India Insight

The biggest losers in India’s economic slowdown

(Any opinions expressed here are those of the author and not those of Thomson Reuters Corp.)

The reaction to news that India’s economy grew at its slowest rate in over a decade was predictable. There was frustration over squandered potential, pleas for a rate cut, unshaken optimism and even an opportunity to indulge in clever wordplay. Yet as everyone from economists to businessmen had their say, the demographic affected most by this slowdown was silent – India’s poor.

One of the big successes of India’s economic growth has been its positive impact on poverty reduction. The percentage of the country’s population living below the poverty line declined from 37.2 percent in 2005 to 29.8 percent in 2010 (the last year when exact numbers were available). That translates to 52 million Indians who have been lifted above the poverty line. Encouraging as those gains are, the country still counts over 320 million poor among its citizens.

Higher economic growth has also correlated with a larger rate of poverty reduction. Between 2005 and 2010, the country’s GDP grew at an average of 8.5 percent and the poverty rate (the proportion of the population below the poverty line) registered an average annual decline of 1.48 percent. In the preceding decade, when GDP growth averaged 6.5 percent, the poverty rate declined at 0.74 percent annually.

If these seem like really small percentages to quibble over, consider this: over the next seven years, India has the opportunity to lift anywhere from 66 million to 160 million people out of poverty (see chart). The difference between the two numbers is that the first assumes a 1 percent annual decline in the poverty rate, while the second assumes a 2 percent decline.

from Global Investing:

Retail volte face confirms India as BRIC that disappoints

Jim O'Neill, the Goldman Sachs banker who coined the term BRICs to capture the fast-growing emerging-markets quartet of Brazil, Russia, India and China,  has fingered India as the BRIC that has disappointed the most over the past decade in terms of reforms, FDI and productivity. New Delhi's latest decision to put on hold a landmark reform of its retail sector will only confirm this view.

The government's backtracking on plans to allow foreign investment in supermarkets will not surprise those accustomed to New Delhi's record on key economic reforms. But it means India's weak performance on FDI receipts will continue and that's bad news for the worsening balance of payments deficit.  Speaking of the retail volte face, O'Neill said: "They shouldn’t raise people's hopes of FDI and then in a week, say, 'we’re only joking'".

Various Indian lobby groups that oppose the reforms contend that foreign giants such as Wal-Mart and Tesco will kill off the livelihoods of millions of small traders.

Has India squandered its English advantage?

When the British were finally expelled from India in 1947, driven out of a country scarred by decades of imperialist rule, they left at least one parting gift: a linguistic legacy that has formed a crucial ingredient in the country’s economic miracle.

English proficiency is hailed as an invaluable foundation in India’s rise to the top of the world’s information technology and knowledge outsourcing industries, fuelling the country’s rapid growth with billions of dollars of business every year and streams of overseas investments into global IT centres such as Bangalore.

Nine-year-old Chinese pupil, Sun Minyi, listens to his teacher during a special English class at Chongming county, north of Shanghai July 12, 2002. REUTERS/Claro Cortes IV

But, as Asian rival China surpasses India’s English proficiency rates for the first time, that advantage over other developing economies looks to have been squandered.

Is India really the world’s fifth most powerful country?

India is the world’s fifth most powerful country, according to a New Delhi-authored national security document, the Times of India reported on Wednesday, as Indian analysts placed the emerging nation above major European powers.

Outranking traditional global powers such as the UK, France and Germany, India’s ballooning population, defense capabilities and economic clout were cited as reasons for its position behind only the U.S., China, Japan and Russia in India’s National Security Annual Review 2010, which will be officially released by the country’s foreign ministry next week.

Its statistical foundations in terms of population numbers and GDP aside — in terms of purchasing power parity, it should be noted — India’s experience of wielding power on the global stage of late, boosted by its temporary seat on the United Nations Security Council, has been less encouraging.

Where has India’s hawkish stance on China gone?

India’s complex diplomacy with China became further muddled on Friday as the chief of the Indian army categorically denied any troop build-up on either side of the Asian giants’ shared border in response to recent reports of Chinese military incursions into Indian territory.

India’s civil government and army officials strike a delicate balancing act in their position on the country’s powerful neighbour, with a hawkish military stance traditionally tempered by more reserved – but domestically unpopular – rhetoric from New Delhi.

A soldier of the Indian army stands guard in Medo village, an insurgency affected area, on the road to India-China border in the northeastern state of Arunachal Pradesh September 6, 2007. Picture taken September 6, 2007. REUTERS/Parth Sanyal

However that appeared to be out of date on Friday as General V.K. Singh, Chief of Army staff said neither side was bolstering its border troops, four days after trashing media reports of potential acts of Chinese aggression on Indian soil last September.

Does the Indian media overplay Indo-Chinese tension?

New Delhi’s flat-out denial of the most recent reports by state authorities of Chinese military incursions across its border with India in Jammu and Kashmir may show a tendency to gloss over such seemingly insignificant events — in favour of bigger strategic and trade interests — that the media appears to ignore. Chinese Premier Wen Jiabao (L) talks to Indian Prime Minister Manmohan Singh during a signing of agreements ceremony in New Delhi December 16, 2010. Wen pressed on with a charm offensive in India on Thursday, vowing "friendship and cooperation" a day after striking business deals with his hosts worth more than $16 billion. REUTERS/B Mathur

Chinese Premier Wen Jiabao (L) talks to Indian Prime Minister Manmohan Singh during a signing of agreements ceremony in New Delhi December 16, 2010. REUTERS/B Mathur/Files

On Monday afternoon, amidst a lull in the seemingly endless Indian news cycle, all major TV news channels flashed a breaking story of Chinese troops crossing the Indian border in the disputed northern state.

Permit-free visits for foreigners to India’s Unexplored Paradise?

INDIA CHINA BORDERFor the first time in half a century, India plans to let foreigners visit all of its troubled north east without special permits, opening up the picturesque region that New Delhi hopes will be its gateway to Southeast Asia, local media have reported.

If the proposal goes through, it will open up the eight north eastern states that remains a mystery even to many Indian, a region so unexplored that India’s tourism board sells it as “Paradise Unexplored.”

It could also give a fillip to the local economy, which now largely is sustained on federal handouts, creating jobs and boosting incomes in the states where separatist movements have tapped into resentment over lack of development.

Suu Kyi underlines India’s strategic approach to Myanmar

Aung San Suu Kyi, the Myanmarese pro-democracy leader who was released from seven years of continuous house detention on Nov 13, used her first interview with an Indian media organisation to criticise the world’s largest democracy for its foreign policy towards the military junta-ruled nation.Aung San Suu Kyi addresses supporters outside her National League for Democracy party headquarters in Yangon November 14, 2010. REUTERS/Soe Zeya Tun

“I am saddened with India. I would like to have thought that India would be standing behind [the pro-democracy movement]. That it would have followed in the tradition of Mahatma Gandhi and Jawaharlal Nehru,” Suu Kyi told the Indian Express on Wednesday.

“I do not oppose relations with the Generals but I hope that the Indian government would talk to us as well. I would like to see talks begin immediately. I would like to see close and friendly relations, like those that have not been seen recently.”

from Afghan Journal:

India, U.S. build ties, with an eye on China

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In the end, Pakistan wasn't the unspoken elephant in the room when U.S. President Barack Obama sat down for talks with Indian leaders. Far from tip-toeing around India's Pakistan problem which complicates America's own troubled war there and in Afghanistan, Obama spoke clearly and squarely.

Safe havens for militants in Pakistan wouldn't be tolerated, he said, in what was music to Indian ears. But he also left nobody in doubt Washington wanted India to improve ties with Pakistan, saying New Delhi had the greatest stake in the troubled neighbour's stability.

But the one elephant that the leaders of India and the United States didn't name but which was written all over the flurry of announcements made during the three-day trip was China. Beginning with the headline-grabbing endorsement of India's bid for a permanent place on the U.N. Security Council to maritime cooperation and a surprise partnership to promote food security in Africa, the United States seems to have gone the extra mile to bolster New Delhi's credentials as a global player.

from Afghan Journal:

Obama in India next month; ripples in the region

U.S. President Barack Obama takes part in a town hall meeting at Concord Community High School in Elkhart, Indiana, February 9, 2009. REUTERS/Jim YoungU.S. President Barack Obama's visit to India is still a couple of weeks away and there is the huge U.S. election before then, but it has already set off ripples in the region. The Chinese have especially cottoned onto Obama's Indian journey, fretting over what they see as a U.S. attempt to ring fence China by deepening ties with countries around it. And continent-size India with a population of over a billion and an economy growing at a clip just behind China's is seen as a key element of that strategy of containment.

Qui Hao of the National Defense University, writes in the Global Times that while U.S. military alliances with Japan and South Korea form the backbone of the "strategic fence" around China, the "shell" is the partnership that Washington is building with India, Vietnam and other nations that have territorial disputes with China.

India, Qui cautions, would do well not to blindly follow America's policies in the region, especially if it really wanted to be a global player. India, China and the United States were bound up in a triangular relationship, and as the two weaker parts of that relationship, it was important that they maintained stable ties so that Washington didn't exploit their differences, Qui wrote.

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