VZCZCXRO8099
RR RUEHBI RUEHCI RUEHLH RUEHPW
DE RUEHNE #3312/01 2011113
ZNR UUUUU ZZH
R 201113Z JUL 07
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 7001
INFO RUEHCG/AMCONSUL CHENNAI 0929
RUEHCI/AMCONSUL KOLKATA 0454
RUEHLH/AMCONSUL LAHORE 4053
RUEHBI/AMCONSUL MUMBAI 0120
RUEHPW/AMCONSUL PESHAWAR 4604
RUEHIL/AMEMBASSY ISLAMABAD 3659
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 003312 
 
SIPDIS 
 
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 
 
E.O. 12958: N/A 
TAGS: EAGR EFIN EINV ETRD IN
SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS 
 
 
¶1.  (U) Below is a compilation of Economic highlights from Embassy 
New Delhi for the week of July 16 - 20, 2007. 
 
Chidambaram Signals Continued Tight Monetary Policy 
--------------------------------------------- -- 
 
¶2.  (U) Finance Minister Chidambaram on July 19 stated that the 
government will maintain a "fairly tight" monetary policy because of 
continued concerns about inflation stemming from domestic fuel and 
food prices.  Market observers felt he was preparing the market to 
expect the central bank, the Reserve Bank of India (RBI), to 
continue current interest rate levels at the end of the month during 
its quarterly policy review.  Prior to Chidambaram's comments, 
market observers had hoped the RBI might lower rates, as inflation 
has come down to a 13-month low in recent months and credit growth 
has slowed.  However, even though inflation has moderated, some of 
it is due to the base effect (high prices last year at this time 
mean less of a year on year rise), which analysts expect to wear off 
by the end of 2007, suggesting inflation, especially in food and 
fuel prices could rise again.  High food prices were blamed for 
several state election losses by the ruling coalition earlier this 
year. 
 
India Growing Into Middle-Income Country Ranks 
--------------------------------------- 
 
¶3.  (U) The Prime Minister's Economic Advisory Council (EAC) has 
projected per capita income will reach $1021 in the current fiscal 
year, which would be a 25 percent increase over per capita income 
levels last year, according to the Business Standard.  The EAC bases 
its projection on anticipated 9 percent GDP growth this year, which 
would make for an unprecedented three years of above-nine percent 
growth.  Exceeding $1000 in per capita income would graduate India 
from the World Bank's category of low-income countries, with 
individual incomes below $905 in 2006, into the lower middle-income 
ranks, where incomes ranged from $906 to $3595 in 2006.  While some 
of that increase is attributable to the rupee's appreciation, the 
World Bank's lead economist in India was quoted as attributing most 
of the effect to higher GDP growth.  India still needs to address 
the challenges of income disparities that often temporarily increase 
during periods of rapid economic growth. 
 
Jet Begins Service to US In August 
---------------------------------- 
 
¶4.  (SBU) During a meeting with Econoff on July 19, Jet Airways 
(India) Executive Officer Saroj Datta reviewed the airline's plans 
for service to the US and future expansion plans.  On August 5, Jet 
will launch its Mumbai-Brussels-Newark route, marking the first US 
destination for a private Indian airline.  Then, in October, pending 
slot availability at JFK Airport, Jet will introduce a 
Mumbai-Brussels-New York flight.  Also, this September, the airline 
will begin service on its Mumbai-Brussels-Toronto route.  Jet was 
also considering a Mumbai-Shanghai-San Francisco route but 
commercially viable slots are not available at the busy Shanghai 
Airport.  When asked why Brussels was chosen as Jet's primary 
routing point through Europe, Datta explained that while other 
cities were also in the running, the Belgium government provided 
some very attractive concessions.  Jet will also work with 
Brussels-based Sabena flight academy to train pilots and take 
advantage of the diamond trade passenger traffic from India to 
Belgium. 
 
¶5.  (SBU) When asked about the airline's plans to join one of the 
major alliances, Datta noted that Jet is open to bilateral code 
share opportunities and has agreements with Quantas, a South African 
airline, and ANA.  In the future, there may also be arrangements 
with Air Canada and United but nothing has been formalized.  Datta 
also explained Jet Chairman Naresh Goyal's comments about working 
with Air India to provide complementary/supplementary services to 
the growing Indian aviation market: while India's two leading 
carriers are competitors, Goyal believes there are still areas for 
cooperation to promote Indian aviation vis-a-vis other international 
airlines.  As for futre growth plans, Jet envisions tremendous 
 
NEW DELHI 00003312  002 OF 002 
 
 
potential in freight traffic and hopes to use its wide-body Boeing 
777s to introduce a related business in the next 12-18 months. 
Datta expressed Jet's gratitude for Ex-Im Bank's support in 
financing the purchase of the Boeing 777s. 
 
GOI Grateful for US Efforts at June FATF Plenary 
--------------------------------------------- --- 
 
¶6.  (SBU) The Executive Forum Assessment Team visited New Delhi from 
July 9-13 to hold consultations for an ATA Counterterrorism Training 
course for GOI officials in September 2007.  As part of their 
discussions, they met with Ministry of Finance Joint Secretary 
(Capital Markets) KP Krishnan who provided useful suggestions in the 
areas of combating money laundering and terrorism financing. 
Krishnan also discussed his recent participation at the FATF plenary 
in Paris in late June 2007.  He was very pleased with what he 
described as the US's intervention to recommend the Asia-Pacific 
Group's (APG) Mutual Evaluation for India be conducted earlier than 
late 2008.  Krishnan noted that India must undergo a successful APG 
mutual evaluation to transition from being a FATF observer to a full 
member. 
 
¶7.  (SBU) Krishnan further explained that FATF members will now 
determine when India's next evaluation will take place, and he 
believes that it is likely in the next six to eight months. 
Krishnan also informed the delegation that the GOI is hoping to 
introduce amendments to the Prevention of Money Laundering Act 
(PMLA) during the monsoon season of Parliament; after which, the 
amendments are likely to be referred to a standing committee. 
Krishnan pledged his government's commitment to amending the PMLA by 
the end of 2008 to include some of the FATF recommendations but 
noted that the Ministry of Finance does not have final say.  (Note: 
Post understands from Treasury that Krishnan's understanding of the 
Plenary decisions is not accurate.  Most importantly, it has not yet 
been decided when India's Mutual Evaluation (ME) would take place. 
Further, an APG ME would not substitute for a FATF ME, which must 
take place within the two-year observership period.  Post will 
continue to engage with Treasury to monitor and report on next steps 
in India's efforts to meet core FATF recommendations and changes to 
its AML/CFT regime.  End note.) 
 
¶8.  (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi 
 
WHITE