India News Wrap: March 1

In this section, ASG covers a few relevant developments and announcements of the last two weeks, with insights on their implications for businesses. 

Economic Update

India, UAE strengthen strategic partnership

During the three-day visit to India by Sheikh Mohammed bin Zayed Al Nahyan, the crown prince of Abu Dhabi and deputy commander of the UAE Armed Forces, the two countries deepened their economic ties. India and the UAE struck seven agreements across different sectors to advance their strategic partnerships. Some sectors that are likely to benefit include infrastructure, renewable energy, insurance, currency swap arrangements, cybersecurity and skill development. Discussions focused on ways to increase trade volumes by over 60% in the next five years - the UAE is already the third largest trading partner for India after China and U.S., and India-UAE trade is valued at $60 billion - along with increased cooperation in the oil sector and especially on terrorism. The crown prince’s trip, which came six months after Prime Minister Narendra Modi’s visited the UAE, also saw a landmark deal for the UAE's national oil company, Abu Dhabi National Oil Company, to use India’s strategic storage units to store crude oil. India will be able to use two-thirds of this oil for free, a move that will boost its energy security. An official press release said that the joint statement issued during the visit “reflects the desire to intensify cooperation between the two countries in a wide range of sectors - political, economic, security as well as on regional and multilateral issues."

Political Update

JNU campus row likely to affect Budget Session

Tensions between the government and the opposition were heightened after arrests under the sedition law of several Jawaharlal Nehru University, Delhi, students for allegedly chanting “anti-national” slogans in support of Afzal Guru, who was convicted for planning and conducting an attack on the Indian Parliament and executed by the state in 2013. The police crackdown on students and the exercise of brute force in a trial court complex by lawyers against journalists and protesters has united the opposition parties, including the Congress and the Left, against the government ahead of a crucial Budget Session. While industry was optimistic that several key reforms, including the much-delayed GST bill, would be passed this session, this latest controversy and previous developments, including the crisis in Arunachal Pradesh and the suicide of Rohith Vemula, a Dalit student -- mean that hopes of a productive legislative session are dwindling. The opposition declared its intention to hold the government accountable for these incidents at an all-party meeting, but the NDA has said it is willing to debate the issue in Parliament, in an attempt to stave off walkouts. The government has listed 16 bills, including the GST bill and the Real Estate bill, to be passed this session.

Jat community reservation demands paralyses state of Haryana

The Jats, an agricultural caste group in Haryana with a significant presence across seven other north Indian states, are engaged in violent agitation demanding inclusion in an affirmative action system that reserves government jobs and educational opportunities for underprivileged communities in India. Several people have been killed, and industrial areas such as Rohtak, Bhiwani, Sonipat, Panipat and Hisar have been the worst affected, with losses at an estimated $2.6 billion.

The Jats constitute around 27% of Haryana’s population, and are the socially, economically and politically dominant caste - of the state’s 10 chief ministers, seven were Jat. Previous reservation demands have been unsuccessful, as the Supreme Court of India has ruled against the Jats fitting the “backward class “category. This is the third agitation of a similar nature under the NDA tenure, following protests from similarly dominant communities in Andhra Pradesh and Gujarat. The nature of the protests -- which have seen communities that have historically not suffered economic, political or social deprivation agitate for reservations in government jobs and universities - underscores the absence of adequate employment opportunities in India.

Policy Update

National Capital Goods policy introduced at the Make in India week

The National Capital Goods policy is expected to propel growth in the capital goods sector and integrate the sector with the government’s Make in India program. The Union Minister of Heavy Industry and Public Enterprise, Anant Geete, launched the policy in Mumbai during the Make in India week held from February 13 to 18. The policy aims to increase exports from the current 27% of production to 40%, while increasing the share of domestic production from 60% to 80%, thus making India a globally competitive capital goods hub. The policy document also addresses concerns regarding raw material, innovation, the availability of finance and generating adequate external and domestic demand. With this document, the capital goods sector is expected to unlock its true potential and establish India as a manufacturing powerhouse.