ICRIER N E W S Vol. XVIII, July - December 2007

Contents

ØGoverning Body ØLetter from the Director ØSeminars ØLectures ØRecent Publications ØICRIER Welcomes ØICRIER in the News ØVisitors/Participants ØAbout ICRIER Governing Body

Isher Judge Ahluwalia Uday S. Kotak R. A. Mashelkar Kirit S. Parikh

Swati A. Piramal Chanda Kochhar Janaki Kathpalia Vijay Laxman Kelkar

Rakesh Mohan N. Ravi Aman Mehta Shankar N. Acharya

N. K. Singh Nitin Desai O. P. Bhatt

Malvinder Mohan Singh Nandan M Nilekani Rajiv Kumar

Letter from the Director

Dear Readers:

The second half of 2007 was a busy period for ICRIER with several high level academic conferences and seminars and the completion of some major research studies. During this period (July to December), 23 conferences, research seminars and workshops were organized in collaboration among others with the Ministry of External Affairs; OECD; The Sasakawa Peace Foundation; Konrad Adenauer Stiftung; UniCredit Bank of Italy; InWent Corporation, Germany; World Bank and the International Monetary Fund.

The conference on `’s Look East Policy – Challenges for Sub-Regional Cooperation’ was organized in Guwahati from 7th to 9th October, 2007, with the support of the Public Diplomacy division of the Ministry of External Affairs and in collaboration with the OKD Institute of Social Change and Development, Guwahati. The conference was inaugurated by Minister of External Affairs, Mr. and included a keynote address by the Deputy Chairman of Planning Commission, Dr. Montek Singh Ahluwalia. The valedictory session was addressed by Mr. Mani Shankar Aiyar, Minister for Panchayati Raj and Development of North East Region. This is part of ICRIER’s focus on regional cooperation in South Asia and it is hoped that a subsequent phase of research and conference activities will include representatives from the leading think tanks and research institutes from neighbouring countries like Bangladesh, Bhutan, Nepal and Myanmar. A steering committee headed by Dr. L.C. Jain and comprising Mr. Jayanta Madhab, Mr. M.P. Bez Baruah, is guiding ICRIER’s research efforts for the North East Region for which a proposal has been submitted to the Planning Commission.

As part of our Financial Sector Research Program, a high-level conference was organized in collaboration with the InWent Corporation, Ministry of Economic Cooperation, Government of Germany on `Globalization and Financial Sector Development in South and Central Asia’. The conference was held on 22nd and 23rd November, 2007. Key speakers included Dr. , Deputy Governor of , Prof. Martin Bohl, Professor, University of Munster, Germany, Professor Pierre Siklos, Wilfred Laurier University, Canada, Mr. K.P. Krishnan, Secretary, Department of Economic Affairs, Ministry of Finance, Professor Dietrich Schonwitz, Deutsche Bundesbank. The highlight of the conference was active participation of specially invited senior Central Bank representatives from South Asian countries such as Afghanistan, Bangladesh, Bhutan, Canada, Maldives and Nepal. It is proposed to organize a similar annual conference on the financial sector each year with an emphasis of capacity building in South Asian central banks, and academicians working in this field.

One of the major highlights of this period was the international conference on `India and China’s Role in International Trade and Finance’ that was held on 6th and 7th December, 2007. Preparations for this conference were led by Prof. Barry Eichengreen, University of California, Berkley and Dr. Poonam Gupta, ICRIER, and included an international call for papers that was sent out in April 2007. Of more than 150 submissions received from all over the world, 12 papers were specially commissioned for the conference. Paper authors included some internationally renowned Economists like Prof. Alan Heston, University of Pennsylvania, Mr. Barry Bosworth, The Brookings Institution, Mr. Eswar Prasad, Cornell University, Mr. Bartz Van Ark, University of Groninger, Mr. Sertey Palsta, MIT, Mr. Rana Hasan, ADB and Mr. Jahangir Aziz, International Monetary Fund etc. The support received from Konrad Adenauer Stiftung and the IMF for this conference is gratefully acknowledged.

3 As reported earlier, the Asian Development Bank (ADB) has selected ICRIER as the Indian counterpart for a joint study on Development Experiences of India and China along with Institute of Public Policy Studies, Beijing University. ICRIER’s research team, led by Dr. Isher Ahluwalia visited Beijing for a two- day mid-term workshop where the preliminary findings of the ongoing studies were presented. ICRIER hosted the team of Chinese researchers working on this project in September, 2007 and then again in November, 2007 to facilitate their field work and discuss their preliminary findings. It is expected that the output from this research project will attract major attention in other developing countries.

Since July 2007, ICRIER Rrsearchers completed nine (9) Research Studies and published 5 Working Papers. Those include: (1) OECD Agricultural Trade Reforms on India’s Prices and Producers Welfare, (2) Capital Adequacy Regime in India: An Overview, (3) Can Horticulture be a Success Story for India?, (4) Trade Possibilities and Non-Tariff Barriers to Indo-Pak Trade, (5) Iron Ore Export and related Issues, (6) Determinants of Competitiveness and Global Integration of the Indian Auto Industry, (7) Global Competitiveness of Plastics and Polymer Industry, (8) Emerging Asian Regionalism – Ten Years after the Asian Financial crisis, and (9) Impact of Preventive Health Care on Indian Industry and Economy.

We secured eight (8) new Research Projects during the past six months for a total research grant commitment of Rs.103.8 lakh. The new research projects are: (1) Global Trading & Financial Systems Multilateralism of the WTO: Yale University, (2) South-South FDI, Third World Multinationals and Development: South Africa, (3) Convergence towards Regional Integration between the EU and India: Trade Implications for India and the UK: Aberystwyth University, (4) Development Strategy for Hill Region of Uttarakhand: CII, (5) Basic Structure of the system of Eduation & HRD in India, KEIO University, Japan, (6) Emerging Asian Regionalism – Ten years after the Asian Crisis: ADB.

As part of our ongoing visitors programme, ICRIER hosted Prof. Barry Eichengreen, University of California, Berkeley, Mr. Barry Bosworth and Ms. Susan Collins of Georgetown University and Dr. Jean Joseph Boillot, Senior Fellow, CEEPI, Paris, France, Dr. K.S. Sarma, President of Ecostat Research Corp, who is helping ICRIER in building a model of leading indicators for export performance and Prof. T.N. Srinivasan of Yale University. ICRIER faculty and researchers have benefited really from the interactions with these eminent scholars and their presentations / seminars during their stay at ICRIER.

The period also saw ICRIER contributing in a major way to pushing forward the activities of the South Asia Network of Economic Institutes (SANEI). We helped the PIDE Secretariat in organizing the SANEI Annual Seminar in Kathmandu in August 2007 and hosted the meeting of the Steering Committee in December 2007. ICRIER’s focus on regional cooperation in South Asia has been further strengthened in the publication of these papers and participation of ICRIER researchers in few international conferences/ seminars on this subject.

I am happy to report that we have now completed our major structural renovation of the working space in ICRIER. Apart from providing additional work stations for our rapidly expanding research staff, the renovation has also upgraded and improved the working environment at ICRIER. However, it is clear to all of us that given the increasing demand for ICRIER’s services, both by domestic and international sponsors, we will be soon looking for additional office space.

I take this opportunity to wish you a most joyous and fulfilling 2008 to all ICRIER’s friends and supporters.

With best wishes

Rajiv Kumar

4 Seminars

10 July Martin T. Bohl: Do Central Banks React to the Stock Market? Prof. Martin Bohl, Westfälische Wilhelms-University Münster, Germany, discussed whether central banks react systematically to stock price movements, based on his empirical study for the German Central Bank. In contrast to the results for the US, the findings for the Deutsche Bundesbank, prior to the European Central Bank taking responsibility for monetary policy in 1999, showed generally a weak relationship between German stock returns and short-term interest rates.

7 August Venkataraman Bharatwaj: SME Financing: Challenges and Opportunities Mr. Venkataraman Bharatwaj presented a practitioner’s account of SME financing in India. Some of the important challenges of SME financing are higher risk of the SMEs and the lack of reliable information and data on their business. He said some of the strategies that banks can adopt to meet these challenges are accepting collaterals outside the business and more importantly, understanding the business model of the SME.

9 August The National Interest Project The National Interest Project aims to examine the external aspects of India’s national interest, and relate it to its foreign policy for the next decade and beyond. Amb. Santosh Kumar, Project Director, said that a notional time-span till 2035 has been chosen so that the long-term objectives could be framed, and policies could be suggested for every ten-year period within those broad objectives. Amb. Kumar stressed that the issue of ‘national interest’ needed

L to R : Amb. Santosh Kumar, External Consultant, to be approached in a systematic manner as the ICRIER; Rajiv Kumar, Director & CE, ICRIER; and cost of failure would undoubtedly be huge. Shyam Saran, Special Enovy of PM Especially in the era of coalition politics, with all its pulls and pressures, it would be important to maintain coherence and continuity in respect of external policy. He emphasized the broad focal-theme of the Project viz., the global structure as it evolves over next two or three decades (which includes a comparison of military balances and our requirements), how to cope up with the conflict scenarios, not only the conventional wars but also the insurgencies, fundamentalism and terrorism; and as to what are the external factors which contribute to the growth of the Indian economy (of more than 8%). What role can the government play in it? Dr. Rajiv Kumar, Director & Chief Executive, ICRIER, and Co-Director of the Project, underscored the adhocism in India’s foreign policy and the need to put it in a strategic framework. He emphasized that the project seeks to look at India’s external interface both in respect of growth and security.

5 12 September Impact of Preventive Healthcare on Indian Industry and Economy

Inaugurating the seminar, Union Minister for Health & Family Welfare Dr. Anbumani Ramadoss said preventive, as opposed to curative healthcare, has become the preferred option in most developed countries as it allows employees to be more productive. Shri Naresh Dayal, Secretary (Health and Family Welfare), Shri Parthasarathi Shome, Adviser to Union Finance Minister and other senior officials of the Ministry of Health & Family Welfare were also present R to L : Parthasarathi Shome, Adviser to Finance Minister, Ministry of Finance, GoI; Naresh Dayal, at the gathering. The objective of the study was to Secretary, Ministry of Health and Family Welfare, examine the corporates practising preventive GoI; Anbumani Ramadoss, Hon’ble Minister of Health and Family Welfare, GoI; and Rajiv Kumar, healthcare, and assess the impact on company Director & CE, ICRIER profitability and competitiveness. It has increasingly being recognized that healthier the population of a country, the greater is its economic growth.

18 September Jaimini Bhagwati: Mumbai – an International Financial Centre

Dr. Jaimini Bhagwati, Additional Secretary at the Ministry of External Affairs, Government of India, discussed the principal recommendations of the High-Powered Expert Committee (HPEC) report. The recommendations of HPEC report are embedded in wide-ranging suggestions for financial sector reforms and also improvements in central and state government finances, the legal system, urban infrastructure, and governance. He pointed out a crucial missing link in Indian financial markets, i.e., liquid sub-sovereign debt markets and interest rate derivatives. He suggested that if Mumbai is to emerge as an IFC, fuller account convertibility should go hand-in-hand with further deregulation in interest rates and an arbitrage-free INR yield curve, and financial services along with insurance and pension services need to reach to the larger section of our population.

20 September Raed Safadi and Przemyslaw Kowalski: India’s Trade Integration based on the OECD Secretariat’s First Economic Survey of India The study says that though India’s trade barriers appear to be relatively high, the extent of trade liberalisation has been impressive. The decreasing reliance on trade taxes reflects the continuing commitment to trade liberalisation. India’s GDP growth rates for the most part of the last 15 years have outperformed those of other lower and middle income countries. India’s per capita GDP has more than doubled between 1990 and 2005 (a compound annual growth rate L to R : Rajiv Kumar, Director & CE, ICRIER; Raed Safadi; and Przemyslaw Kowalski of 3.76%). This pales in comparison to China’s 9.6% per annum during the last two decades (a rate at which Chinese per capita GDP more than quadrupled in 1990-2005). Regarding the possible paths of India’s future growth, the

6 baseline simulation results highlight that India exhibits a strongly services-dominated growth pattern with the services sector growing rapidly at over 9% per annum since 1993, and bringing the share of services in the economy to more than 50% of GDP in 2007.

21 September Jagangir Aziz: Can China’s Rapid Growth be sustained? During the last decade, China’s economy grew at around 10 percent, while keeping inflation at around 3 percent. Despite this success there is growing unease within China and abroad that for the economy to continue its strong growth it must rebalance its economy to rely less on investment and exports, and more on domestic consumption. At the National People's Congress this March, Premier Wen Jiabao cautioned, "the biggest problem with China's economy is that the growth is unstable, unbalanced, uncoordinated, and unsustainable.” The presentation analysed the drivers and weaknesses of the recent growth of China and discussed what needs to be done, particularly, whether the rebalancing will happen on its own or will it require major policy changes and reforms, and whether it will require a change in China’s macroeconomic management.

7-9 October India’s Look East Policy: Challenges for Sub-Regional Cooperation

The Public Diplomacy division of the Ministry of External Affairs (MEA) in association with ICRIER and Omeo Kumar Das of the Institute of Social Change and Development (OKDISD), Guwahati, organized a three-day seminar to discuss regional and sub-regional cooperation. The keynote address was delivered by Minister for External Affairs Shri Pranab Mukherjee and the inaugural address was delivered by Dr. Montek Singh Ahluwalia, Deputy Chairman, Planning Commission. Both highlighted the efforts made by the Centre to promote development of the North East. The seminar brought together a cross section of people from civil society, academia, think tanks, business and industries, NGOs and representatives from the governments of all the north-eastern states for interactive sessions. The valedictory address was delivered by Minister of Development of North Eastern Region (DONER) Mr. Mani Shankar Aiyer.

7 9 October Launch of First OECD Economic Survey of the Indian Economy

The Survey forecasts a sustainable growth of 10%. But to achieve it, further reforms are needed particularly in improving the business environment, infrastructural facilities, public finance and labour market performance. Dr. Isher Judge Ahluwalia (Chairperson, ICRIER) pointed out the lack of emphasis on agriculture in the Survey, when 60% of the people in India are dependent on it for their livelihood. Dr. D. Subba Rao, Finance Secretary, L to R : Rajiv Kumar, Director & CE, ICRIER; Sanu Kapila, Academic Foundation; Angel Gurria, Government of India, identified five challenges - Secretary General, OECD; Isher J. Ahluwalia, Chairperson, ICRIER; and D. Subba Rao, Finance stepping up agricultural growth, expanding Secretary, Ministry of Finance, GoI on the occasion employment opportunities, building infrastructure, of book launch of First OECD Economic Survey of the Indian Economy improving service delivery and managing globalization.

11 October Moving out of Poverty in India

ICIRIER organised a Workshop on the World Bank Study on “Moving Out of Poverty in India: Understanding Freedom, Democracy and Growth from the Bottom - Up”. Dr. Deepa Narayan, Senior Adviser, PRMVP, World Bank, introduced the study. It attempts to explore how and why people move out of poverty, and to understand the dynamics of transitions out of poverty of people in India. She summarised the statistics obtained from the ladder of On the dais L to R : Binayak Sen, Senior Economist, Poverty Reduction and Management Unit, South life such as Moving out of Poverty Index (MOP), Asia, World Bank; Rajiv Kumar, Director & CE, Mobility of the Poor Index (MPI), Mobility of Rich Index ICRIER; and Deepa Narayan, Senior Adviser, PRMVP, World Bank with delegates at the seminar (MRI) etc for the four states, and mentioned that the study also draws inferences from 2785 Life Stories. Access to economic opportunity is influenced by an overall environment of fairness and a well functioning local democracy. She concluded by saying that the 73rd amendment for PRIs was a step in right direction whose benefits have already been seen in West Bengal and Andhra Pradesh. Dr. Binayak Sen, Senior Economist, Poverty Reduction and Management Unit, South Asia, World Bank, discussed the land reforms and local democracy in West Bengal.

15 October Feasibility of an Asian Currency Unit

ICRIER and the Sasakawa Peace Foundation, Tokyo, conducted a seminar on ‘The Feasibility of an Asian Currency Unit’. The objective of the seminar was to focus on the challenges and opportunities facing East and South Asia as they engage in greater efforts to create a common Asian Currency Unit in the region. The seminar came up with an agenda of forward looking measures that could serve as inputs into future government policy actions. The seminar was attended by academics, senior policymakers, industrialists as well as the media. 8 20 October Roundtable with Dr. Daniel Markey A roundtable meeting with Dr. Daniel Markey, Senior Fellow for India, Pakistan, and South Asia at the Council on Foreign Relations, was organised. Dr. Markey was visiting India in relation to a project he is doing titled "India's intellectual infrastructure for an ambitious foreign policy". He expressed his views on the types of investments India might make in order to improve its capacity to formulate, debate, and implement foreign policy as it grows to assume the status of a global power. This included issues related to bureaucracy/institutions of foreign policy, and also issues related to think tanks and educational institutions.

23-24 October, 2007 Seventh India-Korea Dialogue, Seoul The Seventh India-Korea Dialogue was jointly organized by Seoul Forum for International Affairs (SFIA) and ICRIER in Seoul on 23 and 24 October, 2007. Mr. Shashank, former foreign secretary, led the Indian delegation. The Korean delegation was led by Prof. Kim Dalchoong, Program Chair, SFIA. The broad theme of the dialogue was the India-Korea relationship in the global perspective. The Dialogue was divided into six sessions and the topics ranged from political issues, regional security issues, economic issues, bilateral trade and global issues, to investment opportunities and energy security. The Dialogue brought together eminent persons from leading academic institutions, economists, defense & security analysts, and corporate leaders from both the countries. Concerns were raised about the business and investment environment in India. It was emphasized by the Dialogue participants that India-Korea relationship is on high priority for both countries, and they hope to see the Comprehensive Economic Partnership Agreement (CEPA) being finalized by the year-end.

1 November India & Italy in the Global Economy: Enhancing Trade and Co-operation

All important aspects of the India-Italy trade and economic relations came up for discussion and analysis. Many useful suggestions were made to enhance and strengthen the India-Italy trade and economic partnership in the present day globalised world. Prominent personalities from academia, industry associations, institutions/think tanks etc. attended the gathering, which included Dr. , Member, Board of Governors of ICRIER; L to R : Andrea Goldstein, Senior Economist, OECD; Giuliano Enea, MD, Finmeccanica; Rajendra K. Jain, Mr. Roney Simon, Director (Italy), FICCI; Mr. Niccolo Professor, Centre for European Studies, JNU; Tassoni Estense, Economic and Trade Counselor, Amitendu Palit, Visiting Fellow, ICRIER; and Rashmi Banga, Economist, UNCTAD-India Embassy of Italy, New Delhi; Dr. Rajiv Kumar, Director and CE, ICRIER; Dr. Vivek Dehejia, Professor, ICRIER; Professor Fabrizio Onida of Bocconi University, Italy; Mr. GV Srinivas Director (Europe), Ministry of External Affairs, GoI; Professor Rajendra K. Jain, JNU; Dr. Amitendu Palit, ICRIER; Professor M. De. Cecco, Italy, Dr. Mandira Sarma, Fellow, ICRIER, Mr. Stefano

9 Chiarlone, UniCredit Group; Miss Sonia Pant, Ministry of Commerce, GOI; Mr. T.S.Vishvanath, CII; Mr. Francesco Gazzoletti, IBM India Pvt Ltd; Mr. Nicolo Tassoni Estense, Economic and Trade counselor, Embassy of Italy; Mr. Giancarlo Lamio: Director, Italian Trade Commission, New Delhi; Mr. Suniti Varma, K.K. Consulting, New Delhi; Mr. Bruno Valanzuolo: Chief Technical Advisor, UNIDO; Mr. Jacopo Gasperi, Partner Studio Petrucci associate, Milano Counsel Titus & Co. Advocates, New Delhi; Mr. Shantanu Mukerji: General Manager, Zegna South Asia Pvt. Ltd; and Mr. Giovanni De Filippis: Managing Director, Fiat Automobile India Pvt. Ltd, Mumbai.

5 November India-US: The National Interest Interface A roundtable was held on “India- US: The National Interest Interface” with Prof. Francine Frankel, Department of South Asia Studies, University of Pennsylvania, at ICRIER. The discussion focused on some aspects of the National Interest Project, particularly the issues relating to Indo-US relations and Indian foreign policy. Prof. Frankel discussed the following questions: What non-alignment might mean as an approach to realizing India's national interests in the first decades of the 21st century? Is there a need to completely rethink India's national interests, and the means of achieving them? What is the meaning of "strategic partnership", and how many and of what type should India have? How the power alignments in Asia have got changed and where does India fit into it? If the nuclear deal goes through, how will it change the US-India relations? If not, how will it affect India's ability to act independently of China?

13 November Determinants of Competitiveness of the Indian Auto Industry ICRIER in collaboration with the National Manufacturing Competitiveness Council organized a Seminar on “Determinants of Competitiveness of the Indian Auto Industry”. The seminar was chaired by Dr. V. Krishnamurthy (Chairman, NMCC), and was attended by top government officials along with many eminent scholars and industry representatives. Dr. Rajiv Kumar, Director & CE, ICRIER, who presented the main findings, highlighted the recent L to R : V. Krishnamurthy, Chairman NMCC; Rajiv Kumar, Director & CE, ICRIER; Deep Kapuria, growth trends of the Indian auto sector. He discussed Chairman and Managing Director, Hi-Tech Gears, the high level of tariff protection for certain sub- Ltd.; K. Narayanan, Professor (Economics), IIT Bombay; and V. Govindarajan, Member Secretary, segments of the auto industry, which are distorting the NMCC investment pattern and resource allocation. Citing the field survey results, he said the R&D expenses in the Indian auto industry are very low, and whatever R&D exists is largely involved in process development rather than product innovation. The study elaborated the importance of borrowings for component manufacturers and emphasized credit facilitation for SMEs. It also underlined the shortage of skilled manpower, poor infrastructure, fluctuating steel prices, unavailability of industrial land at reasonable price and sludge management etc. as the major constraints faced by the industry. It said that these anomalies should be addressed in a time-bound manner.

10 21 November Subir Lall: Discussion on the linkages between Globalization and Inequality Over the past two decades, income inequality has risen in most regions and countries. At the same time, per capita incomes have risen across all regions for even the poorest segments of the population. This indicates that the poor are better off in an absolute sense during this phase of globalization, although incomes for the relatively well off have increased at a faster pace. The analysis carried out in Chapter 4 of the October 2007 WEO finds that technological progress has had a greater impact than globalization on inequality within countries. The limited overall impact of globalization reflects two offsetting tendencies: whereas trade globalization is associated with a reduction in inequality, financial globalization — and foreign direct investment in particular — is associated with an increase in inequality. Reforms to strengthen education and training would help ensure that workers have the appropriate skills for the evolving global economy. Policies that broaden the access of finance to the poor would also help, as would further trade liberalization that boosts agricultural exports from developing countries.

22-23 November Financial Globalisation and Financial Sector Development in South and Central Asia

ICRIER, and InWent – Capacity Building International, held a seminar on Financial Globalisation and Financial Sector Development in South and Central Asia. The seminar was attended by several Central Bank representatives from South and Central Asian countries, academia, representatives of multinational organisations, financial practitioners and the media. There were four broad themes; Financial Globalisation and Domestic Financial Sector L to R : Ramon Moreno, Bank for International Development - Implications for Monetary Policy Settlement (BIS), Switzerland; Ricardo Gottschalk, Research Fellow, Institute of Development Studies (Session I), Global Integration of the Financial (IDS), United Kingdom; Günther Taube, InWEnt; D. System and Domestic Financial Sector Liberalisation Ravi Shankar, Managing Director, Risk Solutions, Standard & Poor's; Naba Gopal Banik, General – Analytical Issues (Session II), Financial Inclusion - Manager, Bangladesh Bank, Dhaka; and Peter Spicka, Deutsche Bundesbank, Germany A Key Challenge for Financial Sector Development (Session III) and Effects of Basel II on Regulatory Aspects of Central Banking in Emerging Markets and Developing Countries (Session IV).

29 November Garry Pursell: Manufacturing Protection in India since Independence

Of Late, India has emerged as one of the world’s low protection and open industrial economies. Average manufacturing tariffs are now just slightly above China’s and Korea’s and at about the same level as of Sri Lanka’s, which has traditionally been considered the sole low protection industrial economy in South Asia. Reflecting this new openness of the manufacturing sector, in 2006 manufactured exports and imports were respectively about 62% and 58% of manufacturing GDP, whereas in the mid-1980s they were only about 16% and 30%. Now manufactured exports consistently exceed manufactured imports and have become an important driver of industrial and general economic growth, increasing at between 20 and 25% annually since 2002 and probably accounting for about a quarter of manufacturing GDP, compared with only 6% or so during the pre-liberalization years.

11 Despite continuing domestic policy constraints and infrastructure bottlenecks, after many years of disappointingly low growth, since about 2004 the manufacturing sector appears to have moved to a higher growth trajectory of about 9% to 10% annually. Mr. Pursell concluded with a brief summary of the principal trade barriers which remain in the manufacturing sector, and commented on the contrast between the openness of manufacturing trade policies, and India’s highly restrictive trade policies in agriculture.

4 December India and Japan in the Globalized Economy The seminar on India and Japan in the Globalized Economy was part of the outreach activities of the Japan Chair at ICRIER, in collaboration with Sasakawa Peace Foundation (SPF). The objective of the seminar was to spell out various facets of India-Japan Economic Cooperation in today’s globalized world, and recommend measures to strengthen the India- Japan bilateral relationship as such. The seminar brought together some of the prominent L to R : Eisuke Sakakibara, Waseda University, Japan; Hiroyuki Hino, Kobe University, Japan; H.E. Hideaki academicians, policy makers, corporate executives Domichi, Japanese Ambassador to India; and Rajiv Kumar, Director & CE, ICRIER working in the broad area of India-Japan Economic Cooperation from India, Japan and other countries. Prof. E. Sakakibara, Waseda University, Japan; Professor Hiroyuki Hino, Kobe University, Japan; and Dr. Surinder Kapur, Chairman & Managing Director, Sona Koyo Steering Systems Limited; were the speakers at the seminar.

6-7 December India and China's Role in International Trade and Finance and Global Economic Governance

ICRIER, the Konrad Adenauer Stiftung (KAS) and the IMF organized a two-day seminar on India and China’s role in Global Trade and Finance and Global Economic Governance. The discussion centred around three main topics: understanding the reasons and implications of the increasing share of India and China in global trade; challenges that the two economies might face in sustaining the growth momentum in the years ahead; and the implications of the increasing L to R : Shang Jin Wei, Columbia University; Ansgar Belke, University of Duisburg-Essen, Germany; Rajiv role of India and China in the world economy for the Kumar, Director & CE, ICRIER; Barry Eichengreen, George C. Pardee and Helen N. Pardee Professor of global economic governance. Prominent persons from Economics and Political Science, University of California, Berkeley; Herbert Dieter, Senior Fellow, German academia, industry, think-tanks participated in the Institute for International and Security Affairs; and seminar. Kalpana Kochhar, Senior Advisor, Asia and Pacific Department, IMF

12 8 December SANEI Steering Committee Meeting The Steering Committee meeting of South Asia Network of Economic research Institutes (SANEI) was held on December 8, 2007. After five years at ICRIER, SANEI is now based in the Pakistan Institute of

Development Economics (PIDE), Islamabad. The meeting was chaired by SANEI chairman Dr. Ishrat Hussain. The other members who attended the meeting were Dr. Naushin Mahmood, Dr. Isher Ahluwalia, Dr. Rajiv Kumar, Dr. Govind Rao, Delegates at the Steering Committee Meeting of South Asia Network of Economic Research Institutes (SANEI) Dr. Dwarika Nath Dhungel, Dr. M Asaduzzaman, Mr Mangala Moonesinghe and Saba Anwar. The Steering Committee members met the Vice President of India, Mr. Mohammad Hamid Ansari at his residence and briefed him about the SANEI activities and its role as a conduit for disseminating information and to reach out to the other institutes in the region and facilitate collaborative research.

21 December K. S. Sarma: A Multi-Country Econometric Model of Indian Exports For Forecasting and Policy Analysis

Prof. K.S. Sarma, President of Ecostat Research Corporation, said his company would develop a model to predict aggregate exports by destination, and also aggregate Indian merchandise exports worldwide. Trade matrices for the destinations and competitors, for

example trade matrix between India and its competitors would be constructed.

21 December National Interest Project

The second brainstorming session under the National Interest Project outlined the broad objectives of the exercise. He underscored the significance of South Asian neighbours in the context of India’s external policy. Mr. Ashis Banerjee and Ms. Nisha Taneja presented their discussion papers on India’s South Asia Policy. Though most of the participants emphasized that regional integration is crucial for the development of the region, there were differences in their approach, as how to deal with India’s neighbours. Politics was identified as a major constraint in the path of development of this region. It was recognized that India has to suitably manage its neighbours to sustain its development path. Prominent strategists/academicians/ideologues participated in the session, which included Shri K.Subramanyam, Cmdr. Uday Bhaskar, Gen. (Retd.) V.R. Raghwan, Air Cmdr. Jusjit Singh, Professor S.D. Muni, Amb. Arundhati Ghosh, Amb. Vinod C. Khanna, Dr. Ashok Kumar, ICWA, Professor I.N. Mukherji, Mr. Shyam Saran, Mr. Rajiv Sikri, Admiral Raja Menon, Vice Adm. K.K. Nayyar, and Cdr. Alok Bansal.

13 Lectures

4 December Barry Eichengreen: The Cautious Case for Capital flows

Barry Eichengreen, George C. Pardee and Helen N. Pardee Professor of Economics and Political Science at the University of California, Berkeley, delivered a special lecture on December 4. Professor Eichengreen, who is also a research associate of the National Bureau of Economic Research and a research fellow at the Centre for Economic Policy Research (London), as well as having A lecture is delivered by Barry Eichengreen, George C. Pardee and Helen N. Pardee Professor of Economics served as a senior policy and Political Science, University of California, Berkeley advisor at the International Monetary Fund from 1997-98, spoke about capital flows. His lecture was called “The Cautious case for capital flows” which focused on the global phenomenon of massive private capital flow and their effects and impact. Professor Eichengreen was of the view that given the risks associated with highly sensitive financial markets, and their inherent volatility, it was better to be safe than sorry. Thus, it made sense perhaps err on the side of caution. Stronger banking systems, better developed local bond and securities markets, more effective corporate governance, and a more flexible exchange rate need to be in place first as together they enhance the ability of the system to absorb shocks.

“The second challenge, he said “is to limit the risks of instability. To be sure, limiting risks is not the same as limiting volatility. Increased volatility there will be as a result of further deregulation and liberalization of capital flows in particular. Volatility in and of itself is not a bad thing. It is a source of price revelation; it encourages prudence on the part of investors; and it provides information about the resiliency of the financial system. (It is a real-time stress test.) The problem is when spikes in volatility cause liquidity to evaporate, markets to seize up, and financial institutions to fail. These are the circumstances when volatility can cause bankruptcies and serious recession. The 1997 crisis was the last war. It is important now that governments and central banks prepare for the next one.”

14 Recent ICRIER Publications

Working Papers (January to December 2007)

No. Title Author Date

191 Does Capital Account Openness Lower Inflation? Abhijit Sen Gupta January 2007

192 Indo-U.S. FTA: Prospects for Audiovisual Services Arpita Mukherjee February 2007

Paramita Deb Gupta

Prerna Ahuja

193 Technological Capability as a Determinant of FDI Amitendu Palit April 2007

Inflows: Evidence from Developing Asia & India Shounkie Nawani

194 Impact of Special Economic Zones on Employment, Aradhna Aggarwal May 2007

Poverty and Human Development

195 OECD Agricultural Trade Reforms Impact on Surabhi Mittal July 2007

India's Prices and Producers Welfare

196 Capital Adequacy Regime in India: An Overview Mandira Sarma July 2007

Yuko Nikaido

197 Can Horticulture be a Success Story for India? Surabhi Mittal August 2007

198 Impact of Preventive Health Care on Indian Alka Chadha September 2007

Industry and Economy Ali Mehdi

Garima Malik

200 Trade Possibilities and Non-Tariff Barriers to Nisha Taneja October 2007

Indo-Pak Trade

Think Ink http://www.icrier.org/thinkink/index.html

Title Author Date

Supporting or Sporting – Common Wealth of the Economy Ruchi Jain June 01, 2007

Substance Use in India and Asia Garima Malik June 15, 2007

Agricultural Subsidies on Biofuel Crops: A Misnomer? Suparna Karmakar August 01, 2007

Should RBI follow IT? Sanghamitra Sahu August 10, 2007

Do we need moneylenders for financial inclusion? Mandira Sarma September 01, 2007

Electronic Banking Seems a Luxury Mamta October 01, 2007

China’s In (pig)flation. Loknath Acharya October 15, 2007

Is Curative Care the Cure? Ali Mehdi November 01, 2007

Tourism Potential for Regional Development in India Rashmi Rastogi November 15, 2007

Does What You Export Matter? Rajeev Anantaram December 01, 2007

Does Trade liberalization Impact Industrial Workers? Annu December 15, 2007

15 ICRIER Welcomes

Mr. T C A Srinivasa Raghavan Advisor to the Director & CE

Amb. Santosh Kumar External Consultant

Dr. Meenu Tewari Visiting Faculty

Dr. Rajeev Anantaram Senior Fellow

Dr. Dil Bahadur Rahut Senior Fellow

Ms. Vani Archana Fellow

Ms. Nirupama Soundararajan Research Associate

Mr. Amit Singh Research Associate

Mr. Rajeev Ranjan Chaturvedy Research Associate

Mr. Durgesh Kumar Rai Research Assistant

Mr. Gunajit Kalita Research Assistant

Ms. Smita Miglani Research Assistant

Ms. Rashmi Rastogi Research Assistant

Mr. Lakshmana Rao Gubbala Research Assistant

Mr. Saswat Chaudhury Research Assistant

Mr. Loknath Acharya Research Assistant

Ms. Annu Research Assistant

Ms. Mamta Research Assistant

Mr. Indrajit Sinha Ray Research Assistant

Ms. Deepti Sethi Research Assistant

Ms. Preethi M Private Secretary

Ms. Saloni Madan Executive Assistant

Mr. V. Jayaraman Private Secretary

16 ICRIER in the News

ØJuly 1 Economic Times. In search of greener pastures? Outward direct foreign investment (ODFI)fromemerging markets is the latest flavour of the month. At a recent seminar organised by ICRIER, authors reported direct investment or M&A activity within Asia by corporates from China, Taiwan, Singapore, Thailand, Malaysia and Indonesia. Indian corporates have, however, grabbed the major headlines, by their audacious and successful take-overs of Europe’s crown jewels and major assets in the US. Suddenly, Indian companies are making foreign acquisitions a central plank of their corporate strategy.

ØJuly 24 Business Standard. Rajiv Kumar: India should strive for Doha`s success. Nobody can rightly argue that the WTO or the external world is primarily responsible for the woes of our farmers. Several commentators have argued that the Doha Round be declared dead, and attempts to resuscitate it be given up. But will India really benefit from a failed Doha Round, or could saving it yield more gains than losses?

ØAugust 16 Economic Times. China poses threat to horticulture exports. “These three nations can give India a tough competition if right export strategies are not adopted,” the ICRIER paper said. India ’s fruit exports have increased over four-fold during the past four years and value of exports has gone up 10 times. In value terms, mango and grapes earn the maximum exchange for the country. Potato and onion are the most important vegetables, both in terms of quantity and value of exports.

ØAugust 19 Livemint. Abe's visit marks strategic shift in bilateral relations with India. “You can almost pinpoint the timing of the shift in Japan ’s stance towards India ,” said Rajiv Kumar , director and CEO of Indian Council for Research on International Economic Relations. “It happened in late 2005 when a country risk report on China finally convinced Japan that it should reduce its dependence on its largest trading partner.”

ØSeptember 5 Livemint. India and China to lead global growth: Unctad. However, according to Rajiv Kumar, chief executive of Indian Council of Research on International Economic Relations, “A new global financial arrangement is essentially a pie in the sky at this stage. Even the Asian Currency Unit, which is in the realm of possibility, will take a long time to happen.”

ØSeptember 13 Press Information Bureau. Preventive Healthcare in India is still at early stages : Dr. Ramadoss. Inaugurating the seminar on Impact of Preventive Healthcare on Indian Industry and Economy organized by Indian Council for Research on International Economic Relations (ICRIER), today, the Union Minister for Health & Family Welfare, Dr. Anbumani Ramadoss said preventive, as opposed to curative health care has become the preferred option in most developed countries as it allows employees to be more productive.

ØOctober 8 The Hindu. Project to link north-east, South-East Asia. This was the second seminar organised by the Public Diplomacy Division of the Ministry on the Look East Policy in collaboration with the Omeo Kumar Das Institute of Social Change and Development and the Indian Council for Research on International Economic Relations (ICRIER).

ØOctober 10 Independent. India's growth could be even better, says OECD. "This growth is meaningless if it is not inclusive," Isher Judge Ahluwalia of the Indian Council of Research in International Economic Relations told the Associated Press.

ØNovember 30 Business Standard. Shankar Acharya: the upa`s economic legacy. For all these reasons the UPA’s legacy for sustaining rapid and inclusive economic growth in future leaves a lot to be desired. It surely could have been far better. The author is Honorary Professor at ICRIER and former Chief Economic Adviser to Government of India . The views expressed are personal.

ØDecember 16 Times of India. India, Pak have USD 11 bn bilateral trade potential. An Indian Council of Research on International Economic Relations (ICRIER) study, based on surveys of business people, has identified export potential of 2.2 billion dollars from Pakistan to India. On the other hand, India can ship goods worth 9.5 billion per annum to its neighbour.

17 Visitors/Participants

ØBarry Eichengreen, George C. Pardee and Helen N. Pardee Professor of Economics and Political Science, University of California, Berkeley.

ØAnbumani Ramadoss, Hon’ble Minister of Health and Family Welfare, GoI.

ØRamon Moreno, Bank for International Settlement (BIS), Switzerland.

ØRicardo Gottschalk, Research Fellow, Institute of Development Studies (IDS), United Kingdom.

ØGünther Taube, InWEnt.

ØD. Ravi Shankar, Managing Director, Risk Solutions, Standard & Poor's.

ØNaba Gopal Banik, General Manager, Bangladesh Bank, Dhaka.

ØPeter Spicka, Deutsche Bundesbank, Germany.

ØParthasarathi Shome, Adviser to Finance Minister, Ministry of Finance, GoI.

ØNaresh Dayal, Secretary, Ministry of Health and Family Welfare, GoI.

ØAngel Gurria, Secretary General, OECD.

ØD. Subba Rao, Finance Secretary, Ministry of Finance, GoI.

ØV. Krishnamurthy, Chairman NMCC.

ØDeep Kapuria, Chairman and Managing Director, Hi-Tech Gears, Ltd.

ØK. Narayanan, Professor (Economics), IIT Bombay.

ØV. Govindarajan, Member Secretary, NMCC

ØBinayak Sen, Senior Economist, Poverty Reduction and Management Unit, South Asia, World Bank.

ØDeepa Narayan, Senior Adviser, PRMVP, World Bank.

ØShang Jin Wei, Columbia University.

ØAnsgar Belke, University of Duisburg-Essen, Germany

ØHerbert Dieter, Senior Fellow, German Institute for International and Security Affairs.

ØKalpana Kochhar, Senior Advisor, Asia and Pacific Department, IMF

ØEisuke Sakakibara, Waseda University, Japan.

ØHiroyuki Hino, Kobe University, Japan.

ØH.E. Hideaki Domichi, Japanese Ambassador to India.

18 About ICRIER

ICRIER, established in August 1981, has successfully completed its 25 years as an autonomous, policy-oriented, not-for-profit research institute. We have nurtured our cherished autonomy by establishing an endowment fund, income from which meets all our administration expenses. ICRIER’s offices are located in the prime institutional complex of India Habitat Centre, New Delhi. The prime focus of all our work is to support India’s interface with the global economy.

ICRIER’s founding Chairman was Dr. K.B. Lall who led the organization from its inception from 1981 to 1992 when he handed over the Chairmanship to Mr. R.N. Malhotra (1992-1996). He was followed by Dr. I.G. Patel who remained Chairman from 1997 to 2005 until his demise in July 2005. ICRIER’s current Chairperson is Dr. Isher Judge Ahluwalia.

Amongst ICRIER’s founding member are: Dr. , Dr. C. Rangarjan, Dr. M.S. Swaminathan, Dr. Jagdish Bhagwati, Mr. Montek Singh Ahluwalia and Mr. Bharat Ram.

ICRIER conducts thematic research in the following six thrust areas:

• Trade, Openness, Restructuring and Competitiveness • WTO Related Issues • Regional and Bilateral Issues • Financial Liberalization and Integration • Macro-economic Management in an Open Economy • Strategic Aspects of India’s External Relations

In addition, ICRIER holds public policy s to bring together policy makers, academicians, Union Cabinet Ministers, senior industry representatives, Members of Parliament and Media persons to try and forge a consensus on issues of major policy interest. In the effort to better understand global developments and experiences of other economies which have bearing on India’s policies and performance, ICRIER invites distinguished scholars and policy makers from around the world to deliver public lectures on economic themes of interest to contemporary India.

ICRIER’s highly qualified core team of researchers includes several PhD’s from reputed Indian and foreign universities. At present the team has 18 economists. The team is led by Dr. Rajiv Kumar, D.Phil in Economics from Oxford University.

19 Indian Council for Research on International Economic Relations Core-6A, 4th Floor, India Habitat Centre, Lodi Road, New Delhi - 110 003 India Tel: 24645218-19-20, 24692070, 24616329 Fax: 24620180 Website: www.icrier.org