VZCZCXRO4653
RR RUEHAST RUEHBI RUEHCI RUEHLH RUEHPW
DE RUEHNE #0026/01 0041141
ZNR UUUUU ZZH
R 041141Z JAN 08
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 9907
INFO RUEHCG/AMCONSUL CHENNAI 2196
RUEHCI/AMCONSUL KOLKATA 1510
RUEHLH/AMCONSUL LAHORE 4252
RUEHBI/AMCONSUL MUMBAI 1305
RUEHPW/AMCONSUL PESHAWAR 4724
RUEHIL/AMEMBASSY ISLAMABAD 4376
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 000026 
 
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 
JANUARY 4, 2008 
 
 
NEW DELHI 00000026  001.2 OF 002 
 
 
¶1.  (U) Below is a compilation of Economic highlights from Embassy 
New Delhi for the week of January 4, 2008. 
 
CENTER APPEARS TO WAFFLE 
ON GOA SEZ BAN 
--------------- 
 
¶2. (U) In the face of protests that threatened tourism-dependent 
Goa, Congress-ruled Goa Chief Minister Digambar Kamat announced on 
December 31 that the government intended to scrap all 15 SEZ 
proposals it had recommended to the Center for approval.  Since 
three projects had already received central government 
"notification" (final approval) and started investments worth over 
$100 million, Kamat stated that Goa would request that the Commerce 
Ministry, the lead ministry on SEZs, de-notify those three. 
Commerce Secretary and SEZ Board of Approval (BoA) Chairman G.K. 
Pillai quickly and strongly responded on January 2 that notified 
SEZs could not be de-notified.  Pillai stated, "There is no 
provision in law to de-notify a notified SEZ."  However, Kamat met 
with Commerce Minister Nath the following day, whose public 
statements walked back from Pillai's.  Nath stated that the central 
government can de-notify SEZs and that it would not wish to force a 
SEZ on a state that did not want them.  Nath said he would wait for 
the official request from the Goan government and take "appropriate 
action." 
¶3. (U) Meanwhile, the central government is moving ahead with 
efforts to promote SEZ development elsewhere.  On January 2, the BoA 
considered 44 proposals for setting up SEZs, of which 24 were 
granted formal approvals.  During a recent meeting on SEZs organized 
by CII, Commerce Joint Secretary Anil Mukim hailed the success of 
SEZs.  He asserted that Indian SEZs have generated direct employment 
of about 52,000 and indirect employment of 100,000.  Mukim claimed 
the growth was likely to be exponential and that employment could 
shoot up to 150,000 by March 2008 and to 600,000 by the end of 2009. 
 He also expected the foreign direct investment in SEZs to increase 
3-4 fold within the next year. 
¶4.  (SBU) Comment.  The Commerce Ministery's big plans for foreign 
participation in SEZs could take a hit if the GOI capitulates to the 
Goa government and approves de-notification after investors have 
already sunk significant money, not to mention time, into their 
projects.  Post will monitor developments and report as warranted. 
End comment. 
 
CHIDAMBARAM RAISES HOPES OF 
TAX RATE REDUCTIONS IN UPCOMING BUDGET 
-------------- 
 
¶5.  (U) Finance Minister Chidambaram, in a New Year's Day Press 
Conference, pointed to new April to December tax collection data 
that showed corporate tax revenues up 40 percent and personal income 
tax revenues higher by 50 percent.  With those revenues surging, 
direct taxes surpassed indirect taxes, such as customs and sales 
taxes, for the first time in India - a sign of increasing tax 
compliance.  Given that, Chidambaram reiterated his observation from 
last year's budget that higher tax compliance offered a "case for 
moderation" in tax rates.  However, he refused to state 
categorically whether he felt there was now sufficient compliance to 
warrant the tax rate reductions. 
 
UTTAR PRADESH FINALLY 
JOINS VAT 
------------- 
 
¶6.  (U) Uttar Pradesh's (UP) Governor T V Rajeswar issued an 
ordinance on December 31, announcing that the state would finally 
implement the value-added tax (VAT), effective January 1.  UP's 
Chief Minister Mayawati had stated back in October that the state - 
the last hold out to adopt the VAT - would finally implement it. 
Small traders, not surprisingly, protested its implementation, as 
they had previously done.  It is still to be seen whether Mayawati 
and her government will stand firm against protests and maintain the 
VAT tax.  Her government has not yet shown itself to be resolute 
 
NEW DELHI 00000026  002.2 OF 002 
 
 
when new policies become controversial.  The UP government reversed 
a new agricultural policy in August 2007 and is still to re-open 
Reliance Retail stores it closed last summer in response to 
protests. 
 
NEW ESTIMATES FOR 
AIR TRAFFIC GROWTH 
------------------ 
 
¶7.  (U) According to new estimates by the Airports Authority of 
India (AAI), the country is likely to see a 21.6 percent annual 
growth in passenger traffic over the next five years.  Earlier 
estimates predicted handling of 120 million passengers by the end of 
2011-12 at India's already congested airports.  This is now expected 
to rise to 256.5 million air travelers by the end of March 2012, 
according to new GOI statistics.  In addition, Mumbai, the nation's 
busiest airport in India, will soon be overtaken by Delhi.  Once IGI 
Delhi Airport gets a new runway and terminal, expected to be 
complete this summer, more flights will be routed to Delhi.  The two 
groups that are modernizing the Delhi and Mumbai Airports, GMR and 
GVK, expect the aviation map will be redrawn by 2010. 
¶8. (U) AAI data also showed that domestic air travel is expected to 
see a higher growth of around 24 percent. The other trend that 
emerged was a slower growth in aircraft movement - which is the 
number of landings and take-offs - than in passenger volumes 
handled. Aircraft movement is projected to rise nearly 17 percent 
between now and 2011-12, which pointed towards airlines seeing 
higher capacity utilization, estimated at less than 70 percent. 
Alternatively, it could mean that airlines fly bigger aircraft to 
accommodate more passengers, while their load factors remained 
around the same level.  However, aircraft manufacturers see maximum 
demand in single aisle aircraft, like the ones which are popular 
now.  Industry experts believe this trend could point to better 
financial health for airlines in the years to come. 
¶9. (U) With India's airports already congested and still waiting to 
be upgraded, the latest data could see airport developers rework 
some of their calculations.  Developers may now be forced to add 
more parking bays and larger terminals.  The GOI continues to 
maintain that all modernization work will take into account the new 
growth figures. 
¶10.  (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi 
 
WHITE