VZCZCXRO7834
RR RUEHAST RUEHBI RUEHCI RUEHDBU RUEHLH RUEHPW
DE RUEHNE #4512/01 2781109
ZNR UUUUU ZZH
R 051109Z OCT 07
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 8688
INFO RUEHCG/AMCONSUL CHENNAI 1625
RUEHCI/AMCONSUL KOLKATA 0957
RUEHLH/AMCONSUL LAHORE 4150
RUEHBI/AMCONSUL MUMBAI 0713
RUEHPW/AMCONSUL PESHAWAR 4662
RUEHIL/AMEMBASSY ISLAMABAD 3999
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 03 NEW DELHI 004512 
 
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: EFIN EINV EPET ETRD SENV IN
SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF 
OCTOBER 1-5, 2007 
 
NEW DELHI 00004512  001.2 OF 003 
 
 
¶1.  (U) Below is a compilation of Economic highlights from Embassy 
New Delhi for the week of October 1-5, 2007. 
 
STRENGTHENING RUPEE HITS 
SOUTH INDIAN EXPORTERS 
-------------- 
 
¶2.  (U) South India's exporters are starting to feel the pain of the 
strengthening rupee.  Local press reported on September 25 that 
Indian seafood exports, an INR 80 billion (USD 2 billion) per year 
industry, dropped 16 percent in the second quarter compared with the 
same period last year, due largely to the rupee's rise.  This 
sector, especially important in South India, generally sells its 
products in dollars while its costs are in rupees.  The managing 
director of a seafood export promotion agency told Consulate General 
Chennai that the strengthening rupee is making it more and more 
difficult for exporters and that companies have already started 
laying off workers. 
 
¶3.  (U) A separate newspaper report claimed that exports from the 
Coimbatore region, an area in the southern India state of Tamil Nadu 
known for its textile, tea, motor, and jewellery production, slumped 
17 percent in Q2 compared with the same period last year.  New 
orders have been drying up, and the president of the local export 
promotion board told CG Chennai that European knitwear labels, 
usually reliable purchasers of the region's products, have started 
ordering from lower-cost Indonesia and Thailand instead.  Knitwear 
producers in the region manufacture a large volume of products for 
the U.S. market and have been particularly hard hit.  Press reports 
say thousands of workers have been laid off. 
 
NEW OIL FIND IN 
ANDHRA PRADESH 
---------------- 
 
¶4.  (U) Local press reported on September 23 that Reliance 
Industries Limited (RIL) discovered oil in the Krishna basin, just 
off the coast of the Krishna District in Andhra Pradesh. The 
seafloor at the drilling site sits under 565 meters of water and the 
target depth of the well is nearly 3600 meters.  This is Reliance's 
second oil discovery in the area; it also reported a major natural 
gas discovery nearby in 2002.  An RIL manager confirmed the find 
with CG Chennai, but cautioned that the company was still assessing 
the size of the reservoir. 
 
KARNATAKA SIGNS E-GOVERNMENT DEAL WITH MICROSOFT 
--------------------------------------------- --- 
 
¶5.  (U) Microsoft Corporation signed a letter of intent on September 
24 with the Government of Karnataka that will allow the software 
company to develop e-governance packages for Karnataka's Department 
of Information and Biotechnology (DIB).  Karnataka's Chief Minister 
told reporters that the department will become paperless by October 
¶1.  A DIB official told CG Chennai that Microsoft hopes to use this 
opportunity to show that it can develop a solution that can 
streamline a variety of legacy systems and can later be sold 
throughout the country.  He added that Microsoft is only of the 
companies working on developing e-government solutions for the 
Karnataka government. 
 
CONTINENTAL CONNECTS GLOBAL 
FINANCIAL CENTERS IN NEW YORK 
AND MUMBAI 
------------- 
 
¶6.  (U) On October 1, Continental Airlines inaugurated its nonstop 
service between Newark Liberty International Airport and Mumbai 
Chhatrapati Shivaji International Airport.  Initially, Continental 
plans to offer the service four times a week (Sundays, Mondays, 
Fridays and Saturdays) and then increase to daily service beginning 
on October 28.  Continental Airlines President Jeff Smisek discussed 
the benefits of time savings and convenience by adding this nonstop 
 
NEW DELHI 00004512  002.2 OF 003 
 
 
service to Mumbai.  Mumbai will be the 30th city in Continental's 
trans-Atlantic route network.  Since 2005, Continental has operated 
the New York-Delhi nonstop service.  Smisek also said, "We see 
significant opportunities for growth on this new route linking 
America's financial center with India's business and entertainment 
capital and most populous city."  Endorsing this view, Indian 
Ambassador to the US Ronen Sen had previously said that, 
"Houston-based Continental Airlines has commenced direct flights to 
India, and there has been a 60 per cent increase in business visas 
issued by our Consulate in Houston."  The launch of this new nonstop 
is another significant achievement of the U.S.-India Open Skies 
Agreement and liberalization of air service between our two 
countries. 
 
PARAMOUNT PLANS DIRECT FLIGHTS 
TO UNITED STATES 
----------------- 
 
¶7.  (SBU) M. Thiagarajan, Managing Director of Paramount Airways, 
told Consulate General Chennai officers that his airline is planning 
direct flights to the United States beginning in 2010 or 2011. 
Paramount, a Chennai-based, all business-class airline, currently 
operates five Embraer aircraft servicing the south Indian states 
where it has a 26 percent market share.  Thiagarajan said the 
airline plans to add flights "soon" to New Delhi and Mumbai. 
Visiting the consulate for a visa interview, Thiagarajan said he is 
in talks with Boeing to purchase an unspecified number of 787 
Dreamliners to support proposed Bangalore-San Francisco and 
Chennai-Boston routes.  Thiagarajan was enthusiastic about the 
Dreamliner, mentioning that the airplane's size and capabilities are 
perfect for Paramount's all-business class format.  Thiagarajan said 
a Boeing team visited Chennai and he now plans to travel to Seattle 
to continue discussions. 
 
ANTI-RETAIL MOVEMENT 
GAINS MOMENTUM 
-------------- 
 
¶8.  (U) Following a slew of setbacks for organized retailers in 
various states, the National Movement for Retail Democracy (NMRD), 
headed by the Federation of Associations of Maharashtra (FAM) and 
India FDI Watch, is organizing a large and well-publicized 
demonstration in Mumbai for October 10.  Organizers have said that 
they expect more than 100,000 farmers, traders, and small retailers 
to participate.  The principal goal of the protests is to get 
Maharashtra to scrap its Model Agricultural Produce Marketing 
Committee Act, which permits retailers to set up wholesale markets 
and buy produce directly from farmers, with a more general demand 
that big retailers leave the state altogether.  NMRD has flagged 
Reliance and Wal-Mart as specific targets. 
 
¶9.  (U) FAM has further lodged public-interest litigation with the 
Delhi High Court seeking restrictions on foreign cash-and-carry 
retailers, like Germany's Metro and the eventual Wal-Mart-Bharti 
outlets.  FAM claims that these operations should be able to sell 
only to retailers, not to other businesses such as hotels and 
restaurants, which FAM says are consumers. 
 
¶10.  (SBU) Secretary General Praveen Khandelwal of the Confederation 
of All India Traders (CAIT) made plain the anti-corporate movement's 
intent to take advantage of the sensitivity of the retail issue at a 
time when political parties are looking toward midterm elections. 
Khandelwal said that his organization, which will join the October 
10 demonstration, has informed all political parties that CAIT's 
support depends on the parties' stance on organized retail. 
(Comment:  We believe that although the central government and many 
state governments favor organized retail, there will be very little 
overt support for large retailers until elections have passed. 
Anti-retail elements are deliberately confusing the issues in an 
effort to involve farmers in their protests and in their rhetoric, 
even though farmers' incomes stand to increase dramatically with 
better penetration of organized retail.  For now, many Indians seem 
 
NEW DELHI 00004512  003.2 OF 003 
 
 
to consider a stance in favor of organized retail to be not only 
anti-trader, but also anti-farmer, which is causing central and 
state governments to keep their distance or act on the side of 
protestors.  End comment.)  The Economic Times reported that the 
central government has at least decided that it will not ban 
corporate retail and that FDI in retail down the road will be 
necessary to prevent domestic retailers from dominating the market 
due to lack of competition. 
 
¶11.  (U) Reliance Retail continued its retreat from Uttar Pradesh 
(UP) and West Bengal (WB) this week.  The company fired 400 
employees in WB and started relocating 700 from UP after laying off 
almost 900 there last week.  The Indian Express quoted an unnamed 
Reliance official as saying that, from now on, the company will not 
enter any state if the government cannot promise protection against 
the kinds of protests and fickle policy shifts that have hounded 
them in UP and WB.  The situation in WB grew more complicated this 
week when the ruling Communist Party of India (Marxist) shuffled the 
top three state bureaucrats working on agri-retail and looking at 
revising the state's Agricultural Produce Marketing Act to allow 
contract farming, leading the press to believe that there will be no 
relief for Reliance in the state any time soon.  Reliance also 
announced that it will close its local agricultural collection 
centers in Punjab, Rajasthan, Madhya Pradesh, and Haryana, which had 
been procuring for Reliance directly from farmers, and will operate 
such centers only at the state level. 
 
¶12.  (U) Despite its troubles, Reliance has said that it is planning 
to set up 200 town centers and 665 rural business hubs in 850 towns 
with fewer than 50,000 people.  The Indian Railways have also 
announced plans to find a private partner to set up a rural 
agri-retail chain, for which the Railways would provide logistical 
support and aim to cut down on losses in the supply chain.  These 
developments come on the heels of a joint report from Yes Bank and 
the Confederation of Indian Industry that indicated that the retail 
market in rural areas is growing at twice the rate of the market in 
urban areas. 
 
¶13.  (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi 
 
MULFORD