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13th EU-India Summit: Focusing on strategic partnership

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Prime Minister Narendra Modi (R) with the President of the European Council Donald Tusk. Image source: dailyamin.com

Brussels, EU: The 13th EU-India Summit, a one-day event, is happening again. A news in itself, as opined by a senior Brussels-based diplomat.

It is well-known that India has partnered up with EU, projecting on them as the country’s largest export stop and topping the charts as India’s numero uno trade and investment partner.

The summit will be focusing on its strategic partnership for the next five years, which India and EU, has maintained since the year of 2004.

Though with the United Kingdom stressing on the limitations, it has struck against the Indians and other non-EU professionals and with the rest of the EU states demanding India to notch down the ‘high’ duties on vehicles, some of the experts are expressing their doubts about achieving the goal of the Free Trade Agreement in the near future.

Prime Minister Narendra Modi will be having a discussion on the Bilateral Trade and Investment Agreement (BIT). The scheme was launched back in 2007 but got stagnant after facing an amount of inhibitions in its path.

While returning to the track of political tensions along the lines of commercial relationships, there is to be an amalgamation of ministers particularly belonging to this sector.

According to an EU note:

“India has embarked on a process of economic reform and progressive integration with the global economy that aims to put in on a path of rapid and sustained growth. However, India’s trade regime and regulatory environment remain comparatively restrictive.”

India still maintains substantial tariff and non-tariff barriers that hinder trade with the EU. In addition to tariff barriers and imports, India also imposes a number of non-tariff barriers in the form of quantitative restrictions, import licensing, mandatory testing and certification for a large number of products as well as complicated and lengthy customs procedures.”

The dignitaries- the president of the European Council Donald Tusk, the president of the European Commission Jean-Claude Juncker, the European commissioner for trade Cecilia Malmstrom and Mogherini, will be attending the summit where the recent Brussels attacks will be a point of discussion.

Finally, an evening on Wednesday will be dedicated to the issue of a diaspora by Modi, after which he will be departing for the Nuclear Security Summit at Washington DC. (Inputs from The Hindustan Times)

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Fall Of The Currency And Increase In Oil Prices: India ‘s Turmoil

The falling rupee has given a boost to some of India’s most lucrative exports, such as software services and pharmaceuticals, which add up to billions of dollars.

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Rajesh Kumar, left, shares a ride to work with another employee, Dilip Swain, right, as higher petrol prices in India begin to be felt in people's pocketbooks.VOA

The fall of the currency of India to record lows and rising global oil prices have raised worries that the world’s fastest growing economy faces headwinds that could hurt the fortunes of Prime Minister Narendra Modi’s party in next year’s general elections.

From people filling fuel at gas stations to thousands of students heading out to study overseas, the impact of the slumping rupee is sparking discontent.

Having plunged by about 12 percent against the dollar this year, the rupee is one of Asia’s worst faring currencies, and as in other countries, the slide has accelerated since the crash of the Turkish lira.

“The reasons are global. We must bear in mind that in last few months, dollar has strengthened against almost every currency,” said Finance Minister Arun Jaitley recently as he tried to send out reassuring signals that India’s economy is on track.

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The rupee has plunged by about 12 percent this year raising fears of spiraling inflation. VOA

The rupee’s sharp depreciation comes at a time when the economy had recovered from a slowdown and surged to a two-year high in the quarter that ended in June. Forecasts put growth for this year at 7.5 percent.

Economy will slow

But economists warn this momentum will be difficult to sustain as the tumbling rupee, along with rising crude oil prices, takes a toll on growth. India, the world’s third largest oil importer, gets almost 80 percent of its fuel needs overseas.

“The government needs to mellow down on growth aspirations,” said N.R. Bhanumurthy, economist with the National Institute of Public Finance and Policy. “The growth needs to come down to a little less than 7 percent.”

Even as the government faces the prospect of a slowing economy, it is under pressure to lower taxes on gas and diesel to bring down the sharp rise in prices. Fuel is one of the most heavily taxed items in India, with rates as high as nearly 50 percent. Prices vary from state to state, but they have gone up by about 14 percent this year.

Hoping to cash in on the growing disaffection over the surge in fuel prices and the sliding rupee, opposition parties led nationwide protests that shutdown offices and schools in several cities this week.

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Discontent with spiraling fuel prices poses a challenge to Prime Minister Modi’s Bharatiya Janata Party ahead of general elections next year. VOA

The government dismissed the protests, saying that although people faced momentary difficulties, they understood they were because of factors beyond its control.

Political analysts are not so sure, pointing out that fuel prices are a politically sensitive issue in India and usually result in a spike in inflation.

“Anger is rising, there is resentment,” said Satish Misra at the Observer Research Foundation, warning the ruling party will face a backlash “Obviously that is going to have a negative impact on the electoral fortunes of the Bharatiya Janata Party, there is no doubt about that.”

Warnings from economists

Among those who are upset with the high fuel prices is Rajesh Kumar, who commutes 30 kilometers to the advertising agency where he works. Hit by the higher prices that eat into his income, he has started sharing the ride with another employee.

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Narendra Modi. Wikimedia Commons

“I have given up the idea of buying another car,” he said despondently. “I will not be able to afford the cost of running it.”

Economists however have warned the government against giving in to populist pressures ahead of a series of state polls later this year and general elections around April next year. They say lowering taxes on fuel or taking measures to prop up the currency will strain the country’s finances and hurt the economy in the long run.

Also Read: Diverse Gathering To Be Addressed This World BioFuel Day: PM Narendra Modi

“One needs to be more careful and vigilant,” Bhanumurthy said. “It is easy for India to stay with low growth than experiencing the high deficit.”

But there is also some good news for the Indian economy. The falling rupee has given a boost to some of India’s most lucrative exports, such as software services and pharmaceuticals, which add up to billions of dollars. (VOA)