VZCZCXRO1997
RR RUEHAST RUEHBI RUEHCI RUEHLH RUEHPW
DE RUEHNE #5318/01 3481224
ZNR UUUUU ZZH
R 141224Z DEC 07
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 9714
INFO RUEHCG/AMCONSUL CHENNAI 2075
RUEHCI/AMCONSUL KOLKATA 1390
RUEHLH/AMCONSUL LAHORE 4233
RUEHBI/AMCONSUL MUMBAI 1177
RUEHPW/AMCONSUL PESHAWAR 4708
RUEHIL/AMEMBASSY ISLAMABAD 4296
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 005318 
 
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 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 
DECEMBER 10-14, 2007 
 
NEW DELHI 00005318  001.2 OF 003 
 
 
¶1.  (U) Below is a compilation of Economic highlights from Embassy 
New Delhi for the week of December 10-14, 2007. 
 
DETAILS LEAKED ON LONG-AWAITED 
RETAIL REPORT 
------------- 
 
¶2. (U) Several Indian dailies, most extensively Mint, reported on 
details from the overdue study by the Indian Council for Research on 
International Economic Relations (ICRIER) on the impact of organized 
retail on mom-and-pop shops.  On Wednesday, Mint and others focused 
on the negative aspects of the report, indicating that small 
retailers suffer estimated annualized losses in sales of 10 percent 
when an organized-retail outlet opens nearby.  On Thursday, the Mint 
offered a more complete assessment of the report's findings, which 
argue that the impact on small retailers will be temporary, that 
organized retail will lead to a more efficient supply chain and 
better market realization for farmers, and that consumers get better 
prices from organized retailers. 
 
¶3.  (SBU) In a Tuesday meeting with Econoff, Dr. Arpita Mukherjee, a 
Senior Fellow at ICRIER, confirmed that the above report was 
finished months ago and explained that the Ministry of Commerce and 
Industry had asked ICRIER to hold the report until the political 
unrest surrounding the issue subsides. 
 
ELI LILLY'S CIALIS DENIED PATENT 
----------------------------- 
 
¶4.  (U) Eli Lilly's Cialis, the number-two erectile-dysfunction drug 
in the world after Pfizer's Viagra, failed to qualify for a patent 
under Indian law, according to the Business Standard.  Domestic 
drug-maker Ajanta had filed a pre-grant opposition to Eli Lilly's 
patent application on grounds that scientists at the Central Drug 
Research Institute in Lucknow had synthesized the basic elements of 
the drug in 1970 and that Cialis was consequently not a new chemical 
element and not patentable under Indian law.  Eli Lilly has 
expressed its intention to appeal the decision, noting that 72 other 
countries have recognized the drug as a new chemical entity. 
 
USG DELEGATION ATTENDS 
ICT WORKING GROUP 
------------ 
 
¶5.  (U) The week of December 10 saw the semiannual meeting of the 
US-India Working Group on Information Communications Technology 
(ICT) take place in Delhi, in addition to industry meetings and 
conferences.  On December 14, Ambassador David Gross, EEB DAS and US 
Coordinator for International Communications and Information Policy, 
led an interagency delegation in a series of meetings with Indian 
government and industry officials.  The day began with a breakfast 
meeting with the Indian Telecom Equipment Manufacturers Association 
followed by a meeting with the Secretary of the Department of 
Telecommunications, where spectrum auctions and related issues were 
discussed in detail.  The meeting coincided with newspaper headlines 
trumpeting the speech of PM Singh the day before at the India 
Telecom 2007 conference, where Singh cited the revenue potential 
from spectrum that the GOI/Ministry of Defense is likely to vacate. 
Some industry commentators saw the PM's argument that frequencies 
should be allotted in a 'fair, equitable, and transparent' manner as 
support for a 2G spectrum auction.  However, Minister of 
Communications and Information Technology (MCIT) Raja indicated that 
'legal barriers' prevented the auction of 2G issues. 
 
¶6.  Prior to the ICT Working Group meetings, Gross was  a guest of 
honor at a USIBC luncheon on December 13 hosted by Secretary of 
Telecom Mathur.  This was followed by a meeting between the US del 
and members of India's Parliamentary Standing Committee on 
Information and Technology.  That Committee is considering 
legislation that could have an adverse impact on Internet Service 
Providers, including those from the US.  Other discussions took 
place during the week  with the Chairman and Commissioners of 
 
NEW DELHI 00005318  002.2 OF 003 
 
 
India's Telecom Regulatory Authority (similar to the FCC), as well 
as with the Secretary for Information Technology.  The IT Secretary 
discussed the Internet Governance Forum, cybersecurity, and other 
bilateral and global ICT issues.  Gross also attended a dinner 
hosted by MCIT Raja.  Mission will report Septel on the results of 
Gross' meetings and the ICT Working Group. 
 
INDIA STILL EAGER FOR FAST 
TRACK TO FATF MEMBERSHIP 
-------------------------- 
 
¶7.  (U) On December 10, Econoff met with Finance Director Anand 
Bajaj to discuss progress on issues related to combating terrorism 
financing and money laundering.  Bajaj confirmed earlier press 
reports that amendments to the Prevention of Money Laundering Act 
(PMLA) are now with the Union Cabinet.  Pending approval, the 
amendments are expected to be raised in the budget session of 
Parliament, which begins next year on February 21.  He also 
discussed India's continued interest in seeking an expedited FATF 
mutual evaluation.  The GOI expects to make a case for an early 
evaluation at the next FATF plenary meetings in February.  This 
week, Bajaj and the recently formed FATF cell at the Ministry of 
Finance are completing a detailed questionnaire about what progress 
India has made on FATF's six core recommendations.  India will 
submit the detailed responses to the FATF secretariat this week for 
review and then press the FATF contact group for an early visit and 
mutual evaluation to expedite membership.  Bajaj commented that 
support from the US and UK is critical in helping India accede to 
FATF. 
 
INDIA CLEARS FUNDS FOR 
CRUCIAL AFGHANISTAN ROAD LINK 
----------------------------- 
 
¶8.  (U) On December 13, the Indian Cabinet approved over USD 180 
million for upgradation and further construction of the strategic 
Zaranj-Delaram road in Afghanistan.  In making the announcement, 
Information and Broadcasting Minister Dasmunsi stated that, "The 
construction of the road would help Afghanistan to provide 
communications facility in a remote part of the country.  It will 
demonstrate the government of India's commitment to the rebuilding 
of Afghanistan."  He also added that, "India's presence in general 
would further strengthen our interests in Afghanistan."    Once the 
road is complete,  it will link the ring road in Afghanistan to the 
Iranian border and assist with the reconstruction of Afghanistan. 
Also,  the road should help with the transit of goods to Afghanistan 
and Central Asia by creating an alternate north-south corridor which 
utilizes Iranian rails and other ports, thereby reducing the 
dependency on transit rights through Pakistan.  The Zaranj-Delaram 
road project is part of India's pledge of USD 750 million for 
Afghanistan's reconstruction that includes projects in 
infrastructure, health, and education. 
 
INDUSTRY GROUPS SEEK 
REVIEW OF M&A RULES 
-------------------- 
 
¶9.  (U) On December 11, industry groups from the three largest 
chambers in India, FICCI, CII, and Assocham, met with Acting 
Chairman Vinod Dhall of the Competition Commission of India (CCI) to 
request a formal review of the new competition law.  Assocham 
Secretary General D.S. Rawat said that, "Industry is apprehensive 
 
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because a large part of (the) competition law was drafted five to 
six years back and industry has only moved forward since then.  So, 
any new law should not be retrograde."  Dhall said that the chambers 
have two weeks to list their concerns, noting possible solutions. 
CCI's advisory committee will review these submissions at an 
advisory meeting in January.  Industry is primarily concerned about 
the following issues - (1) mandatory approval of CCI for M&As; (2) 
an extended deadline of 210 days within which CCI can approve a 
merger or acquisition; and (3) a clause which makes it necessary to 
notify CCI of every cross-border M&A above a threshold, currently 
 
NEW DELHI 00005318  003.2 OF 003 
 
 
set at USD 382 million (INR 1,500 crore).  The industry is worried 
because they lack a full understanding of the law's provisions. 
Dhall said these concerns will abate once industry understands that 
most M&As will be approved is 30-60 days; while only  complex 
mergers  will take longer, up  to  210 days. 
 
AIR INDIA JOINS 
STAR ALLIANCE 
--------------- 
 
¶10.  (U) On Thursday, the Star Alliance airlines network approved 
Air India as its newest member.  By joining the world's largest 
network of 19 airlines, Air India joins airlines like United, US 
Airways, Singapore Airlines, and Lufthansa in offering a choice of 
over 17,000 daily flights across 160 countries.  With rumors of the 
state-run carrier setting up a European hub in either Munich or 
Vienna in the coming months, the deal could prove to be significant 
for Air India's relationship with European airlines, most of whom 
are Star Alliance members.  Over the last few years, Air India has 
been facing enormous competition at home from top private carrier 
Jet Airways as well as the entry of other private carriers, an 
increase of low cost private carriers, and more foreign carriers 
flying to India.  By joining the Star Alliance network, Air India 
gains a certain cache in the industry and will help the national 
carrier better compete at home and abroad with better fare 
structures and frequent flyer benefits for its customers. 
 
ECONOMY CONTINUES TO HUM ALONG 
--------------------- 
 
¶11. (U) The FY 2007-2008 mid-year economic review that Finance 
Minister Chidambaram submitted to Parliament on December 7 shows 
that the economy continues on its robust growth path.  According to 
government data, GDP growth remained buoyant in the first half of 
the FY 2007-08 at 9.1%, after a 9.4% growth in FY 2006-07. 
Inflation  eased below 3.1% by end November 2007. The review 
indicates that the main growth engine will continue to be industry 
and services which grew by 9.7% (April-October) and 10.4% 
(April-September) respectively.  Farm output is growing at 3.7%, 
better than the 2.8% growth for the first half of  last year. 
Manufacturing growth slackened during April-October 2007 growing at 
10.4% compared to 11.2% in the corresponding period of FY 2006-07, 
attributable to a slowdown in consumer durables, automobiles and 
real estate (due to interest rate hikes during the year) and in 
export demand (due to rupee appreciation).  Buoyancy in investment 
demand and boom in capital goods suggests growth will remain 
sustained, however.  Montek Singh Ahluwalia, Deputy Chairman of the 
Planning Commission forecasts growth between 8.5-9% for FY 2007-08, 
a rate many analysts also predict. 
 
¶12.  (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi 
 
WHITE