VZCZCXRO4742
RR RUEHAST RUEHBI RUEHCI RUEHLH RUEHPW
DE RUEHNE #0573/01 0531305
ZNR UUUUU ZZH
R 221305Z FEB 08
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 0573
INFO RUEHCG/AMCONSUL CHENNAI 2494
RUEHCI/AMCONSUL KOLKATA 1806
RUEHLH/AMCONSUL LAHORE 4318
RUEHBI/AMCONSUL MUMBAI 1598
RUEHPW/AMCONSUL PESHAWAR 4778
RUEHIL/AMEMBASSY ISLAMABAD 4576
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 000573 
 
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 
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 18 - FEBRUARY 22, 2008 
 
NEW DELHI 00000573  001.2 OF 004 
 
 
¶1.  (U) Below is a compilation of Economic highlights from Embassy 
New Delhi for the week of February 18-22, 2008. 
 
BIOTECH COTTON INCREASES 
FARMER INCOME 
----------- 
 
¶2.  (U) The International Service for the Acquisition of 
Agri-biotech Applications reports that biotech crops are gaining 
ground worldwide with another year of double-digit growth.  Studies 
in India show biotech cotton has increased yields by up to 50 
percent.  Indian cotton growers increased income by as much as USD 
250 per hectare, increasing income for cotton farmers nationally 
from USD 840 million to USD 1.7 billion last year.  The study showed 
that 9 of 10 Indian farmers who plant biotech cotton replant it the 
next year. 
 
RISING RUPEE PUTS A NEW TWIST 
ON "OFFSHORING" 
---------------- 
 
¶3. (U) The rising value of the rupee against the dollar has put the 
brakes on the plans of an Indian automobile manufacturer to move 
production from the United States to India.  Ashok Leyland, a 
Chennai-based builder of commercial vehicles with annual revenues of 
nearly USD 2 billion, bought in May 2007 several small auto parts 
companies in Alabama and the Carolinas, with a plan to shift their 
production facilities (and jobs) to "low-cost" India.  An Ashok 
Leyland executive recently told Consulate Chennai, however, that the 
strengthening rupee was forcing the company to reconsider its plans, 
since the exchange-rate shift made it worthwhile for these companies 
to continue manufacturing in the United States to serve the American 
market.  Under current circumstances, he said, the costs associated 
with shifting production back to India make doing so an overly 
expensive proposition.  (Ashok Leyland, part of the Hinduja Group 
conglomerate, has cooperative ventures with both Italian-based 
Fiat's IVECO brand and Japan's Nissan.) 
 
INDIAN FORMAL PRIVATE SECTOR 
ENJOYING HIGHER SALARIES 
------------------ 
 
¶4. (U) As other knowledge intensive service industries take off in 
India, they are beginning to show higher salary growth than IT 
companies, as well as surpassing Asian counterparts' growth rates. 
(Note: The data available to Post did not include absolute wage base 
levels or actual monetary value of increases for cross-country 
comparisons.    End note.)  Hewitt Associates, in its 12th annual 
'Asia-Pacific Salary Increase Survey' shows that Indian employees 
received an average salary increase of 15.1% in 2007, the highest 
increase across Asia-Pacific countries. Indian employees are 
expected to see a similar hike of 15.2% in 2008, followed by China 
at 8.7%, the Philippines at 8.4%, Korea at 6.7% and Thailand at 
6.4%.  The survey included 540 private Indian companies across 19 
industries and 22 sub industries.  The survey forecasts that 
employees in the real estate sector are likely to record the highest 
salary hike of 25% in 2008, followed by telecom at 17.6%, energy at 
17.5%, banks at 16.9%, retail at 16.2% and accounting at 16.1%. 
 
¶5.  (SBU) Salary increases in the information technology and 
outsourcing sectors are forecast to record the lowest pay hikes of 
the covered sectors in 2008, as salaries in these sectors have 
stabilized between 13-14% since 2004.  Press reports indicate that 
IT companies like Tata Consultancy Services, Wipro, Infosys and 
Satyam Computer Services are planning to reduce the salary increases 
of their employees to around 7-8% for FY 2008-09, beginning April 
2008, as they seek to mitigate the impact of rupee appreciation and 
potential slowdown in US orders.  The Hewitt survey notes that with 
growing competition for skilled professionals, attrition rates were 
at an all time high in 2007 with the insurance sector marking a 
turnover rate of 35.2%, followed by IT-enabled services at 28.9%, 
 
NEW DELHI 00000573  002.2 OF 004 
 
 
and the hospitality and restaurant industry at 27.1%. Automotive, 
energy and chemicals industries faced the least attrition rates. 
Comment: The growth in salaries reflects the steady expansion in 
these white collar service sectors. The rise in formal employment is 
a welcome one in India, but it also means more sectors are fighting 
for the insufficient pool of trained professionals in the country. 
This will increase the necessity of collaboration between these 
service industries and training institutes and colleges to produce 
the needed skills the industries need.  End comment. 
 
AIRPORT STRIKE FROM 
FEB 26 ONWARDS 
------------------ 
 
¶6.  (U) The Airports Authority of India (AAI) Employees Union has 
called for an indefinite strike by its non-executive staff at 
airports across the country from February 26.  According to the 
union leader, M.K. Ghoshal, "We have called for a strike to protest 
on several issues, including the proposed closure of the existing 
airports in Hyderabad and Bangalore (for aeronautical purposes)." 
The existing Hyderabad and Bangalore airports will soon be closed 
after the inauguration of the new greenfield airports in both those 
cities next month.  The AAI unions have been waging a vigorous 
battle to oppose privatization in airport modernization and 
greenfield projects.  The Employees Union has also launched 
grievances about other issues, including pensions and promotion 
avenues.  In a country where there is a shortage of air traffic 
controllers and difficulties in air traffic control due to air 
congestion and poor airport infrastructure, the strike could have a 
disruptive impact on air traffic. 
 
AIR INDIA PROFITS 
FROM US ROUTES 
---------------- 
 
¶7.  (U) As Indian airlines offer new direct flight service to the 
United States, India's national carrier Air India is hoping to turn 
around its declining fortunes through its India-US sectors.  Last 
Friday, Air India launched its Delhi-New York nonstop flight, about 
six months after starting its Mumbai-New York service.  In the 
coming months, Air India plans to introduce a Bangalore-San 
Francisco flight.  The airline has future plans to connect other big 
cities in the US - including Washington, DC, Seattle, Houston, and 
Dallas, via a European stop.  Jitendra Bhargava, Air India's 
Executive Director, has acknowledged that the India-US sector is 
their largest revenue generator.  Last fiscal year, this sector 
accounted for USD 654 million and is expected to generate USD 825 
million in FY 08-09.  Air India is using state-of-the-art long range 
Boeing 777-200 aircraft and has placed orders for eight more. 
 
¶8.  (U) Many Indian carriers that are currently losing money are 
banking on the US sector to return to profitability.  Jet Airways 
has flights to New York and Newark via its Brussels hub. It will 
soon launch a Mumbai-Shanghai-San Francisco flight. The airline is 
also planning nonstop flights to US with a very high number of 
business class seats. Kingfisher will begin a Bangalore-San 
Francisco flight this August. 
 
PARAMOUNT WANTS BOTH BOEING 
AND AIRBUS AIRCRAFT 
--------------------- 
 
¶9.  (U) Chennai-based Paramount Airways, India Ltd, plans to buy at 
least 17 planes from both Boeing and Airbus at an estimated value of 
USD 1.5 billion to enable its international entry in 2011. 
Paramount, which operates in south India, has in its fleet five 
Brazilian-made Embraer planes and envisions purchasing seven Boeing 
787 Dreamliners; this would make the airline the third Indian 
carrier after Air India and Jet Airways to buy the plane.  The 
airline also plans to buy 10 Airbus' wide-body planes (the A330 and 
A350).  After Paramount meets the domestic five year requirement to 
 
NEW DELHI 00000573  003.2 OF 004 
 
 
fly international routes in October 2010, the airline hopes to fly 
to Europe, West Asia, South-East Asia, and the US.  According a 
press report, the airline is conducting aircraft acquisition 
negotiations at the ongoing Singapore Air Show.  An announcement 
about the airline's purchases is expected in March.  Paramount's 
Managing Director has indicated that he will approach the US 
Export-Import Bank as well as European credit agencies to help 
finance the purchases. 
 
GOI EFFORTS TO HELP THE 
COMMON PERSON 
--------------- 
 
¶10.  (U) The GOI has announced two new financial inclusion funds, 
each valued at USD 126 million, to help the common person (the aam 
aadmi in India) - the Financial Inclusion Fund and the Financial 
Inclusion Technology Fund.  The advisory panel that recommended the 
two funds is headed by C Rangarajan, Chairman of the Prime 
Minister's economic advisory council.  Rangarajan has stated that 
both funds will draw on contributions from the central government, 
Reserve Bank of India, and the National Bank for Agricultural and 
Rural Development.  The panel has also suggested creating a National 
Rural Financial Inclusion Plan (NRFIP) to provide financial services 
to the underprivileged populations, given that nearly 46 million 
households in India lack access to credit. 
 
¶11.  (U) This proposal will bring together various 
groups/organizations, including regional rural banks and self-help 
groups, and also work towards strengthening the cooperative credit 
structure and using the latest technology like hand held ATMs. 
Under NRFIP, the panel has outlined a goal of covering financially 
excluded households through at least one financial channel by 2012. 
The GOI has already asked banks to open at least 250 accounts 
annually to expand coverage for the common person.  According to 
media reports, only about 27 percent of total farm households are 
indebted to formal sources, of which one-third still borrow from 
informal sources. 
 
SITE FOR SECOND INTERNATIONAL 
AIRPORT AT VISAKHAPATNAM 
----------------------------- 
 
¶12.  (U) The Airport Authorities of India (AAI) has selected the 
site for a second international airport in the southern port city of 
Visakhapatnam.  After conducting a feasibility study, AAI selected a 
site near Rayavaram.  This is the same area that is attracting two 
large multi-product special economic zones (SEZs) and is home to 
petrochemicals investment and two oil refineries.  With other 
projects in the works for this region, Visakhapatnam will certainly 
attract more international air traffic in the future. 
 
CABINET APPROVES CONSIDERATION 
OF AMENDMENTS TO ASIAN 
HIGHWAY ROUTE 
----------------- 
 
¶13.  (U) The Indian Union Cabinet has approved a proposal to 
consider amendments to the Asian Highway (AH) routes 2 and AH-48, as 
defined in the list of highway routes under the intergovernmental 
agreement on the Asian Highway network which is under consideration 
by UNESCAP.  The amendments request including the Phulbari section 
between Banglabandha and Siliguri and defining the route of AH-2. 
Also, India may request a link to Bhutan by extending the AH-48 
route from Thimphu in place of the Phuntsholing-Indian border as 
currently outlined and then eventually, connecting it up with AH-2 
at Phulbari in India.  By extending AH-48 from Thimphu to Jaigaon, a 
border town in India, and connecting it to AH-2 in India, the new 
route will provide greater access to the Asian Highway Route from 
Bhutan to India, as well as to both Bangladesh and Nepal.  The Asian 
Highway network, a 140,000-km project, is being executed by the 
division of the United Nations charged with connecting Asia and 
 
NEW DELHI 00000573  004.2 OF 004 
 
 
Europe. Of the total length, about 12,000 km will run through India 
alone.  For the Asian Highway, 32 countries have signed an agreement 
to pursue this project. 
 
NYSE EURONEXT SET TO BUY 
EQUITYIN INDIA'S MULTI 
COMMODITY EXCHANGE 
----------------------- 
 
¶14.  (U) NYSE EQ>Q}QQQ~`ies, funds and exchanges to acquire 
up to 49% of a commodity bourse, but with single holdings capped at 
5%. The transaction signed on February 15 between Catherine Kenney, 
President of NYSE Euronext and Jignesh Shah, Managing Director and 
CEO of MCX is expected to be completed over the next 2-3 months, 
subject to regulatory approvals. Duncan Niederauer, Chief Executive 
Officer of NYSE Euronext commented that the deal will produce new 
business opportunities for NYS in the commodities sector and deliver 
value to its shareholders. 
 
¶15.  (U) Jignesh Shah of MCX added that "the proceeds from the stake 
sale will be used to develop the spot market linkages and related 
infrastructure for farmers such as warehouses." For NYS, this will 
be its second investment in India after buying a 5% stake in the 
National Stock Exchange (NSE) last year. Comment: The deal was 
announced just weeks after the new FDI policy, suggesting that NYSE 
was waiting for a clear policy before making its purchase, similar 
to the timing of its investment in NSE last year. Other such deals 
may soon be forthcoming.  The investment, if used as Shah indicated 
for warehouses and other rural infrastructure, could truly help 
boost farmers' access to markets and more accurate price discovery, 
raising their incomes.  End comment. 
 
¶16.  (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi 
 
MULFORD