• Speculation about an early general election has subsided temporarily, but the
ruling Indian National Congress party may still be tempted to call one if it
performs well in forthcoming state elections.
• Regardless of when the next general election is held, the result is almost
certain to be another coalition government. Any conceivable alliance will be
hindered by a number of personality and policy clashes.
• Bilateral relations with Pakistan could worsen again after years of rapprochement
if the political turmoil in that country unseats its president, Pervez
• Increased spending on rural welfare and public-sector wages suggests that the
government will miss its target for the budget deficit in fiscal year 2008/09
(April-March) by a small margin.
• The gloomy outlook for the US economy will have a negative impact on the
Indian economy, but the slowdown in India is expected to be shallow, with
real GDP growth decelerating to 7.5% in 2008/09 and 7.2% in 2009/10.
• The Economist Intelligence Unit has revised down its forecast for both export
and import growth following downward revisions to its US GDP growth
forecast, but imports will continue to rise more quickly than exports.
• A decisive electoral victory for the opposition Bharatiya Janata Party (BJP) in
assembly elections in the western state of Gujarat in December has punctured
speculation about an early general election.
• The government’s stand-off with the mainly communist Left Front parties, on
which it depends for its legislative majority, over the implementation of the
Indo-US civil nuclear deal remains unresolved.
• The political fortunes of the leader of the Bahujan Samaj Party, Mayawati,
continue to rise as her party extends its reach beyond its northern home state
of Uttar Pradesh.
• Inflation risks persuaded the Reserve Bank of India (the central bank) to keep
interest rates unchanged at its latest policy meeting...