limited benefits that they are reaping from the country!s rapid economic growth. This all suggests that Congress might want to call an election before the BJP has time to regroup and before rural discontent grows even further.

The awkward arrangement between the UPA government and the Left Front means that the CPI (M) will continue to wield a disproportionate influence over government policy. The CPI (M) has virtually no political support beyond the three states in which it rules: Kerala, West Bengal and Tripura. Its core supporters are workers in the organised sector, which account for only about 6% of the total labour force, but the party!s role of political king-maker has enabled it to delay or to block any reform seen as damaging to their interests. This raises the possibility of the Left Front parties trying to block the UPA!s economic reform efforts during the rest of its tenure.

There are three potential groupings that could win power at the next election: a Congress-led or BJP-led coalition, or an alliance of left-wing and regional parties. Each combination, however, would be beset by a number of contradictions, ranging from personality clashes to divergent approaches to economic policy. For Congress, there is no shortage of potential coalition partners that could provide the votes it needs to command a majority in parliament. The most obvious of these is a caste-based regional party based in the state of Uttar Pradesh, the Bahujan Samaj Party. The party, which is already an ally of the UPA, is led by a rising star of Indian politics, Mayawati, who won control of Uttar Pradesh following a state assembly election earlier in 2007. If held soon, a general election is widely expected to double her party!s tally of seats at the federal level. Uttar Pradesh is India!s most populous and politically important state, accounting for more than one-seventh of the seats in parliament.

The government!s reluctance to risk losing the support of the Left Front by pushing ahead with the civilian nuclear co-operation deal with the US is a blow to relations between the two countries. The chances of the deal being passed ahead of the next US presidential and legislative elections, due in November 2008, look remote. Although India is unlikely to be offered another nuclear co-operation deal on such favourable terms, both countries still have strong reasons to build a strategic partnership in the coming years.

Although many other countries strongly condemned the president of Pakistan, General Pervez Musharraf, for imposing a state of emergency on November 3rd, the Indian government has remained largely silent on developments across its western border. General Musharraf subsequently lifted the state of emergency on December 15th, and a parliamentary election is set to be held in Pakistan on January 8th. But it is far from certain that the situation in Pakistan will stabilise as a result. The Indian government worries that the peace process with its nuclear-armed neighbour, which has made considerable headway under

International relations

India 5


General Musharaff�s rule, could be derailed by a change of administration in Pakistan. An increase in Islamist militancy in Pakistan means that the incidence of crossborder infiltration into India by extremists, which has been falling, could rise again.

Economic policy outlook

The booming economy has allowed the government to announce generous increases in expenditure in its budget for fiscal year 2007/08 (April-March), while still being able to reduce the budget deficit. Large spending increases on health, education and rural infrastructure are part of the government!s strategy to spread the benefits of economic growth to India!s poor. Another priority is to reduce inflationary pressures, including cuts in import and fuel excise duties. However, efforts to liberalise the economy will be limited by the practicalities of coalition politics and by Congress!s focus on subsidising the rural sector. If a general election is called earlier than May 2009, liberalisation will come even further down the agenda as populist policies come to the fore in the pre-election period. The Reserve Bank of India (RBI, the central bank) will use the exchange rate to dampen inflationary pressures, by being less inter-ventionist in the foreign-exchange market. This will allow some of the upward pressure on the rupee caused by strong capital inflows to feed through to the exchange rate. India will also continue to pursue free-trade agreements (FTAs) in order to improve market access for its domestic firms; negotiations with the Gulf Co-operation Council (a grouping of six Middle Eastern states) and the EU could produce FTAs as early as 2008 and 2009 respectively.

India!s consolidated fiscal deficit (comprising the combined deficits of the states and the central government) was equivalent to 6.4% of GDP in 2006/07. Strong economic growth helped to limit the federal government!s budget deficit to its target of 3.5% of GDP in 2006/07. The government aims to cut the deficit further, to 3.3% in 2007/08 and 3% in 2008/09. The Economist Intelligence Unit does expect the deficit to fall, but given the government!s expansionary spending plans, public-sector wage awards, higher public debt-service payments and increased expenditure on subsidies as the price of oil rises, we expect it to miss these targets narrowly. We forecast that the deficit will reach 3.4% of GDP in 2007/08 and 3.3% in 2008/09.

Surging capital inflows may be a cause for concern for India!s financial authorities, but the boost these inflows are giving to the rupee is helping to take the sting out of inflation. Wholesale prices, which the RBI uses as its inflation target, rose by 3.4% year on year in the first week of December; not only is this around one-half of the rate witnessed earlier in the year, it is also comfortably inside the RBI!s inflation target of 5%. There is now little reason why the RBI should increase interest rates, especially as such a move would encourage further capital inflows, which it is keen to avoid. However, wholesale price inflation did increase from early November, when it registered 3.1% year on year, and the government will remain concerned about the impact of high prices for oil and food. Monetary policy is therefore unlikely to be loosened in

Policy trends

Fiscal policy

Monetary policy

6 India


2008-09; we expect that the current repo rate (the rate at which it adds funds to the banking system) of 7.75% and reverse repo rate (the rate at which it drains funds from the system) of 6% will be maintained. The central bank!s stated medium-term goal is to reduce wholesale price inflation to 3%.

Economic forecast

International assumptions summary (% unless otherwise indicated)

2006 2007 2008 2009

GDP growth World 5.3 5.1 4.5 4.6

US 2.9 2.1 1.5 2.4

China 11.1 11.5 9.9 9.3

EU27 3.0 2.7 2.1 2.2

Exchange rates US$ effective (2000=100) 84.6 80.7 76.1 79.7

¥:US$ 116.2 117.5 105.0 96.3

US$:� 1.26 1.37 1.46 1.33

Financial indicators US$ 3-month commercial paper rate 5.03 5.06 4.03 4.30

¥ 3-month Gensaki rate 0.28 0.62 0.80 1.81

Commodity prices Oil (Brent; US$/b) 65.3 73.3 78.0 72.0

Gold (US$/troy oz) 604.5 696.7 822.5 706.3

Food, feedstuffs & beverages (% change in US$ terms) 16.1 26.7 8.1 -1.1

Industrial raw materials (% change in US$ terms) 49.6 12.8 -3.1 -12.8

Note. Regional GDP growth rates weighted using purchasing power parity exchange rates.

Real GDP growth in the US, a vital market for India!s software exports, is forecast to slow sharply, to 1.5%, in 2008, before recovering to 2.4% in 2009. We assess the risk of a recession in the US at 40%. Although the US slowdown will hurt some Indian exporters, other major export markets, especially China, will remain buoyant. International oil prices are set to rise to US$78/barrel in 2008 before falling back to US$72/b in 2009. These price levels will put upward pressure on India!s already substantial oil import bill. A number of threats to the global outlook persist. The most serious is a continuation of the financial market turmoil, as this would appear to have the potential to cause serious disruptions in the real economy. Even if the situation normalises, the weakness of the US housing market could still have a more adverse impact on consumer demand than is currently factored into our core forecast.

International assumptions

India 7


Gross domestic product by expenditure (Rs bn at constant 1999 prices where series are indicated; otherwise % change, year on year; fiscal years beginning Apr 1st)

2006a 2007 b 2008b 2009b

Private consumption 17,787.0 18,807.2 19,931.3 21,213.9

6.2 5.7 6.0 6.4

Public consumption 3,337.1 3,697.5 4,056.2 4,340.1

9.0 10.8 9.7 7.0

Gross fixed investment 8,686.2 10,015.2 11,227.0 12,462.0

14.6 15.3 12.1 11.0

Final domestic demand 29,810.3 32,519.9 35,214.4 38,016.0

8.8 9.1 8.3 8.0

Stockbuilding 868.4 900.0 900.0 900.0

0.3c 0.1 c 0.0c 0.0c

Total domestic demand 30,678.7 33,419.9 36,114.4 38,916.0

8.9 8.9 8.1 7.8

Exports of goods & services 5,407.2 5,738.6 6,240.5 6,792.8

8.6 6.1 8.7 8.9

Imports of goods & services 5,058.7 5,609.8 6,215.2 6,980.7

11.4 10.9 10.8 12.3

Foreign balance 348.5 128.8 25.3 -187.9

-0.3c -0.7 c -0.3c -0.6c

GDP (incl statistical discrepancy) 31,083.6 33,548.8 36,139.8 38,728.1

9.4 7.9 7.7 7.2

a Actual. b Economist Intelligence Unit forecasts. c Contribution to real GDP growth (as a percentage of real GDP in previous year).

Although business confidence in India remains high, capacity is being stretched, and the full impact on economic activity of earlier increases in interest rates has yet to be felt. In view of this, and of the likely effect of high oil prices on private consumption, we expect real GDP growth to moderate from its high of 9.4% in 2006/07, to 7.9% in 2007/08, 7.7% in 2008/09 and 7.2% in 2009/10. These rates of growth are nevertheless strong, with private consumption growth still expected to average 6.2% a year in 2008/09-2009/10. Government consumption growth is expected to average 10.3% a year during 2007/08-2008/09, reflecting the government!s ambitious spending plans, but it will fall back to 7% in 2009/10. Investment will be sustained by the boom in manufacturing and services. Capital inflows will keep liquidity high, and local companies will continue to reinvest profits. Net exports will exert a drag on economic growth, as imports of goods and services (on a national-accounts basis) continue to rise more quickly than exports. In 2007/08-2009/10 growth in exports of goods and services will average 7.9% a year, but that in imports will average 11.3%.

Monetary tightening over the past two and a half years is beginning to cool some elements of domestic demand, and data for the second half of 2007 suggest that the rate of price inflation may have peaked. Wholesale price inflation, which is targeted by the RBI, eased steadily from a peak of 6.6% year on year in March to 3.1% in early November, although it rose slightly again in early December, to 3.4%. Fears of overheating are fading, but consumer price inflation has been slower to subside"it was 7.3% year on year in August and 5.5% in October. The central bank!s anti-inflationary strategy will continue to

Economic growth

Inflation

8 India


bear fruit during the forecast period, but high oil and food prices and rising wages mean that inflationary pressures will persist. Annual average consumer price inflation is forecast to slow from an estimated 6.5% in 2007 to 6.1% in 2008 and 5.6% in 2009.

Capital inflows have continued to push up the value of the rupee despite various measures to dampen the currency!s appreciation, and in late September the rupee broke through the Rs40:US$1 mark. We expect India to remain an attractive destination for foreign investment in the forecast period, which will continue to put upward pressure on the rupee. However, the current account will stay in deficit, owing to the continued widening of the trade deficit. Intervention in the market will have limited appeal for the central bank: to weaken the local currency, the RBI would have to buy US dollars in exchange for rupees, and such intervention, particularly if not fully sterilised, would increase liquidity in the financial system and thereby undermine the RBI!s efforts to contain inflationary pressures. As a result, the central bank is expected to implement specific measures to contain the rupee!s appreciation so that it is not wholly reliant on market intervention. Given the recent performance of the exchange rate, we expect the rupee to average R38.25:US$1 in 2008 and Rs36.38:US$1 in 2009, compared with an estimated Rs41.33:US$1 in 2007.

Firm domestic industrial activity (which will underpin imports) and the gradual liberalisation of India!s trade regime will cause the current-account deficit to widen in US dollar terms to US$27.3bn (equivalent to 2% of GDP) in 2008 from US$16.7bn (1.5% of GDP) in 2007. The current-account deficit will narrow slightly in 2009, owing to strong growth in net current transfers and services exports, but the trade deficit will increase steadily during the forecast period, from an estimated US$76.1bn in 2007 to US$93.1bn in 2009.

Forecast summary (% unless otherwise indicated)

2006 a 2007 b 2008c 2009c

Real GDP growthd 9.4 7.9 c 7.7 7.2

Industrial production growth 10.5 10.0 9.3 8.0

Unemployment rate (av) 7.6 b 7.2 6.8 6.4

Consumer price inflation (av) 6.2 6.5 6.1 5.6

Consumer price inflation (year-end) 6.8 6.3 5.8 5.4

Short-term interbank rate 11.2 13.1 12.9 12.4

Government balance (% of GDP)d -3.5 -3.4 c -3.3 -3.1

Exports of goods fob (US$ bn) 123.2 145.6 171.3 192.7

Imports of goods fob (US$ bn) -184.4 -221.7 -263.1 -285.8

Current-account balance (US$ bn) -10.4 -16.7 -27.3 -14.5

Current-account balance (% of GDP) -1.1 -1.5 c -2.0 -0.9

Total foreign debt (year-end; US$ bn) 132.9 b 147.8 165.2 178.7

Exchange rate Rs:US$ (av) 45.31 41.33 38.25 36.38

Exchange rate Rs:¥100 (av) 38.98 35.19 36.43 37.79

Exchange rate Rs:� (av) 56.89 56.58 55.85 48.29

Exchange rate Rs:SDR (av) 66.66 63.49 61.12 56.12

a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts. d Fiscal years (beginning April 1st of year indicated).

Exchange rates

External sector

India 9


Monthly review: January 2008

The political scene

Two-thirds of the way through its five-year term the United Progressive Alliance (UPA), led by the Indian National Congress party, is struggling to hold on to power. The mainly communist Left Front parties, which support the govern-ment in parliament, oppose the controversial nuclear deal between India and the US, and this has in effect rendered the UPA a minority government. In mid-December Prakash Karat, the general secretary of the Communist Party of India (Marxist), or CPI (M)"the largest element in the Left Front"issued an ultimatum to the government demanding that it withdraw from negotiations with the International Atomic Energy Agency (IAEA) by the end of December or face an early general election (a poll is not due until May 2009). The leftist parties also still insist that they retain a veto over the outcome of the talks with the nuclear watchdog.

As of mid-December there were no indications that Congress would be prepared to enter into a new alliance with the Left Front under different circumstances"for example, under the leadership of a new prime minister. On the contrary, Congress has tried to distance itself from the CPI (M). The communists have come under attack from all major political parties following the recent political violence in Nandigram, in the state of West Bengal, which is a CPI (M) stronghold. The Marxists� armed supporters have been blamed for killings in the town, where local farmers have been resisting plans by the communist state government to set up a special economic zone (SEZ). The head of the Congress party, Sonia Gandhi, said in early December that she deplored the violence in Nandigram. Two days later, on December 9th, the CPI (M) issued its ultimatum regarding the nuclear deal.

Congress may calculate that it can do without the support of its erstwhile ally, as the CPI (M)!s prospects appear weaker now than they were in 2004, when the communists! tally of seats in the general election rose to an all-time high of 61. Congress may therefore try instead to rope in other regional parties to keep it in power in the event that it remains the largest party at the next general election. One party that could provide the necessary support is the Bahujan Samaj Party (BSP), led by the chief minister of Uttar Pradesh (and rising star of Indian politics), Mayawati.

During the first half of December, however, the focus of Indian politics remained firmly on the state assembly election in the western state of Gujarat, where the country�s most controversial politician, Narendra Modi of the Bharatiya Janata Party (BJP), is seeking re-election for the second time as chief minister. The results of the two-stage poll are due out on December 23rd. Mr Modi is widely accused of having turned a blind eye to the massacre of some 2,000 Muslims in the state in 2002, following which he swept the polls, winning 128 out of 182 seats in the state legislature. Mr Modi was refused a visa to enter the US in 2005, and the EU still refuses to grant him diplomatic status.

A parliamentary election could be held as early as April

The Gujarat election will affect the timing of the national poll

10 India


As the Gujarat election campaign heated up in early December, Mrs Gandhi called Mr Modi a �merchant of fear and death�. Earlier in the campaign, Mr Modi is alleged to have justified the killing of a Muslim man by police in Gujarat. Federal election authorities have demanded explanations from both Mrs Gandhi and Mr Modi for their controversial comments.

Political analysts believe that the election will be a close race, and the outcome is likely to have a significant impact on politics at federal level. A Congress victory in Gujarat"which would be its first there in 20 years"would give the party a huge boost. Such a win would pave the way for an early general election, and would put Congress in a favourable position to be re-elected and then push through the nuclear deal with the US. Meanwhile, it has long been thought that a BJP victory in Gujarat would bring Mr Modi closer to his goal of leading the party, which has been in disarray since it lost power at national level in 2004. But he faces stiff opposition within the BJP and the Rashtriya Swayamsevak Sangh (RSS), the party�s powerful grass-roots organisation. The leaders of both the party and the RSS know that the BJP cannot win the next general election solely on a platform of Hindu nationalism, as espoused by Mr Modi.

Thus, on the evening of the first round of polling in Gujarat, on December 10th, the BJP nominated the 80-year-old Lal Krishna Advani as the party�s prime ministerial candidate for the next election to the Lok Sabha (the lower house of parliament). For decades Mr Advani has been the second most powerful party leader after the former prime minister, Atal Behari Vajpayee (who is currently unable to engage actively in politics owing to ill health). Mr Vajpayee did, however, give crucial backing to Mr Advani�s leadership bid. The decision to appoint Mr Advani to lead the party postpones, yet again, the handover to a younger, second-generation leader.

Economic policy

India�s fiscal deficit in the first seven months of fiscal year 2007/08 (April-March) stood at Rs822.6bn (US$20.9bn), equivalent to 54.5% of the annual target, according to government data released on November 30th. The government has said that it will achieve the targets for 2007/08 that the Fiscal Responsibility and Budget Management Act of 2003 require it to meet, namely a fiscal deficit of no more than 3.3% of GDP and a revenue deficit equivalent to 1.5% of GDP. Total expenditure stood at Rs3.7trn (US$94.9bn) in April-October, while receipts totalled Rs2.9trn. Interest payments accounted for almost one-third of total spending. However, the comptroller and auditor general, Vijayendra Kaul, said it was doubtful that the government would achieve its targets for the current fiscal year.

The government signalled in December that it intended to cut peak customs duty on non-agricultural products from 10% to 7.5% in the 2008/09 budget, in line with its aim of reducing duties to Association of South-East Asian Nations (ASEAN) levels of 4.5-5.5% by 2010. The move would bring down duties on such items as airconditioners, refrigerators, washing machines and some capital

Fiscal targets may not be met

The government plans to cut duties in the 2008/09 budget

India 11


goods. Under the proposed measures, customs duties for a number of goods will be even lower than 7.5% in 2008/09. Industry lobby groups have opposed the proposed duty cut, which they say would lead to a surge in imports, harm domestic industry and add to exporters! troubles at a time when a sharply appreciating rupee is already hurting their competitiveness.

Customs duties in India averaged a prohibitive 50% in the mid-1990s. But protection of domestic industry has declined significantly since then: under the UPA government, peak custom duties have fallen from 25% in 2004/05 to 10% in 2007/08. Customs duty used to be one of the government!s main sources of revenue"one reason why liberalisation has been only gradual. Despite frequent cuts in duty, revenue from customs duties remains healthy, as the booming economy is sucking in ever-increasing quantities of imports. Total revenue from customs collection grew by over 17% year on year to Rs493bn in the first eight months of 2007/08.

India�s business environment has improved over the past 12 months, but the ease of doing business varies greatly across India�s 25 states, according to the annual Doing Business 2008 report released by the World Bank in December. The Bank said that India"ranked 120th out of 178 countries"could move up 55 places if the business environment prevailing in its most progressive states were to be replicated across the country. In the last 12 months India improved its ranking in two categories, getting credit and trading across borders. But the country continues to perform particularly badly on enforcement of contracts: it takes four years to resolve a commercial dispute in India�s financial hub, Mumbai, compared with about a year in its Chinese counterpart, Shanghai. Another area where reform is desperately needed is the registration of property. For instance, the transfer of property takes two months in India, about twice the time required in China, and it is also twice as expensive there. Although India moves up 12 places in the latest survey, it still ranks behind its regional neighbours Bhutan (119), Nepal (111), Sri Lanka (101), China (83) and Pakistan (76).

In early December the World Bank agreed in principle to provide the bulk of the financial assistance sought by the state government of Maharashtra for infrastructure projects worth about US$6bn. The loan will include US$2bn for projects to upgrade infrastructure in Mumbai, US$650m for irrigation, US$350m for rural water-supply projects, and US$500m for urban water projects and to upgrade the state�s healthcare infrastructure.

The Bank is reportedly considering making the loan in rupees rather than in US dollars because the Maharashtra government is concerned about currency fluctuations. (The rupee appreciated from Rs44.2:US$1 at end-2006 to Rs39.3:US$1 on December 10th 2007.) It would be the first time that the Bank has agreed to a rupee loan. If approved, the Bank would be likely to sanction the loan in US dollars, but the funds would be handed over in rupees and repayments would be in the domestic currency.

In a related development, the Asian Development Bank (ADB) warned in December that the amount of money needed to upgrade India!s infrastructure

India�s business environment varies hugely across states

The World Bank earmarks funds for Maharashtra

12 India


could be much larger than the US$490bn estimated by India�s main economic advisory body, the Planning Commission. According to the ADB, India will require US$700bn-800bn for infrastructure improvements in the next five years, of which the private sector will need to contribute more than 30%.

Economic performance

The most recent national-accounts data, released on November 30th, suggest that economic activity is slowing to a more sustainable pace of between 8-9%. In the second quarter of 2007/08 real GDP growth slowed to 8.9% year on year"the slowest pace in 12 quarters. The most significant change in the pattern of growth was a marked slowdown in manufacturing growth. Expansion in the sector slowed to 8.6% year on year in July-September, down from 11.9% in the year-earlier period. The contribution of manufacturing industry to overall economic growth fell to 1.4 percentage points"more than the contribution of trade, hotels, transport and communications (3.1 percentage points), but less than that of financing, insurance, real estate and business services (which contributed 1.6 percentage points). The health of the manufacturing sector is a concern for policymakers, since it is this part of the economy that is expected to provide work for the 10m people entering the labour force each year. The sector�s share of total employment fell from 12.1% in 1999/2000 to 11.7% in 2004/05, according to government data released in December this year.

Gross domestic product at factor cost (Rs bn; 1999/2000 prices; fiscal years Apr-Mar)

2006/07 2007/08

1 Qtr 2 Qtr 1 Qtr % change a 2 Qtr % changeb

Agriculture, forestry & fishing 1,230 979 1,277 3.8 1,015 3.6

Mining & quarrying 135 126 140 3.2 136 7.7

Manufacturing 1,036 1,075 1,160 11.9 1,167 8.6

Electricity, gas & water supply 152 152 164 8.3 163 7.3

Construction 462 465 512 10.7 517 11.1

Trade, hotels & restaurants, transport & communications 1,732 1,781 1,940 12.0 1,984 11.4

Financing, insurance, real estate & business services 939 961 1,043 11.0 1,063 10.6

Community, social & personal services 926 985 997 7.6 1,062 7.8

GDP at factor cost 6,613 6,525 7,231 9.3 7,106 8.9

a First quarter of 2007/08 compared with year-earlier period. b Second quarter of 2007/08 compared with year-earlier period.

Source: Central Statistical Office.

On an expenditure basis, private consumption growth was stable in the second quarter of 2007/08, at 5.6% year on year, while government consumption growth accelerated to 12% year on year in the second quarter, from 10.5% in the first. Investment showed the strongest performance, with growth of 15.2%. On the external side, export growth slowed to 4.4% year on year in the second quarter from 5.5% in the first, while import growth collapsed"imports contracted by 0.5%, following an expansion of 16% in the first quarter. Expenditure-based GDP growth slowed from 9.2% year on year in the first to 8.8% in the second quarter.

The economy slows in the second quarter

India 13


Gross domestic product by expenditure (Rs bn; constant 1999/2000 prices; fiscal years Apr-Mar)

2006/07 2007/08

1 Qtr 2 Qtr 1 Qtr % change a 2 Qtr % changeb

Private consumption 42,824.3 40,909.7 45,237.0 5.6 43,202.6 5.6

Public consumption 8,818.8 6,742.3 9,743.7 10.5 7,551.6 12.0

Gross fixed capital formation 19,676.3 20,549.4 22,810.3 15.9 23,668.3 15.2

Valuablesc 1,162.5 1,133.2 1,285.0 10.5 1,355.4 19.6

Change in stocks 2,033.9 2,109.8 2,205.1 8.4 2,290.3 8.6

Exports 13,069.0 12,881.6 13,785.8 5.5 13,450.9 4.4

Imports 12,532.9 12,217.2 14,553.3 16.1 12,156.0 -0.5

Real GDP at market prices 70,440.8 71,896.5 76,934.2 9.2 78,206.9 8.8

a First quarter of 2007/08 compared with year-earlier period. b Second quarter of 2007/08 compared with year-earlier period. c Expenditure on items considered to be stores of wealth, such as jewellery, antiques and works of art; normally considered to be a component of gross fixed capital formation.

Source: Central Statistical Organisation.

Other economic indicators also suggest that the economy has come off the boiling point. Fears of an overheating economy have faded, and businesses are preparing for a moderation in GDP growth. Business confidence fell to a five-year low in July-September, according to a survey conducted by the Federation of Indian Chambers of Commerce and Industry. The organisation cites high domestic interest rates, a sharply higher rupee, surging global oil prices and the fallout from the global credit crisis as the main reasons for the deterioration in business sentiment. It has called for lower interest rates and steps to curb the rise of the rupee. Neither the government nor the Reserve Bank of India (the central bank) is likely to provide the relief that industry has called for, however, as any such moves would run the risk of stoking inflationary pressures.

In the near term, the expectation of an increase in the number of jobs in the manufacturing sector is unlikely to be met. At a meeting of the World Economic Forum in New Delhi, India!s minister for commerce, Kamal Nath, predicted that a strong rupee could lead to about 2m job losses in the export sector. The local currency has risen by more than 15% against the US dollar since October 2006, and labour-intensive export-oriented industries such as textiles and handicrafts have been hit hardest.

Meanwhile, the government said in December that India would be likely to miss its export target for 2007/08 (set at US$160bn at the start of the fiscal year) by US$20bn. This is despite a surge in October, when exports rose by 36% year on year"although this provisional figure must be treated with caution, since later downward revisions are common.

India and the EU are committed to concluding a free-trade agreement within the next 12 months, according to leaders who met at the EU-India summit on November 30th in New Delhi. The expectation is that such a trade pact would significantly boost bilateral trade by lowering trade barriers and tariffs. Bilateral trade stood at about #47bn (US$59bn) in 2006, but remains small compared with the EU!s bilateral trade with China, which totalled #259bn in that year. Trade between the EU and China, the EU!s second-largest trading partner after

Business confidence falls to a five-year low

Jobs in the export sector are at risk

India and the EU hope to conclude a free-trade deal

14 India


the US, rose by 150% between 2000 and 2006. This compared with an increase of 80% in trade between the EU and India, which is the EU�s ninth-largest trade partner. India and the EU agreed at the recent summit that there was much scope for increasing trade and investment flows. India�s exports account for less than 2% of EU imports, and European companies have invested ten times more in China than in India in the past five years, according to the EU�s statistical agency, Eurostat. The EU is India!s largest trading partner, accounting for nearly one-fifth of the country�s total trade. At a total of US$11bn between 1991 and 2007, the EU is also the largest source of foreign direct investment in India, and is a leading partner in development and economic co-operation.

India 15


Data and charts Annual data and forecast 2003a 2004a 2005a 2006a 2007 b 2008c 2009c

GDPd

Nominal GDP (US$ bn) 596.1 692.7 805.6 922.8 1,131.7 c 1,385.4 1,655.8

Nominal GDP (Rs bn) 27,655 31,266 35,672 41,257 46,253 c 52,604 60,012

Real GDP growth (%) 8.4 8.3 9.2 9.4 7.9 c 7.7 7.2

Expenditure on GDP (% real change)d

Private consumption 6.9 5.4 6.7 6.2 5.7 c 6.0 6.4

Government consumption 2.5 5.4 9.8 9.0 10.8 c 9.7 7.0

Gross fixed investment 13.1 11.8 15.3 14.6 15.3 c 12.1 11.0

Exports of goods & services 5.8 28.1 5.9 8.6 6.1 c 8.7 8.9

Imports of goods & services 16.8 12.3 10.3 11.4 10.9 c 10.8 12.3

Origin of GDP (% real change)d

Agriculture 10.0 0.0 6.0 2.7 2.6 c 2.3 2.0

Industry 7.4 9.8 9.6 10.9 9.7 c 9.0 7.8

Services 8.5 9.6 9.8 11.0 8.9 c 8.8 8.5

Population and income

Population (m) 1,049.7 1,065.1 1,080.3 1,095.4 1,110.4 1,125.4 1,140.2

GDP per head (US$ at PPP) 2,936 3,183 3,538 3,936 4,295 c 4,656 5,054

Fiscal indicators (% of GDP)d

Central government revenue 12.5 12.0 10.1 10.7 12.6 c 13.5 13.7

Central government expenditure 17.1 15.9 14.2 14.1 16.1 c 16.9 16.7

Central government balance -4.6 -4.0 -4.1 -3.5 -3.4 c -3.3 -3.1

Net public debt 62.8 63.8 61.5 60.0 59.1 c 57.2 54.8

Prices and financial indicators

Exchange rate Rs:US$ (av) 46.58 45.32 44.10 45.31 41.33 38.25 36.38

Consumer prices (end-period, %) 3.8 3.8 4.2 6.2 6.5 6.1 5.6

Producer prices (av, %) 5.3 6.6 4.7 4.8 4.8 4.8 4.7

Stock of money M1 (% change) 16.2 20.7 18.9 19.2 15.6 16.2 14.9

Stock of money M2 (% change) 13.0 16.7 15.6 21.6 26.4 16.4 16.9

Lending interest rate (av; %)d 11.5 10.9 10.8 11.2 13.1 12.9 12.4

Current account (US$ m)

Trade balance -14,642 -28,036 -46,872 -61,154 -76,133 -91,798 -93,041

Goods: exports fob 60,895 77,939 102,328 123,208 145,556 171,273 192,728

Goods: imports fob -75,537 -105,975 -149,200 -184,362 -221,689 -263,072 -285,768

Services balance 6,478 13,076 22,258 29,022 29,346 32,944 41,520

Income balance -4,895 -4,052 -6,430 -4,334 -3,448 -5,285 -8,651

Current transfers balance 21,832 19,793 23,234 26,109 33,492 36,845 45,691

Current-account balance 8,773 781 -7,810 -10,357 -16,743 -27,293 -14,480

External debt (US$ m)

Debt stock 112,855 124,376 123,123 132,880b 147,807 165,212 178,732

Debt service paid 20,650e 19,250e 24,335e 18,181be 20,118 23,055 25,828

Principal repayments 14,653e 15,874e 17,809e 11,889be 13,244 15,852 17,562

Interest 5,997 3,376 6,526 6,292b 6,874 7,202 8,266

International reserves (US$ m)

Total international reserves 102,261 130,401 136,026 176,105 278,318 312,493 350,640

a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts. d Fiscal years beginning April 1st. e Includes medium-and long-term debt prepayments.

Source: IMF, International Financial Statistics. P ro d uc t io n to rem o v e

16 India


Quarterly data 2005 2006 2007

4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr

Central government finance (Rs m)

Revenue 970 1,355 537 1,118 1,234 1,513 675 1,692

Expenditure 1,215 1,736 1,315 1,205 1,318 1,993 1,799 1,380

Balance -245 -381 -777 -87 -84 -479 -1,124 312

Output

GDP at constant 1999/2000 prices (Rs bn) 7,537 7,880 7,044 7,190 8,217 8,633 7,693 7,821

Real GDP (% change, year on year) 9.0 10.9 8.1 10.7 9.0 9.6 9.2 8.8

Industrial production index (1993/94=100) 223.7 239.0 232.5 237.9 248.8 268.9 256.4 257.4

Industrial production (% change, year on year) 7.1 8.7 10.5 11.8 11.2 12.5 10.3 8.2

Prices

Consumer prices (2001=100) 118.9 119.0 121.3 124.3 127.0 127.3 129.0 132.7

Consumer prices (% change, year on year) 5.0 4.9 6.3 6.6 6.8 7.0 6.3 6.7

Wholesale prices (1993/94=100)

General index 197.7 196.5 201.1 205.7 208.7 209.2 212.0 214.3

Fuel 312.0 313.5 320.6 328.7 326.0 320.6 321.5 322.1

Manufactured goods 172.3 171.5 174.7 178.0 180.9 182.4 184.8 186.5

Financial indicators

Exchange rate Rs:US$ (av) 45.4 44.4 45.5 46.4 45.0 44.2 41.2 40.5

Exchange rate Rs:US$ (end-period) 45.1 44.6 45.1 46.0 44.2 43.6 40.8 39.7

Deposit rate (av; %) 5.8 5.8 5.8 5.8 5.8 5.8 5.8 5.8

Lending rate (av; %) 10.8 10.8 11.1 11.4 11.5 12.3 13.3 13.3

3-month money market rate (av; %) 5.3 5.5 5.8 6.0 6.0 6.0 6.0 6.0

M1 (end-period; Rs bn) 7,213 7,892 7,696 8,086 8,600 n/a n/a n/a

M1 (% change, year on year) 18.9 28.6 19.5 19.1 19.2 n/a n/a n/a

M2 (end-period; Rs bn) 23,808 25,717 26,274 27,854 28,962 n/a n/a n/a

M2 (% change, year on year) 15.6 22.3 18.9 24.7 21.6 n/a n/a n/a

BSE Sensex (end-period; 1978/79=100) 9,398 11,280 10,609 12,454 13,787 13,072 14,651 17,291

Stockmarket index (% change, year on year) 37.7 70.4 42.3 38.1 49.4 18.6 52.8 60.6

Sectoral trends

Crude oil production (m barrels/day) 0.75 0.78 0.79 0.77 0.82 0.82 0.82 n/a

Production index (1993/94=100)

Manufacturing 236.9 253.7 246.4 254.9 264.9 288.0 273.7 276.1

Mining 156.0 169.5 158.4 145.0 166.8 182.6 162.6 156.7

Electricity 190.3 196.2 200.9 201.2 207.7 209.2 217.5 215.4

Foreign trade (US$ m)

Exports fob 25,582 27,621 30,000 32,525 30,708 31,855 36,367 38,770

Imports cif -35,671 -39,684 -40,923 -46,250 -48,385 -46,149 -56,351 -54,688

Trade balance -10,089 -12,063 -10,923 -13,725 -17,677 -14,294 -19,984 -15,918

Foreign payments (US$ m)

Services balance 4,690 6,322 7,965 7,268 7,467 10,027 9,150 n/a

Income balance -2,928 -373 -1,278 -1,462 -1,221 -885 -594 n/a

Net transfer payments 6,436 7,347 5,692 5,226 7,844 8,653 8,327 n/a

Current-account balance -4,782 1,815 -4,567 -4,830 -2,775 2,563 -4,697 n/a

Reserves excl gold (end-period) 131,924 145,854 156,732 159,103 170,738 192,398 206,579 240,396

Source: IMF, International Financial Statistics.

P ro d uc t io n to rem o v e

India 17


Monthly data Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Exchange rate Rs:US$ (av) 2005 43.8 43.7 43.7 43.7 43.5 43.6 43.5 43.6 43.9 44.8 45.7 45.6

2006 44.4 44.3 44.5 44.9 45.4 46.1 46.5 46.5 46.1 45.5 44.9 44.6

2007 44.3 44.2 44.0 42.1 40.8 40.8 40.4 40.8 40.3 39.5 n/a n/a

Money market rate (%) 2005 4.75 4.75 4.75 4.75 5.00 5.00 5.00 5.00 5.00 5.25 5.25 5.25

2006 5.50 5.50 5.50 5.50 5.50 5.75 6.00 6.00 6.00 6.00 6.00 6.00

2007 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 n/a

Lending rate (%) 2005 10.8 10.8 10.8 10.8 10.8 10.8 10.8 10.8 10.8 10.8 10.8 10.8

2006 10.8 10.8 10.8 10.8 11.3 11.3 11.3 11.5 11.5 11.5 11.5 11.5

2007 12.0 12.5 12.5 13.3 13.3 13.3 13.3 13.3 13.3 n/a n/a n/a

M1 (% change, year on year) 2005 17.0 15.9 11.6 15.0 15.7 16.9 20.3 18.4 21.4 15.9 18.1 18.9

2006 20.6 21.8 28.6 26.4 21.8 19.5 16.8 18.5 19.1 20.7 19.3 19.2

2007 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a

M2 (% change, year on year) 2005 15.0 13.8 12.7 13.8 14.2 14.0 14.9 15.1 13.1 17.5 18.0 15.6

2006 16.2 16.7 22.3 19.4 19.1 18.9 19.4 20.4 24.7 19.0 20.0 21.6

2007 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a

Industrial production (% change, year on year) 2005 7.5 5.9 9.8 8.1 10.8 12.2 4.7 7.6 7.2 9.8 6.0 5.7

2006 8.5 8.8 8.9 9.9 11.7 9.7 13.2 10.3 12.0 4.5 15.8 13.4

2007 11.6 11.0 14.8 11.3 10.6 8.9 7.5 10.7 6.4 n/a n/a n/a

Stockmarket index (BSE Sensex) 2005 6,556 6,714 6,493 6,154 6,715 7,194 7,635 7,805 8,634 7,892 8,789 9,398

2006 9,920 10,370 11,280 12,043 10,399 10,609 10,744 11,699 12,454 12,962 13,696 13,787

2007 14,091 12,938 13,072 13,872 14,544 14,651 15,551 15,319 17,291 19,838 19,363 n/a

Consumer prices (% change, year on year; av) 2005 4.4 4.2 4.2 5.0 3.7 3.3 4.1 3.5 3.6 4.2 5.3 5.6

2006 4.7 4.9 4.9 5.0 6.3 7.7 6.7 6.3 6.8 7.3 6.3 6.9

2007 6.7 7.6 6.7 6.7 6.6 5.7 6.5 7.3 6.4 5.5 n/a n/a

Producer prices (% change, year on year; av) 2005 5.5 5.0 5.4 5.9 5.5 4.3 4.3 3.7 4.1 4.7 4.2 4.4

2006 4.1 4.0 3.9 3.9 4.7 5.1 4.8 5.1 5.4 5.5 5.5 5.7

2007 6.4 6.4 6.6 6.3 5.5 4.5 4.9 4.2 3.5 3.1 n/a n/a

Total exports fob (US$ m) 2005 6,927 6,971 7,477 8,188 8,040 8,154 7,862 8,795 8,246 8,754 7,907 8,921

2006 9,118 9,053 9,450 9,209 10,110 10,681 11,152 10,933 10,440 10,036 10,616 10,056

2007 10,847 10,531 10,477 11,858 12,342 12,167 13,294 13,015 12,461 13,696 n/a n/a

Total imports cif (US$ m) 2005 9,958 10,051 10,643 11,776 12,450 12,184 11,894 13,107 12,389 11,841 11,727 12,103

2006 12,511 14,145 13,028 13,048 13,451 14,424 15,070 15,124 16,056 16,806 16,423 15,156

2007 14,990 15,575 15,584 18,547 18,103 19,701 18,205 20,081 16,402 21,011 n/a n/a

18 India


Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Trade balance fob-cif (US$ m) 2005 -3,031 -3,080 -3,166 -3,588 -4,410 -4,030 -4,032 -4,312 -4,143 -3,087 -3,820 -3,182

2006 -3,393 -5,092 -3,578 -3,839 -3,341 -3,743 -3,918 -4,191 -5,616 -6,770 -5,807 -5,100

2007 -4,143 -5,044 -5,107 -6,689 -5,761 -7,534 -4,911 -7,066 -3,941 -7,315 n/a n/a

Foreign-exchange reserves excl gold (US$ m) 2005 125,073 131,520 137,008 137,393 134,349 133,787 136,018 139,546 138,348 138,711 137,896 131,924

2006 134,687 136,640 145,854 154,363 156,845 156,732 158,020 159,708 159,103 161,326 168,150 170,738

2007 173,636 187,683 192,398 197,376 201,161 206,579 220,223 221,969 240,396 256,884 n/a n/a

Sources: IMF, International Financial Statistics; Haver Analytics. P ro d uc t io n to rem o v e

India 19


Annual trends charts P ro d uc t io n to rem o v e

Annual trends charts

Budget balance(% of GDP)

Current-account balance(% of GDP)

Leading markets, 2006(a)(share of total) (share of total)

Leading suppliers, 2006(a)

Other62.8%

US16.9%

UAE8.3%

UK4.3%

China7.7%

Other75.0%

China9.1%

Singapore4.8%

Germany4.8%

US6.3%

Source: Economist Intelligence Unit. Source: Economist Intelligence Unit.

Source: Economist Intelligence Unit.




(a) Fiscal years beginning April 1st. (a) Fiscal years beginning April 1st.

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0 World Asia (excl Japan) India

09080706050420032.0

3.0

4.0

5.0

6.0

7.0 World Asia (excl Japan) India

0908070605042003

-5.0

-4.0

-3.0

-2.0

-1.0

0.0 Asia (excl Japan) India

0908070605042003-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0 Asia (excl Japan) India

0908070605042003

Real GDP growth(% change)

Consumer price inflation(av; %)

20 India


Monthly trends charts P ro d uc t io n to rem o v e

Monthly trends charts

Exchange rate(Rs:US$; av; inverted scale)

Foreign-exchange reserves(US$ m)

Price inflation(% change, year on year)

Monetary aggregates(% change, year on year)

Foreign trade(US$ m; goods only)

Index of industrial activity(av; 1996=100)

80

90

100

110

120

130

140

JulAprJan07

OctJulAprJan06

OctJulAprJan05

OctJulApr2004

100,000

150,000

200,000

250,000

300,000

OctJulAprJan07

OctJulAprJan06

OctJulAprJan05

OctJulApr2004

47.0

46.0

45.0

44.0

43.0

42.0

41.0

40.0

39.0

OctJulAprJan07

OctJulAprJan06

OctJulAprJan05

OctJulApr2004

10.0

12.0

14.0

16.0

18.0

20.0

22.0

24.0

26.0

28.0

30.0 M2 M1

OctJulAprJan06

OctJulAprJan05

OctJulApr2004

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0 Producer prices Consumer prices

OctJulAprJan07

OctJulAprJan06

OctJulAprJan05

OctJulApr2004

-10,000

-5,000

0

5,000

10,000

15,000

20,000

25,000 Balance Imports Exports

OctJulAprJan07

OctJulAprJan06

OctJulAprJan05

OctJulApr2004

Source: Economist Intelligence Unit.Source: Economist Intelligence Unit.



India 21


Country snapshot

Political structure

Republic of India

Federal republic, with 29 states and six union territories

The president, Pratibha Patil, was elected in July 2007 for a five-year term by the members of the central and state legislatures

The prime minister presides over a Council of Ministers chosen from the elected members of parliament

Bicameral. The Rajya Sabha (the upper house) has 245 members"233 elected by weighted votes of the elected members of parliament and the legislative assemblies of states and union territories, and 12 appointed by the president. The Lok Sabha (the lower house) has 545 members"543 elected from single-member constituencies (79 seats are reserved for scheduled castes and 40 for scheduled tribes) and two representatives of Anglo-Indians appointed by the president

Unicameral or bicameral, with elected members; state governors are appointed by the president

Based on the 1950 constitution and English common law

The United Progressive Alliance (UPA), a coalition led by the Indian National Congress, gained the largest number of seats in the May 2004 general election and formed a minority government. The UPA requires additional parliamentary backing in order to govern, and is currently supported by the Left Front, a group of left-wing parties dominated by the Communist Party of India (Marxist)

The last Lok Sabha election was completed on May 13th 2004; the next is due by May 2009

Indian National Congress; Bharatiya Janata Party (BJP); Communist Party of India (Marxist), or CPI (M); Samajwadi Party; Rashtriya Janata Dal (RJD); Bahujan Samaj Party (BSP); Dravida Munnetra Kazhagam (DMK); Shiv Sena; Biju Janata Dal (BJD); Communist Party of India; Nationalist Congress Party (NCP); Shiromani Akali Dal; Janata Dal (United)

Prime minister Manmohan Singh (Congress)

Agriculture, consumer affairs, food & public distribution Sharad Pawar (NCP) Commerce & industry Kamal Nath (Congress) Communications & information technology A Raja (DMK) Defence A K Antony (Congress) External affairs Pranab Mukherjee (Congress) Finance P Chidambaram (Congress) Home affairs Shivraj Patil (Congress) Parliamentary affairs, information & broadcasting Priyaranjan Dasmunsi (Congress) Petroleum & natural gas Murli Deora (Congress) Urban development Jaipal Reddy (Congress)

Yaga Venugopal Reddy

Official name

Form of state

Head of state

The executive

National legislature

State legislatures

Legal system

National government

National election

Main political organisations

Central bank governor

Key ministers

india - iuj.ac.jp · • increased spending on rural welfare, public-sector wages and fuel...

Documents