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RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHNE #3132/01 1901013
ZNR UUUUU ZZH
R 091013Z JUL 07
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 6746
INFO RUEHCG/AMCONSUL CHENNAI 0800
RUEHCI/AMCONSUL KOLKATA 0337
RUEHLH/AMCONSUL LAHORE 4030
RUEHBI/AMCONSUL MUMBAI 9984
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RMHCSUU/FAA NATIONAL HQ WASHINGTON DC
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UNCLAS SECTION 01 OF 02 NEW DELHI 003132 
 
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SENSITIVE 
SIPDIS 
 
USDOC FOR ITA/MAC/OSA/LDROKER/ASTERN/KRUDD 
DEPT PASS TO USTR DHARTWICK/CLILIENFELD/AADLER 
DEPT PASS TO TREASURY FOR OFFICE OF SOUTH ASIA ABAUKOL 
TREASURY PASS TO FRB SAN FRANCISCO/TERESA CURRAN 
STATE FOR SCA/INS MICHAEL NEWBILL AND EB/TRA JEFFREY HORWITZ AND TOM 
ENGLE 
PASS TO FAA THOMAS NASKOVIAK 
PASS TO DOT DAVID MODESSIT 
 
E.O. 12958: N/A 
TAGS: EFIN EINV ETRD EAIR PTER KTFN PREL ENRG ECON IN IR
GM, UK 
SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS 
 
REF A: NEW DELHI 02347 
 
NEW DELHI 00003132  001.2 OF 002 
 
 
¶1.  (U) Below is a compilation of Economic highlights from Embassy 
New Delhi for the week of July 2-6, 2007. 
 
Foreign Banks Report High Profit Growth, Yet Opportunity Costs are 
Extreme 
----------------- 
 
¶2.  (U) Major foreign banks in India have reported a healthy growth 
in net profits in the last Indian fiscal year which ended on March 
¶31.  Citi's profits grew 39 percent to $386.7 million (excluding 
$540 million from the gain of sale of holding in one of the group 
companies), Bank of America's grew 35 percent to $48.3 million, and 
JPMorganChase, which does not publicly report its results, told us 
that it, too, had strong profit growth.  Non-U.S. banks also 
reported solid results: HSBC (64 percent), Standard Chartered (51 
percent), ABN Amro (59 percent) and Deutsche Bank (73 percent). 
Going against the trend, American Express Bank showed a small 
decline in profits having reduced its banking operations in India. 
 
 
¶3.  (U) Fee-based income was the main driver of profit growth for 
most foreign banks we surveyed, reflecting the buoyancy of India's 
financial markets.  Sanjay Nayar, CEO of Citi India, said that 
fee-based income more than offset a 25 basis points compression in 
interest margins.  Citi financed about $15 billion of merger and 
acquisitions by Indians abroad in the past fiscal year.  About 70 
percent of Citi's profits came from corporate banking.  Vishwavir 
Ahuja of Bank of America said structured finance engagements with 
large Indian corporations were mainly responsible for his bank's 
profit growth.  Bank of America does not have retail banking 
operations. 
 
¶4.  (U) U.S. bankers expect continued strong growth in the current 
fiscal year.  Indian companies are continuing their buying spree 
abroad, are seeking more structured finance products, and are 
raising more funds in international markets.  Asit Bhatia, Managing 
Director at Bank of America told us that his bank helped companies 
such as Reliance and Indian Oil to access long-term funds from 
U.S.-based pension funds and insurance companies through private 
placements.  Sanjay Nayar said Citi was in "hyper mode" seeking to 
bring new multinational clients from Europe, U.S., Korea and Japan 
to India. 
 
Comment 
------- 
 
¶5.  (SBU) At the same time, the opportunity costs foreign banks 
incur from the country's restrictive policies towards bank ownership 
and branches are extreme.  In particular, foreign banks are losing 
market share in the rapidly growing retail banking sector, since the 
RBI only issues about a dozen new branch licenses to foreigners each 
year while doling out hundreds to Indian banks.  In contrast, 
foreign banks are doing well and even have a leading, if not 
dominant role, in those areas where there are few restrictions to 
foreign involvement, such as capital markets and corporate finance. 
End comment. 
 
Continental Partnering with Kingfisher 
------------------------------------ 
 
¶6.  (U) India's Kingfisher Airlines has agreed to partner with 
Continental Airlines on frequent flying, airport lounge access, and 
future codesharing to improve service for customers traveling 
between the U.S. and India, The Economic Times reported July 5. 
Starting in October, members of Continental's OnePass and 
Kingfisher's King Club frequent flyer programs will be able to earn 
and redeem miles on all flights operated by the other carrier. 
Reciprocal airport lounge access for eligible customers, including 
 
NEW DELHI 00003132  002.2 OF 002 
 
 
Continental BusinessFirst and Presidents Club members, will also 
begin in October.  The airlines plan codesharing by the end of the 
year.  Continental has operated daily, non-stop flights between 
Newark and Delhi since 2005.  The airline will launch daily, 
non-stop eastbound flights between Newark and Mumbai on October 1, 
according to CNN Money of July 5.  Continental will place its code, 
CO, on Kingfisher flights connecting to Continental's daily 
Delhi-New York and Mumbai-New York flights. 
 
GOI Waives Backlog on Tax for Tourists' Roaming Services 
-------------------------------------- 
 
¶7.  (U) According to The Economic Times of June 20, India's Central 
Board of Excise and Customs (CBEC) said domestic telecom operators 
will not be charged tax on services offered to inbound roaming 
subscribers from July 1, 1994 to January 14, 2007.  Domestic telecom 
operators and the Finance Ministry have been in debate over the 
payment of service tax on roaming facilities provided to 
international tourists in India.  The CBEC resolution is estimated 
to save telecom operators $245 million.  The article states that the 
Finance Ministry ruled earlier this year that telecom operators 
would have to pay the tax starting January 15, 2007, including the 
backlog from July 1994.  Telecom operators have been adding the 12% 
tax on roaming services used by international tourists in India 
since January 15 - raising travelers' costs - but had refused to pay 
unanticipated charges from the past. 
 
 
India's Telecom Majors To Offer Satellite-based Broadband 
--------------------------------------------- ------- 
 
¶8.  (U) Bharti Airtel and Reliance Communications may provide 
satellite-based broadband services alongside their Direct To Home 
(DTH) offerings, which are planned for market by year end, according 
to The Economic Times of July 2.  This move may prompt Dish TV, 
India's largest private DTH player, to enter the satellite-based 
broadband services market as well.  Bharti said it will provide 
broadband services in areas where it does not make sense to lay 
copper wire.  Reliance is also considering satellite internet 
services, which are an ideal solution for rural users but are often 
too costly as a stand-alone offering.  Separately, in an attempt to 
monetize its tower assets valued at about $3 billion, Tata 
Teleservices (TTSL) short listed nine tower companies (including US 
Crown Castle) to sell or lease out its approximately 6,000 telecom 
towers across India, The Economic Times reported July 3.  The new 
towers are to be on a build-operate-lease basis and the holding 
companies will be able to offer sites to other operators.  TTSL 
plans to spin off its tower business with a goal of reinvesting 
money earned from sales and rentals of towers into core telephone 
services. 
 
¶9.  (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi. 
 
Mulford