VZCZCXRO4154
RR RUEHAST RUEHBI RUEHCI RUEHDBU RUEHLH RUEHPW
DE RUEHNE #4667/01 2921134
ZNR UUUUU ZZH
R 191134Z OCT 07
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 8900
INFO RUEHCG/AMCONSUL CHENNAI 1722
RUEHCI/AMCONSUL KOLKATA 1047
RUEHLH/AMCONSUL LAHORE 4171
RUEHBI/AMCONSUL MUMBAI 0807
RUEHPW/AMCONSUL PESHAWAR 4672
RUEHIL/AMEMBASSY ISLAMABAD 4051
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 004667 
 
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 EAGR ELTN EAID SENV IN
SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR OCTOBER 15-19, 
2007 
 
NEW DELHI 00004667  001.2 OF 003 
 
 
¶1.  (U) Below is a compilation of Economic highlights from Embassy 
New Delhi for the week of October 15-19, 2007. 
 
INDIA INCREASINGLY AN FDI PLAYER 
--------------------------- 
 
¶2.  (U) The UN Commission on Trade and Development (UNCTAD) 
released its annual World Investment Report this past week, 
highlighting India's growing role as both a recipient and source of 
foreign direct investment (FDI).  The report noted that India had 
received $17 billion in FDI in 2006, an amount equal to the past 
three years combined.  Multinational companies surveyed about their 
FDI plans through 2009 identified India and China as their top two 
global FDI destinations, ahead of the US and Europe. In particular, 
the next few years are expected to see a significant rise in FDI in 
India's manufacturing sector.  The steel and auto sectors stand out: 
as much as $12 billion in FDI in steel and $3 billion in the 
automobile industry have been announced.  Private equity has been a 
significant source of FDI in recent years, accounting for nearly 
one-fifth of all mergers and acquisitions last year alone.  The 
report cautions that such private equity prominence is a new 
phenomenon.  Since private equity seeks out investments from which 
it can exit in 2-3 years, private equity-driven FDI may not have the 
same qualitative impact that more traditional FDI has, nor stay in 
the country as long. 
 
¶3.  (U) India also continues to make its name as a source of outward 
FDI as well, nearly quadrupling its outward flows to $9.7 billion 
from 2005 to 2006.  Private companies that were "resource-seeking" 
were the main drivers - whether those resources were created assets 
such as brands and technologies or energy resources.  Indeed, the 
oil and gas sector played a prominent role, accounting for roughly 
one-fifth of the outflow in 2006. 
 
RELIANCE MOVES TO NEW RETAIL FORMATS 
AND NEW JVS, WHILE OTHERS GO ON-LINE 
-------------------- 
 
¶4.  (U) According to the press, Reliance Retail is turning its 
attention to non-grocery formats, hastening the roll-out of its 
planned health-and-wellness, footwear, jewelry, music, and other 
specialty outlets.  Reliance will reportedly include West Bengal, 
where plans for grocery outlets are on hold due to violent protests 
and lack of political support, in this expansion.  The company, 
however, does not intend to open stores of any sort in Uttar Pradesh 
for the time being.  The Economic Times also reported that Reliance 
is working on a joint venture with Volvo for the manufacture of 
vehicles tailored to Reliance's needs as part of what company head 
Mukesh Ambani called "an over-arching pan-India transportation 
warehousing logistics infrastructure."  The deal, per the daily, 
would be the first of its kind anywhere in the world.  Reliance has 
further announced plans for a joint venture with Citigroup to set up 
a non-banking finance company that will deal mainly in consumer 
loans and credit cards. 
 
¶5.  (U) Subhiksha, Spencer's, and Pantaloon's Big Bazaar are all 
reportedly moving toward offering an on-line service, where 
consumers could place orders for delivery, with Subhiksha in the 
lead and hoping to launch this platform in December. 
 
INDIAN SEAFOOD EXPORTERS HOPE WTO RULING 
WILL EXPAND SALES TO U.S. CONSUMERS 
----------------- 
 
¶6.  (U) India's seafood exporters are hailing a preliminary World 
Trade Organization (WTO) ruling against the United States.  Local 
media report that a preliminary determination by the WTO's 
settlement body found that the practice of requiring certain India's 
shrimp exporters to execute a U.S. customs bond in order to export 
to the United States violates trade rules.  An appeal of the ruling 
is possible, but India's exporters are optimistic.  The president of 
the Seafood Exporters Association of India told Consulate General 
 
NEW DELHI 00004667  002.2 OF 003 
 
 
Chennai that the bond requirement had made business "unviable" and 
predicted that the WTO ruling would lead to a doubling of the number 
of seafood exporters willing to export to the US.  He added that 
U.S. consumers should expect to see more Indian shrimp in grocery 
stores "before Thanksgiving." 
 
OIL AND GAS PIPELINE CONFERENCE: 
STANDARDS AND REGULATIONS 
------------------------------- 
 
¶7.  (SBU) The American Society of Mechanical Engineers (ASME) held a 
four-day conference and technical workshop on Oil and Gas Pipelines 
with participation from the Government of India's Petroleum and 
Natural Gas Regulatory Board (PNGRB), Bureau of Indian Standards, 
and Engineers India Limited.  The conference focused on India's 
evolving regulatory system and Indian adoption of U.S. and 
international technical and engineering standards (ASME and ISO) for 
pipeline construction, operation, and maintenance in the context of 
India's creation of safe, efficient and modern nation-wide natural 
gas, petroleum, and petroleum product pipeline networks.  Embassy 
Econ First Secretary in an opening address emphasized U.S. industry 
and USG interest and encouragement of PNGRB promoting time-proven 
principles of Regulatory Independence, Transparency, and 
Non-Discrimination for pipelines and of the PNGRB institutionalizing 
regular consultations with industry on the regulatory framework. 
 
¶8.  (SBU) To promote GOI-USG cooperation in oil and natural gas 
industry regulations and standards, the Ministry of Petroleum and 
Natural Gas (MPNG) and U.S. Trade and Development Agency (USTDA) are 
finalizing the request for proposals for a $690,000 feasibility 
study grant for a national natural gas grid and they are discussing 
a follow-on scope of work for technical assistance in the oil and 
gas regulatory area.  In the context of the U.S.-India Energy 
Dialogue, the US Embassy wants to promote bilateral exchanges of 
information, experience, and best practices on oil and gas pipeline 
regulatory frameworks between the PNGRB and USG agencies, such as 
the Department of Transportation and Federal Energy Regulatory 
Commission. 
 
MCDONALD'S PLANS EXPANSION 
IN SOUTH INDIA 
------------------ 
 
¶9.  (U)  Local media reports that McDonald's plans to open 20 new 
restaurants in South India by the end of next year, expanding its 
presence in Bangalore and Hyderabad and entering the currently 
McDonald's-less Chennai market.  Currently, the chain's presence in 
the South is limited to a total of 10 restaurants in Bangalore and 
Hyderabad.  McDonald's is also reportedly exploring the possibility 
of establishing a distribution center in the South to support this 
expansion.  A small, satellite operation based in Bangalore 
currently serves the chain's South Indian locations.  An expanded 
distribution center in the South should be a boon for local farmers. 
 Northern farmers, mainly in Punjab and Maharashtra, currently 
supply much of McDonald's southern restaurants' needs. 
 
TWO REGIONAL AIRLINES TO BEGIN 
OPERATIONS IN JANUARY 
----------------------- 
 
¶10.  (U) South India's air travelers should have some new options by 
January, when both Air Dravida and TransIndia plan to begin 
operations.  The two regional airlines intend to operate 
single-aisle jets between the South's metro cities (Chennai, 
Bangalore, and Hyderabad) and turbo-prop aircraft on routes between 
the region's smaller cities.  The executive director of Air Dravida 
told Consulate General Chennai that his company had procured three 
second-hand, 50-seat Bombardier aircraft already.  He said that 
there is a "huge" unmet demand for air travel from the South's 
smaller cities to the region's metros and that he expects Air 
Dravida to break even within four quarters. 
 
 
NEW DELHI 00004667  003.2 OF 003 
 
 
¶11.  (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi. 
 
MULFORD