Country Report India October 2009

Outlook for 2010-11

• The scale of the Indian National Congress's victory in the general election in April-May 2009 means that the Economist Intelligence Unit expects the new government to be cohesive and durable.
• Relations between India and Pakistan are thawing, and it remains the case that India's broader objectives towards Pakistan cannot be realised without a resumption of the composite dialogue between the two countries.
• Congress's continuation in power means that economic policy will remain broadly unchanged. Priority will continue to be given to combating the effects of slower economic growth and to measures targeting the rural sector.
• The more dominant role that Congress will take in the new governing coalition means that there is scope for further progress on economic reform. However, internal party dynamics will ensure that progress not guaranteed.
• Real GDP growth is forecast to slow to 5.5% in fiscal year 2009/10 (April-March) owing to the global recession. Economic growth is forecast to accelerate to 6.3% in 2010/11.
• The poor monsoon will keep food price inflation high, and consumer price inflation is forecast to ease only slightly, to 8.6% in 2010 and 5.7% in 2011, from an estimated 9.8% in 2009.

Monthly review

• On August 19th the leadership of the main opposition Bharatiya Janata Party expelled a founding member of the party, Jaswant Singh, after he published a book in which he praised the founder of Pakistan, Mohammed Ali Jinnah.
• In early September the United Progressive Alliance coalition government completed 100 days in office after winning the general election in April-May.
• Direct tax collections in April-August rose by just 4.1% year on year, while indirect tax receipts in April-July plummeted by 28% year on year.
• On August 27th the government revealed its foreign trade policy for 2009-14. It includes the extension of a tax-refund scheme for exporters and greater incentives for exporters to diversify into new markets.
• The Indian economy grew by 6% year on year in the first quarter of 2009/10, up from 4.1% in the previous quarter.
• In July exports declined by 28.4% year on year. Preliminary data for August show that exports fell by 19.7%??