��������������������������Year 2007 has been marked as the ‘India-China Year of Friendship through Tourism’ which was lunched on 14.2.2007 in New Delhi to promote tourism between the two countries. On this date the two also officially released a joint logo for�the�tourism year, made up of Chinese landmark the Great Wall and India’s Taj Mahal as well as the two national flags.

Since then both have had on their agenda number of activities such as :

1. A sixteen Member Chinese Media / Tour Operators group visited India on fam tour in March, 2007 under the �Hospitality Scheme� of Ministry of Tourism.�
2. China National Tourism Administration (CNTA) sponsored delegation comprising of Tour Operators from Jiangsu Province, Zhejiang Province and Shanghai visited India for tourism promotion.
3. CNTA participated in South Asia Travel & Tourism Exchange (SATTE) Exhibition which was held in April, 2007 in New Delhi
4. Ministry of Tourism organized Road Shows in Beijing and Shanghai in April 2007 to showcase India�s tourist attractions in Chinese market

And both governments are immensely encouraging their citizens to visit each other’s country as part of the move to enhance economic, strategic and cultural ties.

The increase in the number of tourists from China to India and vice versa justifies these moves. (more…)

Seems like there�e a complete deadlock between the Indian Government and the Left over the Indo�US Nuclear Deal and none is going to change it mind�

Devils advocate, a classy�program on CCN IBN, anchored by Karan Thapar, India’s best known�television commentator and interviewer, had an� exclusive interview�with Rajya Sabha�s (Council of States, the Upper House of Parliament) MP, �Sitaram Yechury, on last Sunday, on how and why is the Left against the�Nuclear Deal�and is the Indian Government going to be �made to fall�?

The discussion was basically on two points: bringing down the government by the Left hence stopping the deal or the Left protecting the government at the cost of the deal.�

The interview on CNN IBN goes like this:

Karan Thapar :

If operationalising the deal is your key concern rather than withdrawing support, then I shall put it you that the deal is in fact not going to be operationalised until the US Congress ratifies it and until India and America sign on the dotted line. And that being the case, if you withdraw support, then you can stop the operationalisation. Are you prepared to do that or not?

Sitaram Yechury :

According to the Indian Constitution, once an international agreement has been arrived upon, there is no need for Parliament�s ratification.

Karan Thapar :

Many people watching this interview will say that Sitaram Yechury faces a trade-off. He can either bring the government down, as a result stop the deal, or he can protect the government at the cost of the deal. What he seems to be indicating is that he doesn�t want to bring the government down, so he is prepared to let the deal take place even though he speaks against it.

Sitaram Yechury :

No, I do not accept the facile link-up of the deal being or not being operationalised or even the government falling down, which you are making. You are making a link-up that is simply not acceptable because it is not true.

For the entire hot discussion watch the Video on CNN IBN Live

It seems a mid term poll is very likely�in a few months to go.

So does the present 21st century India fear America? And are we seeing a shift in our political scenario with foreign policy issues taking a shape that it has today leading to Governments falling?

What�s your say?

In July 2005, US and India reached an agreement on civilian nuclear energy cooperation which aimed at warming US-India relations, lift the US moratorium on nuclear trade with India, provide US assistance to India’s civilian nuclear energy program, and expand US-Indian cooperation in energy and satellite technology. With this deal US recognized India’s history of imposing voluntary safeguards on its nuclear program. It also recognized that India has a good record on proliferation. Although it is not a signatory to the Nuclear Non-proliferation (NPT) treaty, India has maintained strict controls on its nuclear technology and has not shared it with any other country.�

But India�s own political parties, all this time, had been thinking the other way. Some of these have never been happy with the US and now using this nuclear treaty as a weapon, they have raised voice over Indian government�s increasing relationship with the US. In this week, they have asked the government to stall the agreement and demanded an immediate review of all strategic aspects of the agreement� And if it not done, they have threatened mass protests across the country and also a re-look at its relations with the ruling United Progressive Alliance.

The left front is asserting that using this deal, US is putting pressure on India to buy fighter planes, helicopters, radars and artillery involving multi-billion dollars investments of Indian forex reserves. The left front says, this deal for US alone, is a strong �commercial advantage�.�

Pakistan & the deal?

Pakistan though a strong alliance of US since 9/11 happenings, has not received a similar deal on from Washington. Some critics say this apparent U.S. favoritism toward India could increase the nuclear rivalry between these two nations, and potentially raise tensions in the already dangerous region.�
Pakistan is worried that this will possibly feed the Indian nuclear weapons program and therefore weaken deterrence. Some experts feel these two countries, both already nuclear, will now deal more cautiously with each other. Pakistan is already exposed as a proliferation risk. Pakistani nuclear scientist A.Q. Khan’s illicit nuclear network, revealed in 2004, had shocked the world with its trade of nuclear technology. These experts therefore has a reason to worry worry that this US-India deal could even prompt Pakistan to go elsewhere for a similar nuclear deal.�

China & the deal?�

Some analysts feel that China’s rise in the region is prompting US to seek a strategic relationship with India. The US is trying to cement its relationship with India to counter balance China. The US administration is hoping that improving ties with India is the only way to politically deal with China.

China and India are set to begin joint military exercises in October, just another example of the two nations growing bilateral relations. The decision to begin military exchanges and cooperation has�focused on two areas: counterterrorism and joint military exercises.�

In June we reported on India Army Chief of Staff General Joginder Jaswant Sigh’s visit to China and the subsequent announcement that China and India would hold the first ever joint army exercises between the two nations. Both countries hope that the joint exercises will�strengthen Sino-Indian defense ties and�build up�confidence within each�another.

Jagannath Panda comments in a report for The Jamestown Foundation’s China Brief, that�China has increasingly relied on its military diplomacy to advance its strategic ambitions overseas. Indeed, China’s military is a very active ambassador for the country abroad, supplying arms and training across the developing world. In India, the Chinese have looked to overcome a historical mistrust by increasing the breadth of the exchanges, as Panda’s report states:

Perhaps, the significance of these exchanges is their unprecedented nature; not even in the prime days of the �bhai-bhai� Sino-Indian relations did this type of relationship exist. It seems that the proposed �joint military operations� are intended to bridge the communications gap between the two militaries. Both armies are in favor of inviting observers to their exercises, which suggests a �degree of comfort� with each other more than anything else. (more…)

With Shanghai Having a Market Cap Four Times The Size of Bombay - Why Is It Indian Companies Are Taking The Lead In Global M&A?

An examination of the roles and responsibilities of the stock exchanges of Shanghai and Mumbai leads to some interesting potential implications for the development of companies listed on the respective bourses � and some pointers as to why it is currently Indian � and not Chinese � companies that are currently expanding globally.

Firstly, lets look at some comparisons and history.

The Bombay Stock Exchange (BSE) � is known as the oldest exchange in Asia. It traces its history to the 1850s, when stockbrokers would gather under banyan trees in front of Mumbai’s Town Hall. The location of these meetings changed many times, as the number of brokers constantly increased. The group eventually moved to Dalal Street in 1874 and in 1875 became an official organization known as ‘The Native Share & Stock Brokers Association’. In 1956, the BSE became the first stock exchange to be recognized by the Indian Government under the Securities Contracts Regulation Act. (more…)

Indian Army Chief of Staff General Joginder Jaswant Singh, upon returning�from China where he met with his Chinese counterparts at the end of May, announced that China and India would hold the first ever joint army exercises between the two nations. At the time, this was seen as a clear step forward for two nations that went�to war over border issues in 1962 and to this day disagree on the exact boundaries of the two countries. That step forward may have been a half step however, as the Indian foreign minister was quoted as saying that “India has told China that it will not part with portions of the state of Arunachal Pradesh to settle a decades-old border dispute.”

Just a few weeks ago, it was all looking so promising when The Jamestown Foundation�reported�on�the announced joint exercises in their biweekly China Brief:

Given China’s concerns regarding the separatist activities in Xinjiang and Tibet, the Chinese military has expressed interest in learning from their Indian counterparts who have had significant experience in counter-insurgency operations in the Kashmir region and in the northeast. While China and India have viewed each other with suspicion since the 1962 border war, the joint exercise reflects the ongoing efforts by both countries to improve the bilateral relationship. (more…)

Ha ! What a politically involved series of meetings 2.6billion has had - we meet with the Chinese equivilent Ministers in two weeks time courtesey of Dezan Shira & Associates long term contacts in China law & tax so look out for that. Meanwhile, in Delhi, here is our debate with India’s Minister of Commerce, Kamal Nath. Chris Devonshire-Ellis, senior partner of Dezan Shira & Associates international practice, and asks the questions:

Mr. Minister, how do you perceive India’s reforms ?

I believe we are in the secondary stage. First, we have ensured that the regulatory reforms are largely in place and enshrined in law by an act of Parliament. These cannot be changed without debates and an amendment to the acts in question. The secondary stage we face is implementation. This is a big challenge. China is much better than implementing reforms than we are, they are a one party state. But sometimes they rush. We have other issues, including democratic debate, to consider. The second phase is governance. We have to ensure that acts of parliament are implemented. This is the Indian governments huge task.

How does democracy drive India ?

We are all elected. We all have to go home and face our constituents and answer their questions. Usually there are five:

1) How can I protect my land ?

2) How can I get clean drinking water ?

3) How can I get basic sanitation ?
4) How can I get basic health care beyond the local herbal traditional recipes ?

5) How can we get access to education for our children ? (80% of rural Indians drop out of education at age eight)

These are not unreasonable requests. Our goal is to spread increased wealth, and empower our rural areas. It is a moral issue. 65% of Indians live in rural areas, and as a democracy we must listen to them. Our challenge is to spread growth amongst the nation. If we can accomplish this, with such a workforce, India will greatly affect global trade and properly contribute to it.

What about the economic gap between manufacturing and agriculture ?

Agriculture is a problem. We need to create more jobs in manufacturing. This is intended to take some of the stress off un-sustainable agriculture, such as a family of 15 trying to live off 1 hectare, but we need help with this.

So how are the Doha (India’s entry into WTO amongst others) talks going ?

Globally we missed the 2005 deadline. At that time not many nations understood the small print over agricultural reforms. Now we do. Agriculture is the sticking point, that is really all, and it is not confined to India. The developed world subsidises it’s agriculture. This is for different reasons. The EU for example, subsidizes, but has no real intention to sell to India, it is more an EU internal issue. But take cotton. The US is an export aggressive nation and wants to export cotton to India. The US government subsidises US cotton production by 45%. I am happy to import US fruit and vegetables. But I am not happy to import their subsidies. All that said - we are confident of a breakthrough mid-summer this year. Bush has a legacy to leave. To our European cousins I can say we have agreed a reduction in tariffs in imported wine and spirits. (Loud cheers from various sections of 2.6billion journos who heard that).

How is the deregulation of legal services in India coming along ?

We’ve always felt that lawyers can debate issues better than government, so we’ve passed this over to them to deal with in their own industry. There are some domestic regulations that need change. For example, you can only have a maximum of 20 partners in India, and in London it’s 1,000. Consequently the size of Indian practices is diminished. We are looking at ways to both liberalise the Indian domestic market, and when that is sorted, we’ll look at how we can introduce foreign expertise intio the mix.

The retail industry in India is still restricted to foreign investors. Any comments ?

We face a number of challenges here. The main two is a domestic fear that by opening up this market we will loose our Mom & Pop stores, and that only 3% of retail in India is collectively organised. The industry as you describe does not exist on that scale here. Retail in India needs calibration and defination, and we need to ensure that the family store is continued to be passed down the generations from Fathers to sons, from Mothers to daughters. We need investments at the back end for sure but we also need to secure the legacy of the local traders. THis evolution will take time.

Can India’s Judiciary uphold and enforce the Law ?

We have problems here, but not in the essential structure of the courts. You never hear of Indian courts being biased. We have a well proven rule of law. We do have problems in backlogs of work and the courts are jammed up, and that is a problem. We have rule of law here in India and lawyers themselves can be clever and constently delay hearings on technicalities. There is a legal backlog and we are aware of this. But our courts are independent and impartial. We are looking at ways of reforming legal administration with the help of the UK, US and EU. But this will take time. The good news is the process is there !

Minister Nath, thank you for talking to us

Chris Devonshire-Ellis

Senior Partner, International Practice, Dezan Shira & Associates

We met today with India’s Finance Minister, P. Chidambaram. In a frank and pragmatic address he made the following points and observations relating to the sustainability of India’s growth:

How do you see India’s FDI evolving ?

India had FDI of USD10billion in 2006, this is expected to rise to USD12.5billion for 2007. We believe this will rise to about USD25 billion in the next five-ten years. Another income source for the country that differentiates us from say, China, is that of the Indian diaspora, which is the largest in the world. Indians overseas remit annually about USD24 billion back to India. But regular FDI is expected to grow at about 9% annually.
What measures are in place to sustain this ?

We are well down the road of reforming as a nation. For example, our Government is now made up of academics and professionals, our Prime Minister is a world renowned economist and was educated at Cambridge (1st class honours degree) and Oxford (D. Phil. degree). As finance Minister I am a qualified lawyer and a Harvard graduate. Our Planning Commission is headed up by a Professor of economics, while our Minister of Science & Technology is also a lawyer and has been President of the Supreme Bar. Our Minister for Commerce has a degree in commerce. So government now has the right academic talent, we are more academics than politicians, and this helps in getting the intellect required to understand what needs to be done, where the problems are, and how to fix them. We have liberalised most industries in India, and most are available for foreigners to particpate in 100%. Other sectors, such as banking and insurance, will be liberalised by 2009, and our effective tax rate is 20%. So we have a lot to offer. Sustained growth is out key. We also enjoy high savings rates in excess of 30% of GDP and as long as this is maintained our fundamental growth will be sustainable. India is already the worlds 3rd largest economy having overtaken Japan recently.
Which areas of India are seeing the highest growth rates ?

Delhi and the Punjab lead, followed by Mumbai and the Western coast, and South East Indian around Chennai. The coastal cities are doing well. Our challenge is to get that growth into the rural areas. 65% of Indians live in rural villages and we need to empower them. We need to balance our increased economy and infrastructure development with the moral issue of providing basic services, such as fresh drinking water, sanitation, education, and medical care to the rural areas. If we can accomplish this we will overtake China by 2030 as the demographics of India’s young population, our huge labour force affect global development, and as China’s one child policy starts to bite into their aging population.

What about the disparity between the service industry and the manufacturing industry in India’s economy ?

Much is made of this, and we have had problems with the development and implementation of large manufacturing industries. But this is changing. Manufacturing will have grown by 11% in this quarter and a percentage of GDP. So we don’t see this as an issue actually. At present services account for 55% of GDP, Manufacturing 28% and Agriculture 17%. Agriculture is where the problems lie, not manufacturing, and we are pushing through reforms to assist this sector also.

Is Micro-credit a big tool for the rural population ?

Very much so and it is an untold tale of success actually. India has 2.5 million self-help schemes, largely run by women, and supported by NGO’s and banks. They have a recovery rate of between 97-99%, which is a fantastic achievement. This is also helping lift the rural population out of poverty and later, into productivity. It will take awhile but the rural population will be the continuing engine of India’s growth in 20 years time.

How important are developing countries in global growth ?

Actually 2006 was a watershed year. For the first time, 50% of gobal growth came from the developing nations. The US is still immensely powerful, but Asia is now the primary growth driver, lead by China and with India behind. This will not change. To succeed globally, international businesses must have China and India in their plans.
How does India compare with China in it’s economy ?

Apart from some similarites in demographics, there is a huge difference in the type of economies we have. India is actually far closer to the US model than the Chinese. China’s economy is dependent upon exports, whereas India is a consumer led economy. We have a massive middle class that can and does buy. We use exports to fund our imports, and have a healthy domestic market for product that is far stronger than China’s.

Minister, thank you for your time.

Note: IBM have just announced plans to invest USD6 billion in India by 2009, effectively tripling their existing investment of USD2 billion. Growth for IBM in India during 2006 was 38%, with a workforce of some 50,000 employees in India. 90% of that workforce is engaged in providing services external from India.

We’ve been lucky enough to hear the Indian Prime Ministers comments as regards India’s development today (13th March 2007) in comments to 2.6billion.com. Chris Devonshire-Ellis, of Dezan Shira & Associates, summarises:

“Dr. Singh made a provocative yet illustrating presentation over the current and future development of India in the global community. I summarise these as follows”:

1) It’s March 2007. Where is India today ? And what is the sustainability of India’s Economic Growth?

India’s economy has grown at 8% the past three years and touched 9% in 2006. In terms of domestic savings and deposits, India has also recorded rates of 32% & 34% of GDP being realised in this fashion. Accordingly we see that if India can sustain this growth - and we are taking steps to ensure this will be the case, a sustained growth rate of this magnitude will transform India and smooth it’s passage as a global player.

2) How will this be accomplished?

Those savings rates will enable us to re-invest. However we do need to reconcile current public spending with fiscal policies. Our macro-economic policies dictate that such rates will continue. Additionally, we expect a three fold increase in FDI over the next two years and this will also assist. There are weaknesses, and we recognise these. India needs to develop a long term debt market also to carry some of this, and we need to better co-ordinate public and private investment.

3) India’s democracy and it’s multi-faceted images has often meant stagnation for the country. Is this a problem?

India is the world’s largest democracy. we are proud of this, and we are a large nation. Although oppostion parties may be voiciferous in opposition, actually there is a lot of
common ground and fiscal unity on what needs to be done. There is more unity over the countries direction towards openess, transparency and welcoming of foreign investment than meets the media eye at this moment in time.

4) How about WTO entry?

We are hopeful that the current round in Doha will reach a conclusion for Indian entrance in July. These are complicated talks, and we need to be sure that developed nations do not impose unreasonable quotas upon us, especailly in agriculture. Between 35 and 50% of all rural Indians are illiterate. We truly are a developing country and we need assistance to educate. India as part of the global community is better off and the global community with that labor force is better off also if we are permitted to join. The future of low-cost manufacturing as we have seen with the rise of China, lies in Asia, not in the West.

5) India’s service industry and it’s manufacturing industries are imbalanced. How do you see this changing to a more sustainable economic model?

India has a historic reason for this, yet we must balance our economic output to protect sustainability. We must develop more manufacturing. Actually, our policies are in favour of this; we export in order to purchase imports that we need. We don’t need to create huge trade imbalances. But we do need to boost exports to buy the materials we require nto redevelop the countries infrastructure.

6) How much do you think is required in terms of infrastructure development?

We have budgetted for USD300 billion over the next few years. Funded by the increase in FDI, the increasing levels of savings I mentioned, the growth in export earnings and other domestic factors as follows:

* More favorable investment and labor policies, we are constantly evaluating these;

* India’s natural demographics, which see us with a young labour force over the next 30 years as opposed to China’s, which is aging;

* Education in workforce: We are increasing investment in education from 3.6% today to 6% in the next three years.

* As I mentioned earlier, the creation of long-term debt markets. International FDI into India just this year has been more than Institutional income for the first time ever.

7) How about security with Pakistan and China ?

The media loves to sell newsprint. Relations with Pakistan are cordial, although we have our well known differences, these are being worked on. With China we have border disputes but again, these are being discussed. It is not in anybodies interest to fall out of the global community, and although we have differences with these, and other nations from time to time these can be worked out as global solutions. India, with over 1 billion people, is part of the global community and we are working towards our integration into this world.

Prime Minister, we thank you for your time.