VZCZCXRO7277
RR RUEHNEH
DE RUEHNE #0878/01 1211306
ZNR UUUUU ZZH ZDF
R 011306Z MAY 09
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 6412
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RHMFIUU/FAA NATIONAL HQ WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHDC

UNCLAS SECTION 01 OF 02 NEW DELHI 000878 
 
SENSITIVE 
SIPDIS 
STATE FOR SCA/INS AND EEB 
USDOC FOR ITA/MAC/OSA/LDROKER/ASTERN/KRUDD 
DEPT OF ENERGY FOR A/S KHARBERT, TCUTLER, CZAMUDA, RLUHAR 
DEPT PASS TO USTR CLILIENFELD/AADLER/CHINCKLEY 
DEPT PASS TO TREASURY FOR OFFICE OF SOUTH ASIA MNUGENT 
TREASURY PASS TO FRB SAN FRANCISCO/TERESA CURRAN 
USDA PASS FAS/OCRA/RADLER/BEAN/FERUS 
EEB/CIP DAS GROSS, FSAEED, MSELINGER 
 
E.O. 12958: N/A 
TAGS: ECON EAGR EAIR ECPS EFIN EINV EMIN ENRG EPET ETRD
BEXP, KBIO, KIPR, KWMN, IN 
 
SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF 
APRIL 27 TO MAY 1, 2009 
 
NEW DELHI 00000878  001.2 OF 002 
 
 
¶1. (U) Below is a compilation of economic highlights from Embassy 
New Delhi for the week of April 27 to May 1, 2009, including the 
following: 
 
-- India Signals Plans to Purchase IMF Bonds 
-- Slowdown in Mergers and Acquisitions 
-- Regulator Issues Notices to 12 Accounting Firms 
-- India Considering Separate Standards for Medical Devices 
 
India Signals Plans to Purchase IMF Bonds 
----------------------------------------- 
 
¶2.  (U) At the G-20 meeting in London in April, Montek Singh 
Ahluwalia, Deputy Chairman of the Planning Commission, indicated 
India's willingness to boost the resources and capabilities of the 
IMF through the purchase of $10 billion of IMF bonds, using its 
foreign exchange reserves.  India's foreign exchange reserves stood 
at $252.5 billion on April 17, 2009.  The $10 billion contribution 
is about 2 percent of the total $500 billion committed to the IMF 
globally at the April G-20 Summit.  This is the same contribution as 
India's share in the Fund.  Ahulwalia said that "if the IMF can 
issue the securities, it's an easy way for us to make a 
contribution."  The benefit of using foreign exchange reserves to 
buy bonds comes from the fact that this process can be implemented 
by the Reserve Bank of India, without any legislative approval. 
Moreover, India would prefer a bond issue as it does not have the 
fiscal strength to contribute $10 billion to the IMF, which amounts 
to about one percent of its GDP. 
 
¶3.  (U) Under Ahluwalia's proposal, the RBI would shift some of its 
funds currently held by US treasury bills or other US government 
bonds to the proposed IMF securities.  Analysts opine that the 
proposal could face political opposition since the contribution does 
not directly help India, as it is not borrowing from the IMF. 
However, India will not lose the money it plans to give to the IMF. 
The Fund usually makes a small profit on its loans.  The modalities 
of the commitment to the IMF are yet to be worked out by the Reserve 
Bank of India and the government ministries. 
 
Slowdown in Mergers and Acquisitions 
----------------------------------- 
 
¶4.  (U) According to Dealogic, mergers and acquisitions 
(M&As)involving Indian companies in calendar year 2009 to date have 
been the lowest (due to the global slowdown) in four years, 
amounting to just $7.4 billion, a decline of 51 percent from the 
corresponding period a year ago.  Inbound M&As totaled $1.6 billion 
in 70 deals so far this year, down 77 percent from last year.  The 
US remained the biggest investor in Indian firms with $483 million 
via 21 deals.  Outbound M&A activity also fell drastically - by 96 
percent - to just $334 million through 34 deals.  The top two 
acquisitions which took place during the year were Reliance 
Industries' 25 percent equity buyout in Reliance Petroleum for $1.7 
billion and Quippo Telecom Infrastructure's 49 percent equity 
acquisition in Wireless II Infoservices for $1.3 billion.  Other 
major M&As which took place include Tech Mahindra's 51 percent 
acquisition in Satyam Computer Services for $577 million, Reliance 
Industries' five percent buy in Reliance Petroleum and Life 
Insurance Corporation of India's two percent purchase in State Bank 
of India. 
 
 
Regulator Issues Notices to 12 Accounting Firms 
--------------------------------------------- -- 
 
¶5.  (U) The Institute of Chartered Accountants of India (ICAI - 
which governs the accounting profession in India) has issued notices 
to twelve Indian chartered accounting (CA) firms that have tie-ups 
with foreign firms.  Indian law allows only those audit firms 
registered with ICAI to provide audit services.  However, according 
to ICAI President Uttam Prakash Agarwal, some unregistered 
international audit firms have allegedly conducted audits by 
associating themselves with local firms and provided services 
 
NEW DELHI 00000878  002.2 OF 002 
 
 
indirectly.  "[ICAI] wants to find out how these firms are operating 
and if they are sidestepping the law to do so.  Therefore, notices 
have been sent to 12 firms having affiliations with foreign entities 
to understand their modus operandi," stated Agarwal. 
 
¶6.  (U) The twelve Indian CA firms must submit by May 23 all 
documents, agreements, contracts, terms and conditions for usage of 
a name, and fee-sharing arrangements with any multinational auditing 
firm.  While ICAI declined to divulge the names of the firms on whom 
it has served notices, Price Waterhouse, an Indian arm of global 
audit firm PricewaterhouseCoopers (PwC), and SR Batliboi, a member 
firm of Ernst & Young, are some of the well-known Indian firms that 
are affiliated with foreign firms.  ICAI has reportedly formed a 
committee to examine the Satyam accounting scandal and recommend 
regulatory changes, wherever required, to the government and the 
Securities and Exchange Board of India (SEBI). 
 
India Considering Separate 
Standards for Medical Devices 
---------------------------- 
 
¶7.  (U) India's Drugs Controller General of India (DCGI) has 
reportedly decided to create separate quality standards for medical 
devices.  At present, for regulatory purposes, medical devices in 
India are grouped with pharmaceuticals.  The new guidelines are 
expected to be notified by the end of May and will classify medical 
devices based on the risks involved.  Both drugs and devices are 
regulated by state drug regulators under the Drugs and Cosmetics 
Act.  The new guidelines would make it mandatory for both domestic, 
as well as foreign, manufacturers to have their medical devices 
certified by bodies like the International Organization for 
Standardization (ISO) and Bureau of Indian Standards (BIS) before 
selling/exporting them in the Indian market.  Some commentators 
believe the move is expected to not only create a level playing 
field for both Indian and foreign manufacturers of medical devices, 
but will also provide transparency in rules and regulations 
governing the export, manufacturing, and sale of medical devices in 
India. 
 
¶8.  (U) The nodal department for medical devices - Ministry of 
Health - has told media that DCGI has finalized the new guidelines 
and submitted them to the Drug Technical Advisory Board for 
approval.  According to industry estimates, Indian manufacturers 
produce medical devices worth $2.5 billion, with about 60 percent 
exported to Europe, Middle East, Africa and North America.  At the 
same time, India imports approximately $1.5 billion in medical 
devices to meet domestic requirements. 
 
¶9.  (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi. 
 
BURLEIGH