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OO RUEHAST RUEHBI RUEHCI RUEHDBU RUEHLH RUEHNEH RUEHPW
DE RUEHNE #1658/01 2220245
ZNR UUUUU ZZH
O 100245Z AUG 09
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 7640
INFO RHEHAAA/WHITE HOUSE WASHDC IMMEDIATE
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RHEHNSC/NSC WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RHMCSUU/FAA NATIONAL HQ WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUEHGV/USMISSION GENEVA 8498
RUEHUL/AMEMBASSY SEOUL 1519
RUEHUJA/AMEMBASSY ABUJA 0110

UNCLAS SECTION 01 OF 02 NEW DELHI 001658 
 
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 MDELANEY/CLILIENFELD/AADLER 
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 FSAEED, KDUNNE, AGIBBS 
EEB/ESC 
US MISSION GENEVA FOR PALLGEIER/DSHARK 
EMBASSY ABUJA FOR ECON/FAS 
EMBASSY SEOUL FOR ECON/FAS 
 
E.O. 12958: N/A 
TAGS: ECON EAGR EFIN EPET ETRD BEXP KIPR IN XB XA
 
SUBJECT: New Delhi Weekly Econ Office Highlights for the Week of 
August 3-7, 2009 
 
REFTEL:  A. NEW DELHI 368 
  ¶B. NEW DELHI 435 
¶1. (U) Below is a compilation of economic highlights from Embassy 
New Delhi for the week of August 3-7, 2009, including the 
following: 
 
-- Exports Decline for 9th Straight Month; Imports Decline More 
-- Possible Law to Clarify Sector-specific Investment Caps 
-- India and South Korea Sign Trade Agreement 
-- India Still "Gathering Information" on EU Drug Seizures 
-- India and Nigeria Sign Deal on Pharmaceutical Exports 
 
Exports Decline for 9th Straight 
Month; Imports Decline More 
--------------------------------- 
 
¶2. (U) India's exports shrunk for the ninth consecutive month in 
June 2009, falling by 28 percent compared to the same month last 
year primarily due to the continued slowdown in the United States 
and the European Union. Sectors most hit by the global slowdown 
continue to be labor-intensive ones including leather, textiles, 
handicraft, gems and jewelry.  Imports contracted by 29.3 percent 
led by a 51 percent decline in oil imports, reflecting a slowdown in 
domestic consumption.  With imports declining at a faster rate than 
exports, the trade deficit narrowed to $6.2 billion in June 2009 as 
compared to $9.1 billion in June 2008. On a cumulative basis, 
exports in the first quarter of FY 2009-10 (i.e. April 1 to June 30, 
2009) were down 31 percent compared to Q1 of FY 2008-09, while 
imports were down 36.5 percent. The trade deficit for Q1 FY 2009-10 
was $15.5 billion, almost half of the deficit recorded during the 
same period last year. 
 
Possible Legislation to Clarify 
Sector-Specific Investment Caps 
------------------------------- 
 
¶3. (U) According to media reports, new legislation is being proposed 
to clarify foreign direct investment (FDI) and sector-specific 
investment caps.  According to the report, the clarification would 
be implemented through an act of Parliament, instead of tinkering 
with the investment regime through press notes, executive orders, 
and other ad hoc measures. (Reftels A and B). 
 
¶4.  (U) Comment: Clarity on the sectoral FDI caps would be welcome; 
liberalization or elimination of the caps would be even better.  At 
this point, no details have been made public.  The report appears to 
be a continuation of the running debate on the treatment of foreign 
investment between the Ministry of Finance, the Reserve Bank of 
India (RBI), and the Ministry of Commerce and Industry.  Post will 
continue to monitor possible investment-related legislation, but 
given the lack of progress in Parliament on other economic reform 
laws such as the insurance bill, we are not holding our breath. 
 
India and South Korea Sign Trade 
Agreement 
---------------------------------- 
 
¶5.  (U) India signed a pact with South Korea on Friday morning that 
will eliminate duties at a slower pace than the U.S.-South Korea 
Free Trade Agreement signed in June 2007 (but not yet ratified by 
Congress), according to media sources.  The Comprehensive Economic 
Partnership Agreement (CEPA) is expected to eliminate 75 percent of 
India's duties on South Korean imports, while South Korea will cut 
93 percent of its duties on Indian products.  Bilateral trade 
between the two countries was $15.6 billion in 2008, just 2 percent 
 
NEW DELHI 00001658  002 OF 002 
 
 
of South Korea's total trade and less than one-fifth of U.S-South 
Korea bilateral trade of $82.7 billion.  The agreement should 
benefit South Korea's auto parts industry and India's service sector 
(South Korea has agreed to allow access to Indian IT professionals 
but not to nurses and doctors), but provide very little market 
opening in agriculture and forestry.  It does not include rice, 
pork, chicken, most tropical fruits, and other sensitive products. 
(Comment:  The GOI continues to make very slow, incremental gains in 
market opening via bilateral and regional trade agreements, rather 
than making progress on a multilateral front. End Comment). 
 
India Still "Gathering Information" 
on EU Drug Seizures 
------------------------------------ 
 
¶6.  (U) Local media report that the GOI continues to consider 
approaching the dispute settlement body of the WTO to protest 
seizures of Indian medicines at various European ports.  Although 
the seizures were carried out on charges of intellectual property 
rights violations within EU countries, Indian pharmaceutical 
companies contend that since the drugs were in transit to other 
markets (primarily in Africa and South America), the shipments were 
illegally seized.  Currently, the GOI is gathering information on 
the seizures.  According to the Indian Pharmaceutical Export 
Promotion Council (Pharmaexcil), five cases, involving drug-makers 
Cipla, Dr. Reddy's, Aurobindo, and Ind-Swift, have been brought to 
the Ministry of Commerce's attention.  The Department of 
Pharmaceuticals is also pushing for the Ministry of Commerce to 
provide reimbursements to Indian drug companies who now pay 
additional freight to avoid transshipping Indian pharmaceuticals 
through the European Union to South America and Africa.  (Note: 
While a potential WTO case has been reported several times by local 
media, other than comments that the GOI is collecting information, 
no other statements regarding a pending case have been mentioned by 
GOI officials.  End Note.) 
 
India and Nigeria Sign Deal 
on Pharmaceutical Exports 
--------------------------- 
 
¶7. (U) On August 3, the Department of Pharmaceuticals (part of the 
Ministry of Commerce) signed an agreement with the government of 
Nigeria to combat counterfeit drugs in the Nigerian market.  As part 
of the agreement, Nigeria's National Agency for Food and Drug 
Administration and Control (NAFDAC) will open offices in India. 
Nigeria, the ninth biggest export destination for Indian 
pharmaceutical products, will also collaborate with India to set up 
a drug-testing center in Nigeria.  Both governments will work to 
encourage Indian drug companies to set up manufacturing units in 
Nigeria and explore whether or not drug-makers can supply low-cost 
drugs to the Indian government.  (Comment: Last May, Nigerian 
officials seized fake Chinese anti-malarial drugs carrying a 
"Made-in-India" tag.  India's outreach efforts to Nigeria likely 
stem from concerns that African countries, which comprise 18 percent 
of the Indian pharmaceutical market, are beginning to doubt the 
quality of Indian pharmaceutical goods.  End Comment.) 
 
¶8.  (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi. 
 
 
ROEMER