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US visit: Warming business and political ties
Washington DC, USA: Prime Minister Manmohan Singh arrives at the White House today with U.S.-Indian relations all set to witness a rapid transformation.

India's liberalized economy is booming and ties with the U.S. are strengthening to the benefit of both nations, the world's two biggest democracies. The visit will ``reaffirm, at the highest level, the transformation which is taking place in the India-U.S. relationship,'' Shyam Saran, India's foreign secretary, told a press conference in New Delhi July 13. ``We are hopeful of a substantial outcome.''

Singh meets with President George W. Bush today and will be hosted tonight at the first state dinner of Bush's second term. Tomorrow, Singh will address a joint session of Congress and on Wednesday he speaks at the National Press Club in Washington.

The two nations are set to announce a forum to increase trade that includes ten chief executive officers from each side, including Charles Prince of Citigroup Inc., the biggest U.S. financial-services firm; William Harrison of JPMorgan Chase & Co., the third-largest U.S. bank; Stanley Warren of Cargill Inc., the largest U.S. agriculture company; and David Cote of Honeywell International Inc., the top maker of cockpit electronics. The Indian CEOs include Ratan Tata of Tata Group, India's biggest conglomerate by market value.

The U.S. is India's biggest trading partner and its largest investor, estimated to have pumped $4.1 billion into the Indian economy last year, more than double the $1.8 billion of foreign direct investment in 1998, according to the U.S.-India Business Council.

Trade in merchandise between the two nations was worth $21.7 billion last year, according to the U.S. Commerce Department. The U.S. trade deficit with India from January through May of this year totalled $4.15 billion, the department said, while the deficit with China for the same period was $72.5 billion.

India's $661 billion economy, Asia's fourth largest, is forecast to expand 7 percent in the 12 months ending in March 2006. U.S. companies want Singh's government to ease controls on foreign direct investment in areas such as banking and insurance, and to open up its retail sector. Wal-Mart Stores Inc., the world's largest retailer, is among U.S. companies hoping to open stores there.

India in February opened its construction market to 100 percent foreign direct investment.

U.S. retailers including Wal-Mart, Gap Inc. and Chico's FAS Inc. are buying more inexpensive jewellery and clothing from India as they brace for rising costs from China, their biggest overseas supplier. Goods from China would be more expensive if China revalues its currency, as the U.S. is demanding.

The U.S. may use improved ties with India to counter China's expanding power in Asia and to pressure Pakistan to be more cooperative in fighting the war on terrorism. The key is to do so without upsetting delicate relations in the region. Military ties between the U.S. and India strengthened last month when the two nations signed a 10-year defense agreement that calls for joint production of weapons and cooperation on missile defense.

The accord is a sign the U.S. considers India the dominant power in South Asia and may no longer favour Pakistan. Better U.S. relations could help India gain support for a permanent seat on the United Nations Security Council, which would help make it a global power. To date, the U.S. has withheld support.

``If the UN Security Council is going to be expanded to reflect the reality of the 21st century, as opposed to 1945 when it was created, how could India not be included?'' Inderfurth says.
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Outcome budget to be unveiled this week
New Delhi: The outcome budget, already delayed by a fortnight, is expected to be unveiled this week after the Planning Commission evaluates the progress of projects under various Union ministries.

All ministries have sent their inputs to the finance ministry, which has referred them to the plan panel for evaluation, said a government official. It will document valuable inputs for putting in place a mechanism to measure the development of various central projects. Accordingly, the finance ministry will allocate resources based on the progress of a project.

This is the first time finance minister P. Chidambaram will present the outcome budget, which will measure the "effectiveness" of the money spent on various heads under different ministries.
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ICRA forecasts 6.7 per cent growth this fiscal
New Delhi: Credit rating agency Icra has projected a gross domestic product (GDP) growth rate of 6.7% for the current financial year, with an upside of 7.2%.

The upside is contingent on a faster rollout of investment projects and an improved performance in agriculture.

The Reserve Bank of India (RBI), it may be recalled, in its annual policy statement in April 2005, has projected a GDP growth rate of 7% on the basis of expectations of a normal monsoon and agriculture growth of around of 3%.

Icra's competitor Crisil had projected a growth rate of 6.7% to 7%. Among other think-tanks, Ncaer has projected a growth rate of 7.2%, IMF 6.7%, ADB 6.9% and ESCAP 7.2%.

Referring to farm sector, Icra's bulletin, 'Money and Finance', said that growth in 2003-04 was exceptionally high as there was a rebound from precipitous decline in the previous year. Even with a normal south-west monsoon, the agriculture and allied sector is expected to grow by 1.5% .

With regard to industry, it said that output expansion in April 2005, the first month of the fiscal, was very strong with manufacturing sector growing by 10%. The present phase of industrial output expansion, began in July 2002, is continuing sans structural weaknesses that accompanied the first phase of expansion of manufacturing output in the post-reform period.

Icra expects the export demand to turn weaker in the current year as compared to the previous fiscal. Domestic demand growth, however, continued to be strong, as evidenced by the rapid expansion of non-oil import demand (over 50% in April 2005).

The study further added that with company profitability still rising, balance sheets healthy and excess manufacturing capacity reduced to the bare minimum (in most sectors), investment activity is likely to add to the demand facing the domestic economy.

The study has projected a manufacturing growth rate of 7% in the base case, with an upside potential of averaging 8%, provided investment kicks in on a fairly broad basis, particularly in infrastructure sector.
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