The new government which is just two months into its term is changing the economic future of the country, and bringing about significant changes in the Geopolitical and strategic scenario.

There is optimism in the stock market, whose turnaround in the last 3-4 months has been nothing less than spectacular, coinciding as it has with the rising trend in the American markets. Foreign Institutional Investors have invested heavily in both debt & equity. The Current Account Deficit ( CAD) is at a historic low level and general upward sentiment has stabilised the Rupee to Rs 60 to a dollar against Rs 68 last year. The positive sentiment is also reflected in the latest IIP ( index of industrial production) which grew at a 19 month high of 4.7% in May.

While not abandoning the earlier government’s social sector schemes, the budget has a multi-pronged approach to encourage manufacturing, real estate, infrastructure, tourism and to pursue disinvestment with a new zeal. A lot of emphasis is being laid on FDI and Public Private Partnership (PPP) for development of infrastructure, specially the railways.

The budget has had its hits and misses:

1. The optimist target of fiscal deficit as proposed by the earlier UPA is being retained at 4.1% with an aim to reduce it to 3% by the year 2017. That seems to be a tall order.

2. It has reiterated the government’s commitment to come out with a clear road map for implementation of Goods and Services Tax ( GST) by the end of the current year. Most economists are of the opinion that as and when implemented it would be a game changer.

3. The budget has increased the Foreign Direct Investment (FDI) limit from 26% to 49% in the areas of Defence manufacturing and Insurance sectors. India is one of the largest importers of arms. In fact, for a couple of years it has been the largest. The indigenisation of defence manufacturing has been a long-standing goal of policymakers, mainly because it is believed that in its absence India cannot hope to become a great power. Another reason for discouraging the arms imports is that it leads to substantial outflow of foreign exchange thereby adding to India’s generally high CAD. It is widely believed that increased FDI limit in Insurance sector would eventually lead to money flowing into cash starved Infrastructure and real estate sectors.

4. The budget also proposes to set up an infrastructure trust to help provide long term finance for the sector.

5. The Real Estate Investment Trusts (REITs) should be operational in eight months to a year. This measure is expected to give a fillip to the sector, which is more or less unorganised at present.Though a pass through in terms of taxation has been allowed on rental income, there are still a number of clarifications required on other taxes such as estate duty, Service tax etc.

6. The budget proposes 100 smart cities. To encourage this, the built-up area and capital conditions for FDI have been reduced from 50,000 square meters to 20,000 square meters and from $10 million to $5 million respectively with a three year post lock in.

7. The disinvestment in the PSU banks is proposed by the Finance Minister. This is expected to be achieved through public offering with a twin objective, to the benefit of retail investors and to meet the capitalization requirement as per BASEL III norms.

8. To boost tourism, facility of Electronic Travel Authorization ( e-Visa) would be introduced in a phased manner at nine airports in India within the next six months. Some tax concessions have also been given to tour operators.

9. There has been no clarification on the General Anti- Avoidance Rules ( GAAR) which kick in from 1 April 2015. This acted as a temporary dampener for the stock market. These are provisions designed to check tax evasion. The government should have come out with unambiguous and transparent provisions in this regard in order to assure the markets.

10. The governments stand on retrospective taxation leaves a lot to be desired. When BJP was in opposition they described it as Tax Terrorism. This could be a big stumbling block for new foreign investments into India.

11. Filing an appeal against a customs, excise or service tax order passed by a lower authority will now require one to deposit at least 7.5% of the amount demanded by the department with the amount rising to additional 10% for second stage appeal. These provisions are regressive, as in most cases the demands confirmed by lower authorities are set aside by higher authorities.

Whereas the budget makes a sincere attempt to revive the Indian economy, at the geopolitical level, the Modi government appears to be courting China. There have been four senior-level interactions with China. First Mr Wang, foreign Minister of China, visited India, followed by the Vice President of India and later the Chief of Army visiting China and now Mr Modi meeting Mr Xi Jinping at the BRICS meet in Brazil. The meet led to the announcement of the setting up of BRICS bank with an authorised capital of $ 100 billion and a paid up capital of $ 50 billion, equally subscribed by the members. The bank would operate on the principle of one country one vote. In addition, there would be a $100-billion Currency Reserve Arrangement (CRA). For CRA, China will contribute the largest amount at $41 billion, followed by India, Russia and Brazil with $18 billion each and South Africa with $5 billion. The stated aim is to have a positive precautionary effect, help countries forestall short-term liquidity pressures, promote BRICS cooperation as also strengthen the global financial safety net. The bank is to be headquartered at Shanghai with the first president to be an Indian with a six year term.

Rather than challenging the might of IMF & World Bank, the intention behind the establishment of the BRICS bank seems to be of encouraging the emerging economies to set up parallel institutions to supplement the Bretton Woods institutions established under the leadership of Americans and other developed countries. India has generally had a favourable experience of borrowing from these institutions in the 1980s and 1990s, and therefore needs to positively engage with them. A BRICS bank may act as a catalyst to quicker reforms on voting and shareholding pattern of the IMF and World Bank – a long standing demand of emerging economies, including India.

  -Raman Chadha

Secretary of State John Kerry will represent the United States in an annual session of Strategic Dialogue with India, scheduled for July 31, and his visit will be followed by the Defence Secretary Chuck Hagel in early August to revitalise a relationship the US sees as crucial counterbalance in Asia to an increasingly assertive China, a Reuters report quoted US officials as saying on July 16.

The report further states that they will be the most senior most American officials to visit India for talks with the new Government of Prime Minister Narendra Modi, ahead of his visit to the United States, slated this September.

It was at the close of the then Secretary of State Hillary Rodham Clinton’s meetings with the Government of India on July 20, 2009, that the two Governments issued a joint statement regarding their intentions to accelerate the growth of their bilateral relationship to enhance global prosperity and stability in the 21st century. Both Governments had outlined a Strategic Dialogue that would focus on five principal pillars; strategic cooperation, energy and climate change, education and development, economics, trade and agriculture along with science and technology, health and innovation.

It is in line with this agreement that the annual strategic dialogue is being held ahead of the bilateral meet.

“If India and the United States are to build a truly strategic partnership, the two countries must each commit to it and defend it in equal measure”, Republican Senator John McCain has said on the Senate floor on June 26, according to a PTI report.

“We must each build the public support needed to sustain our strategic priorities,” he further added.

The best part of the India-US bilateral ties is that the both the major political parties in America are keen to see the relationship grow in strength. Wary of the Chinese role in geo-political conditions of Asia-Pacific zone, the United States wants to see India emerge stronger economically and politically in Asia.

According to the Reuters report, in testimony for a hearing of the US Senate Committee on Foreign Relations, Nisha Biswal, the US Assistant Secretary of State for South Asia referred to planned joint military exercises involving India, the United States and Japan, a country with a growing strategic rivalry with China in East Asia. “We see opportunities for increasing the collaboration across Southeast Asia,” she said. “We are engaging more frequently in consultations and dialogue with India on ASEAN (the Association of Southeast Asian Nations) and look forward to increased and more frequent consultations across the East Asian sphere,” Biswal said, adding that “A rising India is in some ways going to be an ameliorating influence on China, in China’s own growth and China’s own behaviour in the region.”

At a time when Narendra Modi has sent clear signals to the world that his Government is committed to bring the nation’s economy back on growth track, the NDA Government in India has been keen for better multilateral ties with Japan and even Russia and China, as was clear from last week’s BRICS Summut.

India wants to create mutually beneficial relationship with the USA that can sustain growth for both nations as partners. United States knows that a strong democratic India is in the interest of peaceful global order. That is why these strategic dialogues will play a vital role in ironing out differences, creating road map for future growth and ensure that September end Modi-Obama talks bear maximum yield for both the nations.

Source: Niti Central

Washington: A top American lawmaker has said Prime Minister Narendra Modi wants to focus India-US partnership on an ambitious strategic agenda.

“It was my clear impression from meeting with the prime minister that he wants to focus our partnership on an ambitious strategic agenda,” said Senator John McCain, who recently met Modi.

“That was certainly the impression we had as well in our conversation,” Assistant Secretary of State for South and Central Asia Nisha Desai Biswal said in response.

A few days after McCain’s meeting, Biswal accompanied Deputy Secretary of State William Burns to meet Modi in New Delhi this month.

“We think that we have a very strong opportunity in terms of the security cooperation and the defence partnership. The PM in his conversation with us talked about defence manufacturing as a key area that India would like to pursue. We think that there is scope and particularly the Indian budget did increase the FDI cap to 49 per cent,” Biswal said.

She said with Burns they had a very good meeting with the Prime Minister, finance minister, external affairs minister and various other members of the cabinet.

“They have identified a desire for an increased US-India cooperation in infrastructure, in manufacturing, in the energy sector and certainly looking at the whole issue of skills and how we can improve access to education and skills in terms of the Indian population,” She said.

Those are all areas where we think that American educational institutions and American businesses, American technology bring very significant added value, she said.

“We’re looking to see how we can address some of those areas in more specificity as we look forward to the strategic dialogue and to the Prime Minister’s visit here,” she said.

Highlighting the two country’s greater collaboration in defence and security partnership, Biswal said “we also are going to advance our ability to work together around strategic objectives in the region”.

“Whether it’s in terms of India’s engagement in East Asia and working with us on issues of maritime security, whether it’s in terms of India’s engagement across South and Central Asia and the role that it plays,” she said.

We certainly look to improve our relationship with respect to how we’re working together to address problems in the region and across the globe, she said.

“I think that those are all areas that we need to strengthen the collaboration between our two countries,” she said.

She said this was an important time to re-examine the US- India relationship.

“The historic elections this spring conferred an unprecedented mandate on Prime Minister Modi to create historic opportunity as well in energising our relationship with India,” she said.

Source: ZeeNews

Updated with Rep. Ted Poe and Rep. Eni Faleomavaega joining Rep. Sherman as leading signatories on the Dear Colleague invite letter 

Dear Colleague,

India’s newly elected Prime Minister Narendra Modi is expected to visit the United States in late September 2014.
As you know, India is the world’s largest democracy and recently held the largest democratic election in history. The United States and India have a strategic partnership, and our nations share core values of individual freedom, religious pluralism, and electoral democracy.
Please join us in sending the letter below to House and Senate leadership asking for an invitation to Prime Minister Modi to address a Joint Session of Congress. To sign on, please contact Siamak Kordestani at Siamak.Kordestani@mail.house.gov or 55911.
Sincerely,
Brad Sherman Ted Poe Eni Faleomavaega
Member of Congress Member of Congress Member of Congress

text of letter:
RE: Invite Indian Prime Minister Modi to Address Joint Session in Late September 2014
Dear Mr. Speaker, Madam Minority Leader, Mr. Majority Leader, and Mr. Minority Leader,
Indian Prime Minister Narendra Modi is expected to visit Washington in late September 2014. Given the importance of our relationship with India, we ask you to invite Prime Minister Modi to address a Joint Session of Congress.
As you know, India recently held the largest democratic exercise in history; about 550 million people voted in free and fair elections.
Since recognizing India’s independence in 1947, the United States and India’s relationship has steadily grown. The United States and India share many core values, including religious pluralism, individual freedom, the rule of law, and electoral democracy.
We have an opportunity to build on the U.S-India strategic partnership to the benefit of both our nations. India is a growing economic power in a strategically important region of the world. New Delhi plays a critical role in regional peace and security.
In each of the last three decades, a Prime Minister of India has addressed a Joint Session of Congress, and the upcoming visit of Prime Minister Modi will allow us to continue that tradition.
Thank you for your consideration of this request.
Sincerely,
Members of Congress

Washington:  Prime Minister Narendra Modi, once denied a visa to enter the United States over massacres of Muslims, is expected to receive the honour of addressing a joint session of the US Congress during a visit to Washington in September.

California Republican Ed Royce, chairman of the House of Representatives Foreign Affairs Committee, wrote to House Speaker John Boehner on Friday and asked that he invite Mr Modi to address a joint session of the House and Senate during his trip.

“In every aspect – whether it be in political, economic or security relations – the United States has no more important partner in South Asia,” the letter said. “It is not an overstatement to say that the US-India relationship will be one of the defining partnerships of the 21st century.”
Mr Boehner’s office did not immediately announce a response to the letter, which was also signed by North Carolina Republican Representative George Holding. Congressional aides said they expected an invitation would be issued to the Mr Modi.

The administration of President George W Bush denied Mr Modi a visa in 2005 under a 1998 US law barring entry to foreigners who have committed “particularly severe violations of religious freedom.”

In 2002, when Mr Modi had just become Gujarat’s chief minister, more than 1,000 people, mostly Muslims, were killed in sectarian riots in the state. Mr Modi denied any wrongdoing. India’s Supreme Court ruled in 2010 he had no case to answer.

President Barack Obama congratulated PM Modi on his election victory in mid-May and invited him to the White House. (Read)

The United States, which sees India as a natural ally and potential counterbalance to China in Asia, is eager to expand business and security cooperation with the Modi government.

However, the relationship has failed to live up to that billing, due to bureaucratic and regulatory obstacles in India to expanded business ties and a political dispute over US’ treatment of an Indian diplomat accused of mistreating her nanny, which some analysts blamed on a lack of policy focus by the Obama administration.

Foreign heads of states and heads of government have been invited to address joint meetings of Congress since the early 1800s, normally to underscore their countries’ close allegiance with the United States.

The last such address was South Korean President Park Geun-hye’s more than a year ago, on May 8, 2013.

Source: NDTV.com