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- Oil prices. If they soar and the government intervenes to subsidies, then investors may begin to
worry about the impact on efforts to keep the fiscal deficit below the forecast 5.5 percent of GDP
in 2010/11

Read more: http://www.ibtimes.com/articles/40339/20100803/inflation-monetary-

policy.htm#ixzz1HzhLA0gW


SECURITY

India and Pakistan have improved ties since the depths plumbed after the Mumbai attacks that
killed 166 people and derailed their 4-year-long sluggish peace process. But the process remains
tentative. Another militant attack in India with links to Pakistan could push them to the brink of
war.

Anti-India protests in the disputed Kashmir region, which is at the core of the India-Pakistan
rivalry, have calmed. Seventeen people were killed in those protests, which New Delhi blamed
on Pakistan-based militant group Lashkar-e-Taiba, also accused of the Mumbai attacks.

Violence by Maoist rebels, who want to overthrow the state, is on the rise as they respond to a
government security offensive involving thousands of police. India has announced a unified
command structure on to help coordinate that offensive, but analysts say the move may not be
enough to turn around the battle against the insurgency which the government has described as
the country's biggest internal security challenge. The insurgency is strongest in areas which hold
most of India's mineral reserves and so has meant substantial loss in business.

The threat from foreign militants also remains high. Some militant groups see India as a key
battleground, and Pakistan remains a haven for militants seeking to launch attacks in India.

What to watch:

-- How fast the government can cool tempers in Kashmir.

-- The government has stepped up its offensive against the Maoists but the risk of more attacks,
especially on targets with economic importance, has risen.
-- The danger of militant attacks. Markets have proven highly resilient to terrorism -- the impact
was very limited even when gunmen rampaged through Mumbai in 2008. But an attack which
sharply raised the prospects of conflict with Pakistan would have a strongly negative impact on
asset prices, particularly in the current risk-averse climate in global markets.

Read more: http://www.ibtimes.com/articles/40339/20100803/inflation-monetary-

policy.htm#ixzz1Hzhfz0at
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