Nuclear-armed foes Pakistan, India talk peace over lunch

NEW DELHI (Reuters) - Pakistan President Asif Ali Zardari and Indian Prime Minister Manmohan Singh stood side-by-side in New Delhi on Sunday at the highest-level meeting on each other's soil in seven years as the nuclear-armed foes seek to normalize ties.

Relations have warmed since Pakistan promised its neighbor most favored nation trade status last year, although a $10 million bounty offered by Washington for a Pakistani Islamist blamed for the 2008 attacks on Mumbai has stirred old grievances.

Without giving details, the two leaders said they discussed a wide range of issues during a "fruitful" meeting before sharing lunch. Singh said he hoped to make his first visit to Pakistan at a convenient date.

"We would like to have better relations with India. We have spoken on all topics that we could have spoken about and we are hoping to meet on Pakistani soil very soon," Zardari said as the two men emerged from Singh's residence.

On his first visit to India as part of the 40-member delegation, Zardari's son, Bilawal Bhutto Zardari, stood behind the leaders at the briefing, possibly a sign of his growing role in politics.

"Relations between India and Pakistan should become normal. That's our common desire," Singh said. "We have a number of issues and we are willing to find tactical, pragmatic solutions to all those issues and that's the message that president Zardari and I would wish to convey."

Zardari's visit proceeded as rescue teams, backed by helicopters and sniffer dogs, searched for 124 Pakistani soldiers and 11 civilians engulfed by an avalanche on Saturday near the 6,000-meter-high Siachen glacier in Kashmir -- known as the world's highest battlefield.

India and Pakistan fought two wars over Siachen and hundreds have died there, mostly from the inhospitable conditions.

India has yet to comment on the disaster.

ISLAMIST SHADOW

The continued freedom of Islamist Hafiz Saeed, suspected of masterminding an attack by Pakistan-based gunmen on India's financial capital, Mumbai, in 2008 that killed 166 people, caused some friction in the days before the meeting.

India is furious Pakistan has not detained Saeed, despite handing over a dossier of evidence against him. Pakistan Prime Minister Yousuf Raza Gilani said on Friday that anyone with concrete proof to prosecute Saeed should present it to the courts.

And with Zardari and Singh both suffering major domestic problems, prospects are low for fixing the complex stand-off over disputed Kashmir, the trigger of two of three wars between the two countries since independence from Britain in 1947.

Lasting Pakistan-India peace would go a long way to smoothing a perilous transition in Afghanistan as most NATO combat forces prepare to leave by the end of 2014.

India and Pakistan fought their most recent war in 1999, shortly after both sides declared they possessed nuclear weapons. Hundreds died on the disputed border in Kashmir before Pakistani troops and militants were forced to withdraw.

Zardari is also due to visit the shrine in western India of a revered Sufi Muslim saint seen as a symbol of harmony between South Asia's often competing religions.

Born in a village in what is now Pakistan, Singh has pushed for peace during his two terms in office, but his efforts were knocked off track by the 2008 ouster of former President Pervez Musharraf, with whom he had built trust.

The three-day rampage by 10 Pakistani gunmen in Mumbai later that year derailed the peace process - aimed at finding a solution to Kashmir and other feuds along one of the world's most heavily armed borders. Talks only resumed a year ago.

Informal meetings, during international cricket matches, or in this case before Zardari's pilgrimage to the Sufi shrine, have become the hallmark of Singh's diplomacy.

In November, Singh met Gilani in the Maldives and promised to open a new chapter in their troubled history.

Hopes are focused on resolving the conflict at the Siachen glacier and a dispute over an oil-rich river estuary called Sir Creek.

Musharraf, the last Pakistani head of state to visit India in 2005, has said both issues were as good as fixed while he was in office.

(Additional reporting by Anurag Kotoky; Editing by Ron Popeski)

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Anger over corruption gets public notice in India (AP)

MUMBAI, India – For the last 12 years, a businessman in the northern Indian city of Kanpur has been paying a 5,000 rupee ($113) bribe to government officials to get his income tax refund.

The difference now is that he's talking about it on ipaidabribe.com, a website that serves as an outlet for pent-up frustration with corruption in India.

That discontent — fueled by India's vociferous media and a blossoming sense of empowerment among the middle class — has burst into the open after a series of galling corruption scandals began roiling Asia's third-largest economy late last year. Thousands have taken to the streets, the courts are pursuing rare high-level prosecutions and the government is scrambling to enact a tougher anti-corruption law.

The website is Raghunandan Thoniparambil's way of fighting endemic graft, which many say has worsened as India's economy grows and opens up, creating enormous wealth without adequate regulation and fostering a culture in which everything — from pilot's licenses to school admissions and telecom spectrum — is seemingly for sale.

"Contrary to popular perception, economic liberalization increases corruption in the short term," said Thoniparambil. "What people do not realize is that liberalization and opening markets requires regulation."

Privatization has thrown open huge infrastructure contracts ripe for kickbacks and increasing competition for votes has encouraged India's patchwork of political parties to use any means possible to build up their war chests, he said.

In just over eight months, the site has documented 360 million rupees ($8.1 million) worth of small bribes paid — the largest number of them to police. Over 9,000 messages have been posted and the site has gotten more than 426,000 hits from viewers. The White House was impressed enough to schedule a chat between the site's founders and President Barack Obama when he visited India in November.

Thoniparambil, who spent 26 years working for the elite Indian Administrative Service, said bribery has existed since his early days in government — but cases were isolated.

Today, he said, "every department has their supply chain for corruption."

"It has massive social costs," he added. "It transfers a lot of wealth to those who do not deserve it."

The Asian Development Bank has warned that India — which last year was ranked 87 out of 178 countries on Transparency International's Corruption Perceptions Index — is in danger of sliding into Russian-style oligarchic capitalism if it doesn't shape up.

Allegations of graft involving last year's Commonwealth Games, legislative vote-buying, and a rigged auction for 2G telecom spectrum that auditors estimate cost the national treasury $39 billion have spooked investors, many of whom long tolerated corruption.

Aging Gandhian activist Anna Hazare successfully tapped into the mood of outrage, demanding that India's parliament create a powerful, independent watchdog committee to investigate corruption. His highly publicized hunger strike brought thousands of first-time protesters to the streets, expanding the fight against corruption from the poor to India's growing middle class. Prime Minister Manmohan Singh said he hopes anti-corruption measures will be introduced during Parliament's next session.

Thoniparambil's site, meanwhile, offers a microscopic map of how paying "tea water" is woven into the fabric of daily life.

Typical postings include people complaining about having to pay bribes to get marriage certificates, passports and driver's licenses. One person even complained of being forced to pay a bribe at a municipal office in order to obtain a receipt to prove that he had paid his property taxes.

Thoniparambil hopes the site will do more than let people vent their frustration. He pours over the anecdotes he collects to uncover patterns of graft and packs the site with tips on how to avoid paying bribes.

The site offers "10 commandments" to avoid corruption, including "Get Receipts," and "Demand in writing why your document/form is being rejected."

Thoniparambil said many of the middle-class Indians now Tweeting against corruption often have themselves to blame for paying "facilitators" to bribe officials on their behalf.

"People of otherwise high integrity and professionalism in their outlook are like lambs led to slaughter when it comes to dealing with the government," he said. "They don't do ten minutes of homework required. Instead they just go pay a bribe."

Thoniparambil is working with the transport department in his home state of Karnataka to come up with ways to reduce opportunities for bribery and has launched a campaign to get India to ratify the United Nations' anti-corruption convention, which would require India to strengthen its anti-corruption laws.

Under India's 1988 anti-corruption law, offenders face a maximum of five years in prison and unspecified fines, but prosecutions are rare and fines rarely exceed a few hundred dollars, lawyers say. Moreover, only illicit transactions involving a public servant qualify as corruption. Under other laws, corruption in the private sector can be prosecuted but rarely is.

Some argue that corruption is a symptom of India's economic adolescence, as reforms begun in the early 1990s transform the country from a state-led to a market-driven economy.

"If you look at the state of the U.S. or the U.K. when they were at corresponding points of their democratic capitalism and evolution, they were just as bad," said R. Gopalakrishnan, an executive director at Tata Sons, the Tata group's holding company. "We're only 20 years into our journey."

Few believe there will be a quick fix to India's longstanding corruption problem — past scandals, after all, have come and gone without leading to lasting change. Critics say New Delhi has not shown the leadership required to stamp out corruption, and many believe eradicating India's culture of graft will require better technology, better education and better management of government services, all of which will take years to effect.

Even if tougher anti-corruption legislation does get passed, the law alone is rarely enough in a place like India.

Corporate lawyer Nishith Desai said India's anti-corruption laws not only need to be strengthened — they need to be enforced.

"Without enforcement, law has no meaning," Desai said.

More than law, some argue that eradicating corruption requires leadership — a strong head of state who can take on powerful families and politicians previously deemed untouchable, said Robert Klitgaard, a professor at Claremont Graduate University in California.

"Anyone who goes after corruption has to make it credible and go after impunity," he said. "It means getting some big fish and frying them."

___

Online:

http://www.ipaidabribe.com/

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India: Where There's Smoke ...There's Fire! (The Motley Fool)

At the risk of sounding like a broken record or The Motley Fool's resident curmudgeon, international worries are once again threatening to halt the U.S. stock market in its tracks.

I've mentioned numerous times that the debt crisis in Europe was a problem too easily forgotten; unfortunately, sweeping it under the rug only means a potentially bigger problem down the road. Last week, China's first quarterly trade deficit in seven years caught the market off guard and stymied any immediate hope that China would float its artificially low-priced currency, the yuan. Now India, a country that boasts the 10th highest nominal GDP in the world, warns us that rising oil prices and crippling inflation may hamper its growth.

You might be rolling your eyes at that last one or take it with a grain of salt, but the health of India has now become paramount to the U.S., which is one of its largest trading partners.

As reported this weekend, India's March inflation rate skyrocketed to 8.98% while core inflation -- a measure that excludes volatile food and energy prices -- jumped to a staggering 7.1%. If that wasn't bad enough, January's inflation figures were revised up from a previous report of 8.23% to 9.35%. It seems an almost foregone conclusion that the Reserve Bank of India will soon attempt to control inflationary pressures by raising interest rates by 25 or perhaps even 50 basis points.

With the cost of borrowing money rising, some of India's largest sectors could feel an almost immediate pinch. India's information technology sector, which accounts for more than 7% of India's GDP, could see rapidly dwindling growth expectations. Infosys Technologies (Nasdaq: INFY - News) dove last week after reporting weaker-than-anticipated growth. This earnings report now casts a cloud over the entire IT sector, which also includes powerhouses Wipro (NYSE: WIT - News) and Cognizant Technology Solutions (Nasdaq: CTSH - News).

But don't think just the IT sector could be in line for a slowdown. India's automotive sector could be crippled by a double-edged sword. India's auto giant Tata Motors (NYSE: TTM - News) is battling rapidly rising oil prices and a swift march higher in India's interest rates. Both have the potential to put a major dent in Tata's sales figures.

Even India's banks face the significant reality of a slowdown in growth. Rising interest rates will indeed mean more net interest income, but that income comes with a price -- a reduction in the amount of loans being originated. India's largest banks HDFC (NYSE: HDB - News) and ICICI (NYSE: IBN - News) could find themselves holding the short end of the stick if rates keep rising.

Until recently, India's GDP growth had outpaced most of the world, allowing many of its largest publicly traded companies to trade at reasonably aggressive forward earnings multiples. But with the real fear of monetary tightening strangling the momentum out of India's economy, don't be surprised to see weakness in these India-based securities. Where there is smoke, there's usually fire. It pays to keep a close eye on India going forward.

How important is India to your investment strategy? Share your thoughts in the comments section below and consider tracking these as well as your own personalized portfolio of stocks with My Watchlist.

Add Infosys Technologies, Wipro, Cognizant Technology Solutions, Tata Motors, HDFC and ICICI to My Watchlist.

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