Country Report India March 2009

Outlook for 2009-10

• The month-long general election will commence on April 16th and will be very closely fought. The Indian National Congress will have a slight edge over the main opposition Bharatiya Janata Party in forming the next government.
• There is a strong possibility that the next coalition government will be even more fractured than the current one; this suggests that the likelihood of the next government completing a full five-year term is low.
• Relations with Pakistan are set to remain tense in the wake of Indian accusations of Pakistani complicity in the terrorist attack on Mumbai. The process of normalising bilateral ties will come to a temporary halt.
• Because of slower government revenue growth and new stimulus spending, the Economist Intelligence Unit expects the budget deficit to reach 7.2% of GDP in fiscal year 2009/10 (April-March).
• Global deleveraging and attempts to reduce risk exposure will continue to hit India hard, and we forecast real GDP growth of 5% in 2009/10, after an estimated 6% in 2008/09.
• Further portfolio capital outflows, weakening industrial activity, a persistent current-account deficit, a widening fiscal deficit and a further loosening of monetary policy will all put pressure on the local currency in 2009.

Monthly review

• Pakistans interior minister, Rehman Malik, admitted that the terrorist attack on Mumbai had been partly planned in Pakistan. This went a small way towards easing tensions with India.
• India charged the sole surviving gunman of the attack, Mohammed Ajmal Amir Qasab, with waging war? against India. The charge sheet ran to more than 11,000 pages.
• On February 16th the government presented an interim budget for 2009/10. It included a revision to the estimate for the fiscal deficit in 2008/09, which is now expected to reach 6% of GDP, from 2.5% previously.
• The cabinet has adopted new foreign direct investment rules which, if passed, would ease restrictions on foreign equity inflows into Indian companies.
• Real GDP growth reached 5.3% year on year in the third quarter of 2008/09. The growth rate was reasonably strong, but was still the weakest economic performance in five and a half years.
• Merchandise exports fell by 1.1% year on year in December. Industrial output fell by 2% in the same month, pulled down by a shrinking manufacturing sector.

This report covers the following industry codes:
SIC Code: 1
NAICS Code: 11

• Highlights
• Outlook for 2009-10: Domestic politics
• Outlook for 2009-10: International relations
• Outlook for 2009-10: Policy trends
• Outlook for 2009-10: Fiscal policy
• Outlook for 2009-10: Monetary policy
• Outlook for 2009-10: International assumptions
• Outlook for 2009-10: Economic growth
• Outlook for 2009-10: Inflation
• Outlook for 2009-10: Exchange rates
• Outlook for 2009-10: External sector
• Outlook for 2009-10: Forecast summary
• The political scene: The election campaign heats up
• The political scene: Tension with Pakistan abates ever so slightly
• Economic policy: The fiscal deficit doubled in 2008/09
• Economic policy: The RBI has scope to cut rates
• Economic policy: The government mulls new FDI rules
• Economic performance: Economic growth slowed in the final quarter of 2008
• Economic performance: The government estimates growth for 2008/09 at 7.1%
• Economic performance: Industrial output and exports fall sharply
• Economic performance: Job losses mount
• Data and charts: Annual data and forecast
• Data and charts: Quarterly data
• Data and charts: Monthly data
• Data and charts: Annual trends charts
• Data and charts: Monthly trends charts
• Political structure