10/07/2014 World Business Report


10/07/2014

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News. Now for the latest financial news with Sally and World Business

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Report. Bitter medicine to cure a sick economy ` India awaits the

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first Budget from its new government. Day of action ` over a

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million UK public sector workers walk out in a battle with the

:00:30.:00:36.

government over austerity. Welcome to World Business Report. I'm Sally

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Bundock. Also in the programme: Chinese trade recovers, but the

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numbers disappoint. We'll bring you the details. But first: "Bitter

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medicine". That is what India's Prime Minister Narendra Modi has

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warned his country needs to get its economy back on track. He swept to

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power back in May with promises of reform. Today we find out what that

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medicine might be, with his government's first Budget. Here is

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what he is up against. The most obvious problem is weak economic

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growth. India's economy grew just 4.7% in the year to April. That is

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around the weakest in a decade, and about half what is needed to create

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jobs for the young and growing population. It is estimated a

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million new people enter India's Labour market each month. Then there

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is the problem of inflation. Consumer prices were up almost 10%

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last year, driven by food prices, and that hits ordinary Indians hard.

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They rely on government subsidies to fuel, food and fertilizer. But that

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is crippling the government's finances. Ratings agencies have

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warned they might cut India's credit rating if it doesn't rein in its

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finances. Balancing all this will be the challenge today. Yogita Limaye

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is in Delhi for us. Tell us what is expected from this Budget. Will

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sally, let me just show you where that document was actually made.

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That will bring behind me houses the finance ministry. I have been told

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that finance ministry officials have been locked in there for days trying

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to create this document, which is much anticipated here in India, and

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the Finance Minister has literally just let that building to go to

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India's Parliament to deliver that speech which will happen in about an

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hour from now. To your question, what is expected, as you pointed

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out, India's finances have not been in order for quite awhile now. Need

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to increase revenues or decrease spending. A large part of that goes

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to subsidies, particularly fuel subsidies, where India spends as

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much a $20 billion. The government won with a massive majority, meaning

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they will face perhaps less political opposition even if they

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have to take some unpopular decisions. What most analysts expect

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is that we might see some cuts in those fuel subsidies. As we have

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said, it is a new government, people are hoping for fresh ideas. How

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optimistic are Indian people that today's Budget will be one of the

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key answers to its problems? Well all of the businesses that we have

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been speaking to over the past few weeks seem very optimistic. What

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they want and what they are expecting to see in this Budget is

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that there will be some plan to make doing business in India easier.

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Prime among those, they are expecting a roadmap for a goods and

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services tax, simply put, that is simply one single tax across India.

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Currently, depending on where you operate your business, there are

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several layers of taxation, and it is difficult and cumbersome for

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companies to comply with all of them. Companies want to see a

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roadmap for a single tax across India. As far as ordinary people are

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concerned, there has not been good news. Food prices have spiralled.

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The monsoon forecast is below normal, it is expected to hit

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reduction, and again, if fuel subsidies are cut, things will

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become more expensive. We will talk to you later today as that news

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starts to break. A very important day for the Indian economy. Focusing

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on the UK, more than a million public sector workers here in the UK

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go on strike today, in a dispute with the government over pay,

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pensions and working conditions. Local government employees, from

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refuse collectors to librarians, will be joined by teachers,

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firefighters and civil servants, in what they are calling a "day of

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action". We'll be talking to an expert in a moment, but first this

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report from John Moylan. The Graham family in Northumberland believe the

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government has dealt them a bad hand. As a teaching assistant,

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Sharon's pay has risen by just 1% in four years. So she has to hold down

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two other jobs to get by. Where I work, 75 to 80% of teachers'

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assistants work two jobs. It is not just me, there is lots of us have

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multiple jobs. We are all struggling to get by. Like Sharon, 1.4 million

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local government workers have endured a three`year pay freeze,

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followed by a below`inflation 1% pay rise in 2013. It is the prospect of

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another 1% rise this year which led unions to ballot for industrial

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action. Pay rates in local authorities have got so bad that in

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October, the national minimum wage overtook the council pay rate, you

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can't legally pay any less than councils pay their staff, which is

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appalling when you think of the front`line service jobs that those

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people do in our communities everyday. Tomorrow, council workers

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will be joined by teachers, civil servants, and firefighters, in the

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largest co`ordinated strike since the public`sector pensions dispute

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three years ago. But it has been condemned by the government. I think

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they are wrong and damaging, because they will affect services and affect

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people who have nothing to do with the dispute whatsoever. I also think

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they are wrong because some of them are based on ballots which took

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place two years ago, with a small percentage of people actually voting

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for strike action. The government says pay restraint helps families by

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protecting jobs, services, and repairing the public finances. So

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the Grahams are unlikely to get a boost to their household income any

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time soon. Professor John Ryan is from the Von Hugel Institute at the

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University of Cambridge. Thank you for coming in. Good morning. We

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heard the challenges many are facing. And Chancellor Osborne seems

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to be quite set on his goal to reduce our borrowing has an economy,

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but trade unions are also very determined. How will this play out?

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At the moment Chancellor Osborne has not in successful in looking after

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the finances of the country, the national debt is going up, and

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posterity, as far as the people striking today, in this one`day

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strike, feel that they are being targeted in this process. So there

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are quite a lot of people either living on subsistence wages,

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low`paid workers, as we saw from the peace earlier. They are actually

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struggling in this economy, which supposedly is doing well. How do we

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resolve this then, from your point of view? Because as you say, public

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finances are in a pretty ports done a poor state. How does this get

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resolved? It will get resolved over a period of time, and when another

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period of crisis hit in the next few years, there is quite a lot of

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public sector workers out there. There are lots of debts. And maybe

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there is a point of putting a marker down today for the employment rights

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of the people that are in work. Because in the future, I think that

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those public sector workers will be targeted for redundancies. We have

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seen very similar strike is happening in Europe recently for the

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same kinds of reasons. Greece yesterday had a 24`hour walkout of

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workers. Are they being affected, these days of action? `` being

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effective? They are not doing well at all because of the circumstances

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of the eurozone crisis. Countries like Germany tend to work, and there

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is a negotiated settlement at some stage of the process. It is very ad

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hoc. Countries doing well like Germany, there is resolution. Quite

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a lot of countries in Europe at the moment are going through a more

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advanced process of dealing with these Budget deficits. And it is

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also an insider outsider debate, people in work are trying to protect

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their jobs, people outside are trying to get more employment

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protection. The plot will thicken, no doubt. Thank you for your time

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this morning. We will keep across that story as the date progresses.

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Turning our attention to the world's second`biggest economy.

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Trade in and out of China has continued to recover in June,

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according to official data out in the last few hours. But the figures

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have disappointed the markets. Let's get the latest. Rico Hizon is

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following this for us in Singapore. Lovely to see you. Make sense of

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this latest news out of China. Asian investors are not excited at all

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about the numbers. Exports rising 7.2% from a year ago, the low market

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expectations of more than 10%. Imports also missed for cuts, rising

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by about 5% due to sluggish domestic demand. When you speak to

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economists, Sally, they say unless more stimulus measures as taken by

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the government, they doubt China will be able to achieve its growth

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target of 7.5 cent in 2014. Together with weak inflation reports,

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analysts believe domestic demand remained weak. `` seven .5%.

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China's exports were sluggish this year, but its trade performance has

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gained some traction in recent months, helped along by the

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improving US economy. The government gave exporters more tax breaks.

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Credit insurance and currency trading options. Imports have also

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been weak, highlighting sluggish domestic demand. But activity data

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and June surveys on productivity have spurred some hope that the

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economy is indeed steady. So the markets and investors are still

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hoping for more stimulus initiatives in the second half of the year.

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Sally. Thank you. How let's talk you through some of our business

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stories: French bank BNP Paribas has pleaded guilty to a charge of

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conspiracy, as part of a $9 billion settlement with the US Department of

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Justice for violating sanctions against Sudan, Cuba and Iran. BNP

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Paribas has also admitted filing false business records and agreed to

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a temporary ban trading in US dollars. As ever, the markets are

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very focused on any news out of China, as Ricoh his unmentioned. As

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you can see, a very mixed picture. We saw a real bounce back in the US

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after two days of declines. Earnings beat expectations, and Alcoa's

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shares went up to their highest in two years. A good start to the

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season in the US. Hello again. As we mentioned

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earlier, a survey of senior health and social care staff has found that

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nearly half of them thought it was either "very" or "quite unlikely"

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the NHS in England would still be free in ten years' time. The poll

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also predicted a funding crisis in the

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