International Economy - Current Affairs for September, 2015

GoI has signed a loan with ADB for USD 123.51 million for tranche 3 of the Infrastructure Development Investment Program for Tourism to upgrade tourism infrastructure and services in Punjab, Uttarakhand and Himachal Pradesh. Loan will be utilised for development and conservation of tourist attractions and enhance basic tourism facilities. It will also be used to build the capacity of sector agencies and local communities in the States of Himachal Pradesh, Uttarakhand and Punjab. The third tranche loan comprises of the $250 million multi-tranche financing facility that ADB approved in 2010. Greater than 4000 individuals are set to be trained in tourism related skills and 30 community based societies will be made operational for managing natural and cultural heritage sites.

India has emerged as the most sought after developing market for the US with bilateral trade between the two nations pegged at USD 500 billion by 2025 according to a survey conducted by PwC and Indo American Chamber of Commerce (IACC). Trade between the two nations can grow through considerable efforts from stakeholders even as there has been a 4 fold growth in Indo-US trade since 2006 to USD 100 billion in 2014.

Government is looking to provide mobile connectivity to 55,669 uncovered villages across the nation by the year 2018 as part of Digital India programme, and mobile services will be provided in phased manner with USOF funding. Providing high speed internet and mobile connectivity across the country, providing government services online, promoting electronic manufacturing and creating jobs for youth are some of the priorities of government under Digital India programme. GoI has formed optic fibre cable (OFC) in 23,604 gram panchayats till July to ensure high speed broadband connectivity under the NOFN project. Project is to be rolled out to 50,000 villages by the end of March. NOFN project was set up in 2011. Committee was formed under ex IT secretary J Satyanarayana to suggest alternatives for its faster implementation.

As many as 23 key sectors of export declined in August on account of demand downturn and falling global prices. 23 of 30 sectors monitored by Commerce Ministry were in negative zone in March. FIEO sought immediate intervention of government to stop the slide. India's exports declined 20.66 percent in August to USD 21.26 billion, increasing the trade deficit to USD 12.47 billion. Two top sectors engineering and petrol products contracted by 29 and 47.88 percent while textile exports shrank by 7.32 percent to USD 1.28 billion in August 2015. These 3 sectors constituted 47% of the total exports of the country in the previous fiscal. 11 of 13 key agricultural products fell into negative zone too. Exports of rice, spices and tobacco fell 26.32 percent to USD 443 million, 8.7 percent to USD 209 million and 15.25 percent to USD 62 million and negative growth was observed in cereals (43.94 percent), cashew (7.75 percent), oil meals (19.5 percent), carpet (22 percent), leather (12.78 percent), iron ore (34.28 percent) and chemicals (5 percent). This pushed down overall merchandise export and India aims for USD 900 billion exports in 2202 and 3.5% share in world’s total exports. Previous 4 years have seen exports hovering at USD 300 billion.

GII 2015 was recently released showing emerging economy policymakers can boost innovation with Switzerland being the most innovative nation. Countries like China, Malaysia, Vietnam, India, Jordan, Kenya and Uganda are among a group of countries outperforming their economic peers, according to GII 2015. India was ranked 81 and remained the top of regional ranking in C and S Asia, followed by Kazakhstan and Sri Lanka. Numerous low-income economies are innovation achievers with Sub-Saharan Africa standing out- Rwanda at 94th place, Mozambique at 95th and Malawi at 98th. Additionally, Kenya, Mali, Burkina Faso and Uganda are generally outperforming other economies at their level of development. The top 10 ranked countries were as follows:

1. Switzerland
2. United Kingdom
3. Sweden
4. Netherlands
5. United States of America
6. Finland
7. Singapore
8. Ireland
9. Luxembourg

US Fed Reserve Chief Janet Yellen decided to keep the interest rates in the US economy unchanged. Indian fund managers and economists see this decision as another enabling factor for RBI to cut rates, which could give some more boost to the Indian economy that is again showing signs of stagnation.For the equity market, the immediate trend decider would be how the global markets react to the US rate decision. With Yellen not hiking the rates, FIIs are expected to be part of the Indian growth story.

No voting was needed on decision to continue with UNSC reforms in the 70th session as the decision was adopted by consensus. UNGA unanimously adopted the negotiating text for UNSC reforms establishing the stage for long pending process at 70th session of the international body. The UNGA President, Sam Kutesa also circulated the position of key nations with respect to the negotiating text.

UK pumped in USD 22.2 billion since March 2015, including 30 percent of all investments incurred by G20 economies in the nation, according to Confederation of British Industry. According to the industrial body, British companies employ 691,000 persons, which is 5.5% of total organised private sector jobs and revenue of USD 54 billion from operations in India. Conversely, India is also the biggest investor in the UK. India invests more in UK than the rest of the EU. An Indian company is UK’s largest manufacturing employer. British companies have created 58% of the jobs or 26,900 jobs in the chemical sector alone, injecting USD 5.8 billion, for example. Other important sectors where its presence is felt include drugs, pharma, food processing, services and PNG. Maharashtra, Delhi and TN account for 55% of all FDI into the country in 2014-2015. FDI has created 619,300 jobs in the services sector along with 194,100 jobs in the construction sector.

Philippines is planning Wi-FI services in all its towns and cities by 2016. This free internet will cost the government USD 32 million and push data charges lower down in the country. Access to internet currently costs USD 18 per megabit per second in Philippines. This is more than 3 times the global average of USD 5.

World’s top 20 economies have launched W20 for gender inclusive economic growth. The international grouping is led by Gulden Turktan. It has aimed to provide inclusive economic growth which involves women’s participation and gender equality as well as equal remuneration for men and women. Women Entrepreneurs Association of Turkey is heading the W20 and forming part of its steering committee in addition to Women and Democracy Association and Turkish Businesswomen Association.