VZCZCXRO5016
RR RUEHAST RUEHBI RUEHCI RUEHLH RUEHPW
DE RUEHNE #1783/01 1791312
ZNR UUUUU ZZH
R 271312Z JUN 08
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 2430
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
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

UNCLAS SECTION 01 OF 03 NEW DELHI 001783 
 
SIPDIS 
SENSITIVE 
 
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 MNUGENT 
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 
EEB/CIP DAS GROSS, FSAEED, MSELINGER 
USTR FOR CATHERINE HINCKLEY 
 
E.O. 12958: N/A 
TAGS: EAGR EFIN EINV EPET ETRD SENV IN ECPS BEXP
 
SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF 
JUNE 23 TO JUNE 27, 2008 
 
¶1.  (U) Below is a compilation of economic highlights from Embassy 
New Delhi for the week of June 23 to June 27, 2008, including the 
following: 
 
-- RBI USING RESERVES TO STEM RUPEE DEPRECIATION 
-- ANTI-MONEY LAUNDERING MANDATE FOR REGIONAL RURAL BANKS AND 
COOPERATIVE BANKS 
-- INDIA SIGNS FOUR ECONOMIC AGREEMENTS WITH BURMA 
-- INDIA-SINGAPORE CECA TO ADDRESS SERVICES NEXT 
-- COMPETITION COMMISSION ACTING CHAIRMAN QUITS 
-- JET AIRWAYS LAUNCHES SERVICE TO SAN FRANCISCO 
-- GOVERNMENT-SET PRICES SPUR FAKE PREMIUM GASOLINE SALES 
 
RBI USING RESERVES TO STEM RUPEE DEPRECIATION 
--------------------------------------------- 
 
¶2. (U) According to the Reserve Bank of India's (RBI) weekly 
statistical supplement, India's foreign exchange reserves for the 
week ending June 13 declined the most since December 2005, falling 
by nearly $5 billion to $310.687 billion.  The dip can be attributed 
mainly to the amount of intervention the RBI has done in the forex 
market by selling dollars to prevent the rupee from depreciating 
beyond Rs 43/dollar.  Some of the change in foreign currency assets 
is because of changes in the value of the dollar against the euro, 
the yen, and other currencies during the period.  Central Bank 
officials also attribute the decline to the special market 
operations conducted by the RBI for meeting the dollar-requirements 
of public sector oil companies, through the central bank's purchase 
of oil bonds. 
 
¶3. (SBU) Comment:  Stemming rupee depreciation helps counter 
inflationary pressures, since depreciation raises import prices in 
rupee terms, which get passed through to the domestic market.  As 
the government continues to battle double-digit inflation, propping 
up the rupee (in the face of net FII outflows) is one of the most 
effective measures available to the government.  End comment. 
 
ANTI-MONEY LAUNDERING MANDATE FOR 
REGIONAL RURAL BANKS AND COOPERATIVE BANKS 
------------------------------------------ 
 
¶4. (U) Under "Know Your Customer" (KYC) guidelines, the Reserve Bank 
of India (RBI) this week announced that all regional rural banks 
(RRBs) and cooperative banks must report suspicious transactions 
above Rs 100,000 ($23,529) to the Financial Intelligence Unit (FIU). 
 Similar guidelines for commercial banks were issued by RBI, as part 
of a regular process to update KYC guidelines and AML standards 
since February 2005, last month to combat anti-money laundering 
activities.  The RBI has also asked these banks to prepare a profile 
of each customer based on risk perception and put in place 
appropriate software "to throw alerts when the transactions are 
inconsistent with risk categorization and updated profile of 
customers."  Banks have been advised to pay special attention and 
verify all complex, unusually large transactions, including 
remittances to/from outside India and all irregular patterns of 
transactions having no apparent economic and lawful purposes. 
According to the Prevention of the Money Laundering Act (PMLA) 2002, 
these records need to be housed for at least 10 years.  Where bank 
branches are not computerized, the bank's principal officer should 
cull out the transaction details and file the cash transaction 
report and suspicious transaction reports in an electronic form to 
the FIU.  The RBI notification also requires that any transaction 
involving forged or counterfeit Indian currency notes be reported. 
 
 
INDIA SIGNS FOUR ECONOMIC AGREEMENTS WITH BURMA 
--------------------------------------------- -- 
 
¶5. (U) The media report that India and Burma this week signed four 
economic cooperation agreements.  The first agreement is the 
Bilateral Investment Promotion Agreement (BIPA) between the two 
governments designed to facilitate greater investment flows.  The 
BIPA provides a framework for the resolution of disputes, for 
 
NEW DELHI 00001783  002 OF 003 
 
 
promotion and protection of investment, for extending national 
treatment and most-favored-nation (MFN) treatment, and for 
repatriation of investment.  The second agreement is for a $64 
million credit line agreement for financing three transmission lines 
in Burma by the Power Grid Corporation of India.  The third 
agreement is also a credit line for $20 million for financing an 
infrastructure facility to be used for power distribution in Burma. 
The fourth agreement is between the United Bank of India and the 
Myanmar Economic Bank for providing a banking arrangement for the 
implementation of a border trade agreement between the two 
countries. 
 
¶6. (U) GOI Minister of State for Commerce Jairam Ramesh, while 
suggesting the expansion of border trade centers, emphasized that 
India is in favor of "normal trade" at the border versus the current 
situation where border trade is restricted to 22 specified items, 
traded via the Manipur state-Burma border.  India is lined up to 
develop a hydro electric power project in Burma, in addition to one 
each in Bhutan and Nepal.  According to Ramesh, India's investment 
in this power project in Burma would bring significant benefits to 
both countries. 
 
INDIA-SINGAPORE CECA TO NEXT ADDRESS SERVICES 
--------------------------------------------- 
 
¶7. (U) India and Singapore are working towards an agreement on 
services under the existing bilateral Comprehensive Economic 
Cooperation Agreement (CECA), enabling professionals to practice in 
each other's country.  Commerce Ministry officials have reportedly 
said that this will be the first services agreement that India signs 
with any country, covering movement of personnel in professions like 
dentistry, architecture, nursing, medicine and accounting.  The 
Indo-Singapore CECA was signed in 2005 and has three components -- a 
Free Trade Agreement in goods, a package to promote investment 
flows, and a double taxation avoidance treaty.  The contemplated 
arrangement to boost trade in services would be the fourth and final 
step in the CECA.  In addition, Commerce Minister Kamal Nath 
recently stated that a bilateral agreement on Intellectual Property 
Rights (IPR) cooperation will also be signed shortly. 
 
¶8.  (U) In Indian fiscal year (IFY) 2007-08 (up to February 2008), 
Singapore was India's 5th largest merchandise trade partner and 4th 
largest export market.  India's exports to Singapore grew by 16 
percent in IFY 2007-08, compared to 42 percent growth in imports 
from Singapore.  Total bilateral trade during IFY 2006-07 was $11.49 
billion and has increased by almost 26 percent year-over-year, to 
$13.42 billion in IFY 2007-08 (through February 2008).  Major Indian 
exports to Singapore were: petroleum (crude & products), transport 
equipment, electronic goods, and non-ferrous metals.  Major items of 
imported by India from Singapore were: electronic goods, petroleum 
(crude & products), organic chemicals, machinery (except electrical 
and electronic), and project goods.  In terms of FDI, in FY07-8, 
Singapore emerged as the source of the second largest amount of FDI 
in that year after Mauritius.  The top five sectors attracting FDI 
inflows from Singapore are: petroleum & natural gas, mining, 
services sector, construction activities, and power. 
 
COMPETITION COMMISSION ACTING CHAIRMAN QUITS 
-------------------------------------------- 
¶9. (U) Last week, Vinod Dhall, Acting Chairman of the Competition 
Commission of India (CCI), announced his "early exit" or resignation 
four months before completion of his five-year term in October 2008. 
 Dhall, a former Secretary at the Ministry of Corporate Affairs, led 
the CCI since its establishment in 2003 and played a critical role 
in establishing the commission's draft regulations, guidelines, 
merger notification forms and procedures, and inquiry and 
investigation manuals and India's national competition policy.  As 
for possible successors to Dhall, media reports have suggested 
Pradeep Mehta, Secretary General of CUTS International. 
JET AIRWAYS LAUNCHES SERVICE TO SAN FRANCISCO 
--------------------------------------------- 
 
¶10. (U) Mumbai Consul General attended the June 14 ceremony marking 
 
NEW DELHI 00001783  003 OF 003 
 
 
the inaugural Jet Airways flight from Mumbai to Shanghai and onward 
to San Francisco.  Jet will operate daily flights on this route, 
featuring Boeing 777 aircraft configured with eight first class 
seats, 32 business class seats, and 272 economy class seats.  The 
flights depart Mumbai at 11:00 AM and arrive in San Francisco at 
6:00 PM local time.  Jet Airways CEO Wolfgang Prock-Schauer told 
Consul General that bookings on this flight are already excellent, 
with flights for the first week already sold out.  Prock-Schauer 
said demand for service to the U.S. west coast is high in Mumbai, 
and he believed the route would be very profitable for Jet since 
there is currently little competition on this route.  He also noted 
that this flight will be the first direct flight from Mumbai to 
mainland China, and expected the first leg also to be popular for 
this reason.  This new flight will be the private carrier's fourth 
daily departure from India to North America, following earlier 
launches over the past year to JFK Airport, Newark Airport, and 
Toronto Pearson International Airport. 
 
¶11. (U) Jet Chief Commercial Officer Sudheer Raghavan told press 
reporters that with trade between India and China growing by more 
than 50 per cent last year to $38 billion, the airline was looking 
to tap the rapidly expanding business traffic between the two 
countries.  The airline is currently in talks with several Chinese 
air carriers, including China Eastern Airlines, Air China and 
Shanghai Airlines, to set up code share arrangements to other 
destinations in China, and also to the United States.  Jet is also 
interested in offering future service to Beijing and Guangzhou, 
subject to the availability of air services rights.  Raghavan said 
that the airline was not only aiming to fill the seats on the new 
flight with passengers flying between United States and India but is 
also hopeful of getting a mix of 30 percent of passenger traffic 
from China, India, and the United States. 
 
GOVERNMENT-SET PRICES SPUR FAKE PREMIUM GASOLINE SALES 
--------------------------------------------- --------- 
 
¶12. (SBU) Trying to remain profitable as fuel prices rise, many of 
Chennai's gas stations have ceased selling normal-grade gasoline, 
sold at a government-set price (about INR 55 per liter or USD 4.90 
per gallon), to force motorists to pay for premium grades of petrol, 
which ranges from INR 2 to almost INR 40 per liter higher.  An 
official from the Tamil Nadu Petroleum Dealers Association (which 
represents gas station owners) told Consulate Chennai that petroleum 
companies, attempting to recoup the higher costs they are paying 
refiners, are selling gas stations normal-grade gasoline invoiced as 
premium.  The gas stations, in turn, are then selling this fuel to 
consumers, priced as premium-grade petrol. 
 
¶13. (SBU) A similar problem exists for diesel consumers.  The 
managing director of a company that provides bus services to large 
companies told us that his company is finding it difficult to 
procure ordinary diesel, because his usual suppliers are selling 
only a premium version, making the cost of his operations unviable. 
He also said that some dealers are blending diesel with 
heavily-subsidized kerosene in a bid to cut their costs.  Some 
Consulate staff report that they are unable to find ordinary diesel 
in Chennai. 
 
¶14. (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi 
 
DAVISON