VZCZCXRO3094
RR RUEHAST RUEHBI RUEHCI RUEHLH RUEHPW
DE RUEHNE #0425/01 0391217
ZNR UUUUU ZZH
R 081217Z FEB 08 ZDS
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 0356
INFO RUEHCG/AMCONSUL CHENNAI 2413
RUEHCI/AMCONSUL KOLKATA 1726
RUEHLH/AMCONSUL LAHORE 4298
RUEHBI/AMCONSUL MUMBAI 1518
RUEHPW/AMCONSUL PESHAWAR 4762
RUEHIL/AMEMBASSY ISLAMABAD 4509
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 04 NEW DELHI 000425 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
C O R R E C T E D C O P Y - CORRECTING DATES IN SUBJECT LINE 
 
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 
USDA PASS FAS/OCRA/RADLER/BEAN/CARVER/RIKER 
 
E.O. 12958: N/A 
TAGS: EAGR EFIN EINV EPET ETRD SENV IN
SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF 
FEBRUARY 4 - FEBRUARY 8, 2008  (CORCY) 
 
 
NEW DELHI 00000425  001.4 OF 004 
 
 
¶1.  (U) Below is a compilation of Economic highlights from Embassy 
New Delhi for the week of February 4-8, 2008. 
 
WTO SIDES WITH INDIA 
ON WINE TAXES 
------------- 
 
¶2.  (U) The Business Standard reported Thursday that a World Trade 
Organization (WTO) dispute-settlement panel dismissed the United 
States' complaint against India over excise duties on foreign wines 
and spirits, determining that these duties are not cross-border 
measures.  When India repealed its additional customs duties on 
wines and spirits in July 2007, the European Union suspended its 
similar case with the WTO, but the U.S. pushed for a formal ruling, 
leading to this week's decision. 
 
GOI CONSULTING INDUSTRY ON TRADE 
IN REMANUFACTURED GOODS 
-------------------- 
 
¶3.  (U) According to The Hindu, the GOI has initiated discussions 
with industry stakeholders to clarify the definition of 
'remanufactured goods' and formulate a prudent stance on their 
import in preparation for further discussions on the Doha Round. 
Commerce Additional Secretary Rahul Khullar explained that in 
addition to concerns about safety, dumping, and unfair price 
competition, India will have to consider its potential for exports 
in remanufactured goods, as India does not currently have many 
well-known brands likely to appeal to other countries' consumers. 
With developed countries eager to ship remanufactured goods to the 
Indian market, therefore, a liberalized policy on trade in 
remanufactured goods may be to India's disadvantage.  The current 
Foreign Trade Policy permits the import of remanufactured goods only 
with a license but does not stipulate a definition for the 
category. 
 
WAL-MART TO OPEN CASH-AND-CARRY 
OUTLET BY JUNE 
--------------------------- 
 
¶4.  (U) Wal-Mart announced this week that it will open its first 
cash-and-carry outlet in Ludhiana, Punjab, by June 2008.  The 
facility will be only 80,000 square feet, versus the 1 million 
square feet typical of the company's U.S. stores, and will carry 
mostly food and groceries.  This outlet will sell to wholesale 
buyers rather than directly to end consumers, as foreign direct 
investment is prohibited in multi-brand retail, and it will feed the 
Bharti retail outlets that will open under a joint venture with 
Wal-Mart.  Andrew Sherman, who has served as legal counsel 
throughout the formation of the Bharti-Wal-Mart joint venture, told 
Econoffs that the first of these retail outlets will open within two 
months, with produce drawn from alternate sources until the Wal-Mart 
wholesaler opens. 
 
GOI SEEKS PREFERENCE FOR 
GEMS AND JEWELRY 
------------------ 
 
¶5.  (U) The GOI hopes to get Indian gems and jewelry back under the 
U.S. general system of preferences (GSP), after losing the 
designation in 2007 because U.S. imports from India passed the 
statutory maximum threshold of USD 1.87 billion.  India's Gem & 
Jewelry Export Promotion Council (GJEPC) argues that the 
appreciating rupee, along with the 6.7-percent import duty imposed 
since the loss of GSP status, has significantly impacted Indian 
exports and caused substantial job loss.  The latest trade data 
shows that Indian exports of diamonds and precious stones to the 
U.S. grew 26 percent in the first 11 months of 2007, but the GJEPC 
contends that the bulk of those exports shipped in the first half of 
the year, before the GSP adjustments were finalized, and therefore 
do not reflect the impact of the change in GSP status.  Commerce 
 
NEW DELHI 00000425  002.4 OF 004 
 
 
Joint Secretary Mukim assured DepEconCouns on Thursday that his 
ministry would provide figures to support the export council's 
contention. 
 
BILATERAL TRADE GAP REDUCED 
---------------- 
 
¶6.  (U) U.S. exports to India rose 75 percent through November 2007 
to USD 15.85 billion, with growth of approximately 34 percent in 
aviation and aircraft, 20 percent in engineering goods and 
machinery, and 11 percent in precious stones and metals.  Meanwhile, 
Indian exports to the U.S. rose by a relatively modest 10.9 percent 
to USD 22 billion, resulting in a sharp reduction of the U.S.'s 
bilateral trade deficit. 
 
 
COMMERCE MINISTER SPIES 
DOHA DIVERGENCE 
------------------ 
 
¶7.  (U) Commerce Minister Kamal Nath said Thursday that while there 
has been significant progress made in the past year on the WTO's 
Doha Round, developed and developing countries could reach an 
impasse if developed countries do not make stronger commitments on 
trade-distorting agricultural subsidies.  Nath further stated that 
it might be possible to reach an agreement by the end of this year 
but that to achieve that aim, negotiators must make comparable 
progress on non-agricultural market access, services, and rules as 
well. 
 
CLINICAL TRIALS FOR AIDS 
VACCINE HALTED 
------------------ 
 
¶8.  (U) India's first domestically engineered AIDS vaccine, a 
formula using the adeno-associated virus vector being tested at the 
National AIDS Research Institute, elicited an immune response of 
only 20 percent in Phase I clinical trials, falling short of the 
threshold for continuation to Phase II testing.  Responses were 
similar even where researchers administered boosters.  The vaccine 
failed to reach desired standards in humans despite producing high 
immune responses in animal testing. 
 
FOOD-PROCESSING MINISTRY 
TARGETS FOOD PARKS 
------------------- 
 
¶9.  (U) In a meeting Thursday, Secretary Suvrathan of the Ministry 
of Food Processing Industries (MOFPI) informed USTDA Regional 
Director for South and Southeast Asia Henry Steingass that MOFPI 
plans to help finance 30 food parks across the country to develop 
cold chains for food-processing industries.  Suvrathan said MOFPI 
will contribute INR 500 million (USD 12.8 million) and seek 
private-sector funding of INR 4 billion (USD 102.4 million) for each 
park.  Suvrathan said that MOFPI will launch the first five soon, 
including parks in Andhra Pradesh, Maharashtra, and Jharkand.  In 
addition to cold-chain development, MOFPI hopes the parks will help 
facilitate communication between farmers and retailers, and he said 
that the Ministry might move on to marine parks if the initial parks 
are successful.  Suvrathan suggested that these parks represent an 
excellent opportunity for foreign investors. 
 
BOEING AND TALMSL PARTNER 
ON MANUFACTURING 
-------------------- 
 
¶10.  (U) On Wednesday, Boeing Company and TAL Manufacturing 
Solutions Ltd. (TALMSL), a subsidiary of Tata Motors, agreed to work 
together on the manufacture of structural components for the 787 
Dreamliner airplane.  The newly formed partnership calls for TALMSL 
to build floor beams using advanced titanium and composite 
 
NEW DELHI 00000425  003.4 OF 004 
 
 
materials.  The floor beams will be manufactured in TALMSL's 
facility in Nagpur and then transported to Boeing partners in Japan, 
Italy, and the U.S. for assembly.  Carolyn Corvi, Vice-President and 
General Manager of Airplane Programs for Boeing Commercial 
Airplanes, hoped that the new partnership between Tata Motors and 
Boeing would "increase the value of the 787 to our customers, 
helping to make it the world's leading commercial airplane." 
 
WIPRO TO ENTER DEFENSE MARKET 
------------------- 
 
¶11.  (U) Wipro, India's third largest software services company, 
announced that it plans to build electronic warfare systems, radars, 
flight stimulators, and other defense-sector communication systems 
for U.S. defense contractors such as Lockheed Martin and Northrop 
Grumman.  Under the GOI's defense policy, foreign contractors must 
source components and systems from Indian companies for at least 30% 
of the value for orders from the Indian military of over INR 3 
billion (approximately USD 77 million), and Wipro is pursuing offset 
contracts in anticipation of increasing defense revenues.  India is 
expected to import USD 30 billion in defense equipment through 2012, 
particularly multi-role fighter jets, artillery, helicopters, and 
long-range maritime spy aircraft, and the Ministry of Defense 
projects that Indian companies will receive offset contracts from 
global military equipment makers for a total of INR 400 billion (USD 
10.3 billion) through 2011.  Wipro has already taken the first step 
in asking the GOI for permission to enter defense production through 
offset contracts. 
 
¶12.  (U) Finance Minister Chidambaram expects India's economy to 
grow at 9.0 percent in 2007-2008, with the help of rising foreign 
and domestic investment, and stated that he is prepared to make 
rapid policy adjustments to sustain high levels of growth in a time 
of global economic uncertainties. 
 
HYUNDAI OPENS NEW FACTORY; 
SOME WORKERS PROTEST 
---------------------- 
 
¶13. (U) Hyundai inaugurated its second automobile manufacturing 
facility in Chennai, which will ramp up the Korean carmaker's India 
production capacity to over 500,000 units per year, mainly for 
export.  The new facility, collocated with Hyundai's existing plant, 
will produce 57 cars an hour and employ an additional 7500 workers. 
With this USD 1 billion investment, Hyundai's total stake in Chennai 
is now USD 1.73 billion.  The gala opening of the facility, attended 
by Consulate Chennai, featured both the head of Hyundai Motors and 
the Chief Minister of Tamil Nadu. 
 
¶14. (U) During the opening ceremonies, some 100 workers fired by the 
company for "poor performance" staged a demonstration at the plant. 
Police detained them for demonstrating without a permit, but 
released them after the ceremony.  Local trade union leaders allege, 
however, that the company gave the workers their pink slips because 
they attempted to form a union at the factory. 
 
INTEL ENTERS LOW-COST COMPUTING 
WITH USD 1 BILLION INVESTMENT 
---------------------- 
 
¶15. (SBU) Chipmaker Intel is formally entering the low-cost 
computing market.  Intel India's head of corporate affairs told 
Consulate Chennai that the company plans to invest USD 1 billion 
over three years to work with Indian hardware vendors like HCL, 
Wipro, and Zenith to produce low-cost, light-weight computer 
platforms that will enable customers to access the web cheaply. 
Intel also plans to work with local assemblers to develop both 
technical and marketing capacities.  Intel will also focus its 
investment on developing low-cost WiMAX (a wireless 
telecommunications technology intended to replace cable and DSL) 
capabilities.  On the corporate social responsibility front, Intel 
 
NEW DELHI 00000425  004.4 OF 004 
 
 
signed a memorandum of understanding with the Tamil Nadu government 
to provide low-cost internet connectivity to 22 schools across the 
state. 
 
CHENNAI TO GO AS SMOKELESS AS NYC 
------------------------ 
 
¶16. (U) Local press reports that the government of Tamil Nadu plans 
to turn the state into a (tobacco) smoke-free zone by 2010, with the 
help of funds provided by New York City Mayor Michael Bloomberg. 
Tamil Nadu's director of public health told the press that his 
department had secured a slice of the USD 125 million offered by the 
New York City administration to battle tobacco.  Tamil Nadu, which 
already bans smoking in public places, will use the funds to 
increase awareness and enforce the law more vigorously. 
 
NEW SURVEY ON "HOW INDIA EARNS, 
SPENDS AND SAVES" 
------------------- 
 
¶17.  (SBU) Montek Singh Ahluwalia, Deputy Chairman of the Planning 
Commission, this week released a report on a 2005 survey conducted 
by Max New York Life and National Council of Applied Economic 
Research (NCAER) on "How India earns, spends and saves" to 
understand the changes in income trends.  The sample size used for 
the survey included 63,016 households in 24 states out of which 
31,446 were rural and 31,570 urban.  The survey indicated that 
around 22.3% households control 51% of India's total income. This 
group's per capita income is $829 annually, about nine-times the 
lowest income level-segment of 17.9 per households whose annual per 
capita income is $88. Urban family income stands at $2396/year which 
is 85% higher than the rural family income of $1298/year.  Delhi is 
the richest state with an annual average per capita income of $728, 
versus Bihar, the poorest state, with a per capita income of just 
$156. According to Max New York Life-NCAER survey, using state-wise 
expenditure poverty lines for FY 2004-05, 20.8% of the population or 
214 million people are poor, while the most recent consumption-based 
poverty assessments indicated 26 percent of Indians were below the 
poverty line. The incidence of rural income poverty is 21.7% versus 
urban poverty at 18.7%. 
 
¶18.  (SBU) An average Indian spends at least 12.2% of his income on 
weddings and social ceremonies.  About 81% of the Indians save for 
the future out of which 63% of the households save for social 
ceremonies.  Income level influences the saving pattern, while 
savings behavior is decided by education levels and occupation. An 
average urban family saves about $669 while a rural one saves $290 
on an average. Due to the lack of an efficient social security 
system, over 80% of Indians save but less than a fourth of these 
savings are done in financial instruments.  While two-thirds of all 
savings are kept in the form of liquid cash - cash, bank and post 
office deposits - around one-fifth of all investments are in the 
form of premiums on insurance policies, as compared to just 70% in 
the case of shares and debentures. 
 
¶19.  (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi 
 
MULFORD