VZCZCXRO3073
RR RUEHAST RUEHBI RUEHCI RUEHDBU RUEHLH RUEHPW
DE RUEHNE #3756/01 2291228
ZNR UUUUU ZZH
R 171228Z AUG 07
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 7633
INFO RUEHCG/AMCONSUL CHENNAI 1210
RUEHCI/AMCONSUL KOLKATA 0676
RUEHLH/AMCONSUL LAHORE 4092
RUEHBI/AMCONSUL MUMBAI 0357
RUEHPW/AMCONSUL PESHAWAR 4626
RUEHIL/AMEMBASSY ISLAMABAD 3813
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
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE

UNCLAS SECTION 01 OF 02 NEW DELHI 003756 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
USDOC FOR ITA/MAC/OSA/LDROKER/ASTERN/KRUDD 
DEPT OF ENERGY FOR A/S KHARBERT, TCUTLER, CZAMUDA, RLUHAR 
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 AND EB/TRA JEFFREY HORWITZ AND TOM ENGLE 
 
E.O. 12958: N/A 
TAGS: EAGR EFIN EINV ETRD ENRG SENV IN
SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS AUGUST 13-17, 2007 
 
 
NEW DELHI 00003756  001.2 OF 002 
 
 
¶1.  (U) Below is a compilation of Economic highlights from Embassy 
New Delhi for the week of August 13-17, 2007. 
 
NO BANK FUNDING FOR DOMESTIC 
M AND A ACTIVITIES IN INDIA 
--------------------- 
 
¶2.  (U) In a conversation with Vishwavir Ahuja, Managing Director 
and Country Chief of Bank of America (BA), we learned that banks in 
India are not allowed to fund mergers and acquisition activities in 
India.  Ahuja said that while BA is a leader in financing India's 
outbound mergers and acquisition activities  -- such as Tata's 
acquisition of Corus steel and Birlas' Hindalco Company's 
acquisition of the American aluminum company, Novelis -- Indian 
companies cannot leverage the banking system to finance domestic M & 
A activities, which could be a  great business opportunity for BA, 
he added.  Ahuja observed that one of the reasons why Indian 
companies seek to acquire companies overseas is because of the 
leveraging facilities that foreign banks in India offer.  Although 
the deals are closed overseas, the financing plans are originated in 
India and foreign banks underwrite the loan based on the Indian 
companies' balance sheet. 
 
¶3.  (U) According to Ahuja, the banking regulator, the Reserve Bank 
of India (RBI), is concerned that if Indian companies are allowed to 
borrow from banks for M & A operations, they would instead use the 
money to buy back their shares or play the capital markets, as has 
happened in the past.   Ahuja said that the RBI considers capital 
markets and real estate very sensitive and risky for banks, and 
wants to limit the banks' exposure.  Instead of bank loans, Ahuja 
believes that the growing M & A activities in India are funded by 
private equity or internally generated profits.  In some cases, 
Indian companies also use resources raised from the domestic public 
capital market to make acquisitions of other Indian companies. 
Foreign companies seeking to acquire Indian companies have to bring 
in capital from overseas and cannot leverage funds from Indian or 
foreign banks in India. 
 
BOEING VIES FOR INDIAN 
DEFENSE CONTRACTS 
----------------- 
 
¶4.  (SBU) During a meeting with the Charge on August 16, Ian Thomas, 
President of Boeing International and President of Boeing India, 
outlined the company's strong presence and growth strategy in Indian 
aviation.  Thomas is working closely with Boeing's Integrated 
Defense Systems and Commercial Planes for better coordination 
between the two divisions and follow through on Boeing Chairman Jim 
McNerny's advice to stop working as two separate companies in India. 
 With the Indian aviation market poised for tremendous growth, 
Boeing plans to increase its local manpower from 300 to 3000 
employees.  Thomas is focused on completing Boeing's offset 
commitment of USD 1.8 billion from the historic Air India sale of 
2005 worth more than USD 11 billion for 68 planes.  Within days, 
Boeing will complete its MOU on an offset agreement with the 
Ministry of Civil Aviation. 
 
¶5.  (SBU) Boeing's future plans in India include developing 
strategic partnerships with Indian industry and seeking 
opportunities in the aerospace and defense industries.  On the 
commercial side, Thomas projects Boeing sales worth USD 15 billion 
over the next 10 years and purchase of 911 plans by Indian carriers 
over the next 20 years.  India is one of the top three markets for 
Boeing aircraft, along with Russia and China.  As part of the 
company's longer term commitment to infrastructure, the company has 
invested USD 100 million in a maintenance, repair, and overhaul 
(MRO) facility in Nagpur; Boeing expects to break ground at the 
Nagpur MRO in October 2007.  Also, the company has committed USD 85 
million for a pilot and flight crew training center, now expected to 
come up in Hyderabad.  Boeing has also sought out local Indian 
partners - including products worth few millions with HAL and a 
pending proposal (expected to be approved soon) with Tata 
manufacturing for a floor beam for the new 787 aircraft.  Thomas 
 
NEW DELHI 00003756  002.2 OF 002 
 
 
also sees India as the fifth largest potential market for raw 
materials production of titanium, critical for aircraft 
manufacturing. 
 
¶6.  (SBU) In comparison to Boeing's major competitor Airbus, Boeing 
has a 60 percent market share.  However, according to Thomas, the 
company needs to be more active on the defense market.  Boeing 
intends to offer the Super Hornet to the Indian Air Force for its 
upcoming Multi-role Combat Aircraft (MRCA) competition.  In April, 
Boeing submitted a proposal to develop and deliver eight long-range 
maritime reconnaissance and anti-submarine warfare aircraft to the 
Indian Navy.  The Boeing P-8I Multi-mission maritime aircraft, a 
variant of the U.S. Navy's P-8A, is currently under consideration by 
the Indian Ministry of Defense for India's maritime requirements. 
Boeing hopes to significantly increase defense sales in India  and 
views India as one of the potentially largest defense markets for 
Boeing products outside of the U.S., following the Middle East, 
Japan, and Korea in importance, and bigger than  Singapore and 
Australia. 
 
¶7.  (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi 
 
WHITE