VZCZCXRO6823
RR RUEHAST RUEHBI RUEHCI RUEHLH RUEHPW
DE RUEHNE #2533/01 2631304
ZNR UUUUU ZZH
R 191304Z SEP 08
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 3478
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 06 NEW DELHI 002533 
 
SIPDIS 
SENSITIVE 
 
STATE FOR SCA/INS AND EEB 
USDOC FOR ITA/MAC/OSA/LDROKER/ASTERN/KRUDD 
DEPT OF ENERGY FOR A/S KHARBERT, TCUTLER, CZAMUDA, RLUHAR 
DEPT PASS TO USTR CLILIENFELD/AADLER/CHINCKLEY 
DEPT PASS TO TREASURY FOR OFFICE OF SOUTH ASIA MNUGENT 
TREASURY PASS TO FRB SAN FRANCISCO/TERESA CURRAN 
USDA pass FAS/OCRA/Radler/Bean/Carver/Riker 
EEB/CIP DAS GROSS, FSAEED, MSELINGER 
DEPT PASS TO USTDA HSTEINGASS/JNAGY 
 
E.O. 12958: N/A 
TAGS: EAGR EAIR ECON ECPS EFIN EINV ENRG EPET ETRD BEXP
KIPR, KWMN, PHUM, SENV, IN 
 
SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF 
SEPTEMBER 15 TO SEPTEMBER 19, 2008 
 
¶1.  (U) Below is a compilation of economic highlights from Embassy 
New Delhi for the week of September 15 to September 19, 2008, 
including the following: 
 
-- INDUSTRIAL GROWTH BACK UP IN JULY 
-- NORMAL MONSOON GOOD FOR AGRICULTURE 
-- FOREIGN FIRMS NEEDED FOR MEGA POWER 
-- AHEAD OF US VISIT, PM CALLS MEETING TO REVIEW ENERGY 
POLICY 
-- CABINET APROVES COMPANIES BILL 2008 
-- DIPP STUDYING ICSID MEMBERSHIP 
-- USTDA GRANT PROMOTES STANDARDS COOPERATION 
-- INTELLECTUAL PROPERTY DEVELOPMENTS 
-- INDIAN CABINET AMENDS PRINT MEDIA POLICY 
-- BUREAUCRATIC APPOINTMENTS AT THE MINISTRY OF FINANCE 
-- NAMBIAR APPOINTED CIVIL AVIATION SECRETARY 
 
-------------------------------- 
INDUSTRIAL GROWTH BACK UP IN JULY 
-------------------------------- 
 
¶2.  (U) Government data released last week shows that India's 
industrial growth rose by 7.1 percent in July (versus 8.3 percent in 
July 2007), higher than expectations and up from the previous two 
months of the current fiscal year.  This is the best monthly 
industrial growth in the current fiscal year. The higher overall 
growth in July was more broad-based, led by the capital goods sector 
which grew by 22 percent versus 12.3 percent in July 2007. The 
consumer goods sector grew robustly by 7.3 percent, buoyed by both 
durables and non-durables.  The manufacturing sector, which 
contributes about 80 percent to the index of industrial production 
(IIP), grew by 7.5 percent in July versus 8.8 percent a year ago. 
Mining was up notably at 5 percent, from 3.2 percent a year ago. 
Despite the increase in July, the cumulative increase in industrial 
growth during April-July 2008 moderated to 5.7 percent versus 9.7 
percent in the same period last year.  Analysts opine that 
industrial production may pick up in the coming festival months and 
with the higher income of over 4.5 million government workers 
stemming from the award of the Sixth Pay Commission this month. 
¶3.  (U) The upward trend in growth is reinforced by the thinking of 
the Centre for Monitoring Indian Economy (CMIE), a well-known think 
tank that projects India's industrial production to grow by 9.1 per 
cent in the current fiscal year.  CMIE believes that the Ministry of 
Statistics' current IIP numbers are grossly underestimated and do 
not capture the trend in industrial growth correctly.  According to 
CMIE, sectors like machinery, chemicals, basic metals, rubber, 
plastic and petroleum products and transport equipment would be the 
growth engine for this year. The forecast is based on analysis of 
projected new capacity and expected capacity utilization of major 
industries.  This forecast appears too widely divergent when 
compared to the government's April-July industrial output growth of 
5.7 percent, although most analysts now agree that the IIP basket is 
outdated and inaccurate to some degree. 
 
----------------------------------- 
NORMAL MONSOON GOOD FOR AGRICULTURE 
----------------------------------- 
 
¶4. (SBU) Based on discussions with the GOI, economists, analysts, 
and the media, India experienced a normal monsoon this year and the 
agriculture sector performed satisfactorily during the current 
kharif (fall and early winter harvested) planting season.  In India, 
where agriculture contributes slightly less than one-fifth of GDP 
yet employs more than 50% of the workforce, the monsoon rains are 
the primary source of irrigation for most agricultural land which is 
described as "rain-fed."  Citibank analysts, like other Embassy 
contacts, forecast agriculture growth of 2% for this monsoon year 
(MY), coming off a high growth base last year.  After a poor 
performance in July, the rainfall situation improved considerably in 
August, halting a further deterioration in production prospects of 
most kharif season grain crops, which include rice, corn, sorghum, 
millet, and some pulses.  As India continues to grapple with double 
 
NEW DELHI 00002533  002 OF 006 
 
 
digit inflation, there was good news on oilseeds, which exceeded 
last year's output by  1.65 percent and may help reduce inflationary 
pressures. 
 
¶5.  (U) Cumulative monsoon rainfall in the country until the end of 
August was estimated by the Indian Meteorological Department to be 
two percent below normal, with region-wide distribution of rains 
satisfactory for agriculture.  Cumulative rainfall during June 1 to 
August 27 was normal or near normal in 32 of the 36 weather 
subdivisions.  Areas where rainfall continues to be significantly 
below normal include parts of Maharashtra and Karnataka, Kerala, and 
Nagaland, Manipur and Mizoram, where the major crops are sorghum and 
rice. 
 
¶6.  (U) Despite the improved rainfall situation in recent weeks, 
unprecedented floods in several northern districts of Bihar are 
likely to adversely impact rice and corn production in the state, 
offsetting possible production gains in most other states.  The 
flood-affected districts in the state account for about one million 
tons of rice and 800,000 tons of corn production.  Severe flooding 
also recently occurred in some parts of Assam, where rice is the 
major crop.  A prolonged dry spell in July had a negative impact on 
rice production in the major rice surplus state of Chhattisgarh, as 
plantings in several districts were delayed due to lack of rain. 
The rice production situation is normal in Uttar Pradesh, West 
Bengal, Punjab, Haryana, Orissa, and Andhra Pradesh.  However, 
continued well distributed rains through September and early October 
are required for a normal or better than normal harvest in most 
states, except Punjab and Haryana, where the harvesting starts by 
mid-September.  Some flooding in these two states has occurred in 
the past few days due to excessive rains but the impact on yields 
and quality is not yet known.  Although progressive rice planting up 
to August 22 is ahead of last year's level at 32.5 million hectares, 
MY 2008/09 rice production is forecasted to be 95 million tons, 
marginally below the record 96.4 million tons in MY 2007/08. 
 
¶7.  (U) Government-held food grain stocks on August 1, 2008, are 
officially placed at 34.1 million tons (9.8 million tons of rice and 
24.4 million tons of wheat) compared with 21.2 million tons (9.2 
million tons of rice and 12 million tons of wheat) a year ago.  Rice 
stocks are expected to decline to around 5.5 million tons on October 
1, 2008, the beginning of MY 2008/09, unchanged from the October 1, 
2007 level.  With national and some state elections on the horizon, 
many state governments have started implementing a highly subsidized 
rice distribution program (prices ranging from Rs. 1 to Rs. 3 per 
kg), which has resulted in increased demand for rice distributed 
from government stocks. 
 
¶8.  (SBU) Despite larger grain stocks, the government ban on exports 
of non-basmati rice and wheat continues.  The government recently 
stated that the non-basmati rice export ban will be reviewed in 
November when a clearer picture of rice production emerges.  The 
government has decided to offload up to six million tons of wheat 
from government stocks in the open market to enhance availability 
during the lean supply period (September through March) to limit 
price increases.  This may take place after meeting the requirements 
of the targeted public distribution system (around one million tons 
per month) and setting aside the required four million tons for 
buffer stocks (on April 1) and an additional three million tons for 
reserve stocks.  The Cabinet Committee on Economic Affairs has 
authorized the Food Ministry to decide on the quantity to be 
released each month, the timing of intervention, locations, and 
pricing.  Minister of Agriculture Pawar was recently quoted as 
saying that up to one million tons of rice will be sold in the open 
market to limit price increases if the stock situation improves. 
 
------------------------------------ 
FOREIGN FIRMS NEEDED FOR MEGA POWER 
------------------------------------ 
¶9.  (U) Media reports outlined some of the GOI's concerns that 
Indian companies may fall short of meeting the required financial 
investment of $6 billion to finance two of the remaining Ultra Mega 
 
NEW DELHI 00002533  003 OF 006 
 
 
Power Projects (UMPPs).  Bidding has not started for these two 
UMPPs.  India plans to add over 50,000 MW over the next five years, 
primarily through the addition of five UMPPs of 4,000 MW each.  The 
project at Mundhra in Gujarat, sponsored by the Tata Group, has 
achieved financial closure while the Sasan and Krishnapatnam 
projects have been awarded to the Anil Dhirubhai Ambani Group for 
which appraisals are being carried out by financing agencies. 
¶10.  (U) Many of the GOI's concerns are based on an Asian 
Development Bank (ADB) report which states, "Given that a 4,000 MW 
coal-fired power plant is a large investment even by international 
standards, it is unlikely that apart from the three projects 
awarded, there will be any appetite for the remaining two UMPPs from 
Indian private sector firms acting on their own."  According to the 
ADB, another major constraint facing all major infrastructure 
projects is a lack of long-term debt (preferably at fixed interest 
rates).  For tariffs to be competitive, the ADB said a UMPP needed 
to be structured at 25:75 debt equity ratio, -- the maximum leverage 
required to attract debt at the international level.  The ADB 
recommended that at least 50 per cent of the debt needs to be 
long-term of about 18 to 20 years, with the rest having an average 
maturity of about 12 years. 
 
--------------------------- 
AHEAD OF US VISIT, PM CALLS 
MEETING TO REVIEW ENERGY POLICY 
------------------------------- 
 
¶11.  (U) Prime Minister Singh has asked for a meeting with the full 
Planning Commission this Saturday to review an integrated energy 
policy and deliberate on the country's nuclear energy program.  The 
meeting on the country's energy policy comes before the Prime 
Minister departs for the US on September 22.  The main focus will be 
on a national plan to increase electricity generation throughout the 
country, which is expected to be an important political issue ahead 
of national elections next year.  Electrifying more of India is 
crucial to the government's goals of sustainable robust growth and 
poverty reduction.  The Planning Commission will also discuss 
additional power supply by increasing civil nuclear power 
generation. 
 
----------------------------------- 
CABINET APROVES COMPANIES BILL 2008 
----------------------------------- 
 
¶12.  (U) The Companies Bill 2008 cleared the Indian Cabinet in 
August and will be introduced in the next session of Parliament 
scheduled to begin October 17.  The bill has been coordinated by the 
Ministry of Corporate Affairs (formerly the Ministry of Company 
Affairs) and will replace the Companies Law of 1956.  The Companies 
Law has been amended 24 times and has more than 800 provisions.  The 
proposed law aims to promote shareholder democracy, good corporate 
governance, and protect investors.  The bill will redefine the way 
companies function and streamline mergers and acquisitions.  Key 
provisions of the bill will facilitate joint ventures and relax 
restrictions that limit the number of partners in partnership firms 
and banking companies to a maximum of 100.  With the number of 
companies in India growing to nearly 700,000 today (as compared to 
about 30,000 in 1956) some having greater regional and international 
presence, the Ministry wants to make it mandatory for a company to 
have at least one Indian Director on its board.  Under the bill, a 
single person is permitted to form a company.  The bill will 
encourage greater foreign investment by establishing a framework 
that promotes business and reduces bottlenecks. 
 
¶13.  (U) The Companies Bill also includes a bankruptcy law to 
provide an opportunity for rehabilitation of a business before a 
decision is taken to liquidate.  In addition, insider trading by 
company directors will be recognized as an offense with criminal 
liability.  Strict action against erring companies and regular 
defaulters will be addressed in the bill.  The bill aims to put in 
place an effective regime to monitor and enforce good business 
practices.  Embassy contacts report that the law is not currently a 
 
NEW DELHI 00002533  004 OF 006 
 
 
high priority and will likely not be passed this year. 
 
------------------------------ 
DIPP STUDYING ICSID MEMBERSHIP 
------------------------------ 
 
¶14.  (SBU) Media report that the Ministry of Commerce's Department 
of Industrial Policy and Promotion (DIPP) may be internally 
reviewing the possibility of joining the World Bank's International 
Convention on Settlement of Investment Disputes (ICSID).  A story in 
the Economic Times cited unnamed DIPP sources as indicating that 
discussions between the U.S. and India on a Bilateral Investment 
Treaty (BIT) had added impetus on joining ICSID.  The fact that 
Indian companies have been making substantial investments abroad has 
also added to arguments in favor of ICSID membership.  DIPP 
officials were unwilling to confirm the media reports to Emboff. 
However, a Delhi-based attorney who often advises the GOI, R.V. 
Anuradha of Clarus Law Asscoiates, said that it made sense that DIPP 
was considering ICSID membership.  She noted that the 
India-Singapore Comprehensive Economic Cooperation Agreement 
contained provisions for ICSID arbitration.  It made sense to take 
the additional step and become a full-fledged member. 
 
------------------------------------------ 
USTDA GRANT PROMOTES STANDARDS COOPERATION 
------------------------------------------ 
 
¶15.  (U) Promoting trade through cooperation in the area of 
standards, conformity assessment, and technical regulations (SCATR) 
is the subject of a $535,300 United States Trade and Development 
Agency (USTDA) grant awarded today to the Confederation of Indian 
Industry (CII).  The technical cooperation program will facilitate 
India's development of a transparent and more streamlined SCATR 
system based on market-driven, private sector-led approaches to 
global standardization. 
 
¶16.  (U) The USTDA grant will fund a technical expertise program 
that will include the launching of a U.S.-India standards portal, 
five sector-specific technical workshops, and technical 
collaboration in topics that address trade-related issues.  The 
grant will strengthen the U.S.-Indian economic relationship by 
establishing an ongoing, self-sustaining bilateral cooperation forum 
that represents the broad interests of U.S. and Indian industry. 
 
¶17.  (U) CII has selected the American National Standards Institute 
(ANSI), a non-profit organization based in Washington, D.C., as the 
contractor to perform the USTDA-funded technical assistance.  ANSI 
brings a long history to this project as it has administered and 
coordinated the U.S. private sector voluntary standardization system 
for more than 90 years.  In addition to the USTDA grant, ANSI will 
contribute additional resources toward the program's completion. 
 
¶18.  (U) This program will encourage overarching regulatory and 
policy changes in India that will increase U.S. market access across 
all industry sectors, and will also provide targeted engagement with 
specific industry sectors that have been identified as the greatest 
interest to U.S. organizations and/or have demonstrated the greatest 
impact on Indo-U.S. trade flows.   Current estimates maintain that 
standards and conformity assessments influence 80 percent of all 
exports. 
 
---------------------------------- 
INTELLECTUAL PROPERTY DEVELOPMENTS 
---------------------------------- 
 
¶19.  (U) The Indian Copyright Registrar R. G. Raghavender informed 
Intellectual Property (IP) Attache on September 18 that his work in 
revising the draft copyright legislation was complete.  The original 
draft was revised following public comment on the legislation that 
included input from the United States.  The revised draft will have 
to be approved by the Minister of Human Resource Development (HRD) 
before circulating it to the other Ministries for clearance.  Mr. 
 
NEW DELHI 00002533  005 OF 006 
 
 
Raghavender hopes that the legislation will be approved by the HRD 
Minister and circulated in the next three weeks, as well as cleared 
with sufficient time for introduction into the Winter Session of 
Parliament. 
 
¶20.  (U) FICCI representatives told IP Attache on September 18 that 
the Controller General (CG) of Patents, Designs and Trademarks has 
announced to them that he will provide notice to patent holders when 
pre-grant oppositions are filed on their patents.  This is an 
apparent extension of an announcement by Ministry of Commerce and 
Industry Joint Secretary Prasad to IP Attache and others at 
consultations on the draft Manual of Patent Practice and Procedure 
in Chennai on August 28 that the CG will provide notice to patent 
holders when applications for compulsory licenses are filed with 
respect to their patents. 
 
--------------------------------------- 
INDIAN CABINET AMENDS PRINT MEDIA POLICY 
---------------------------------------- 
 
¶21.  (U) The Indian Cabinet has approved a new Print Media policy 
allowing publication of Indian editions of foreign news and current 
affairs magazines.  Magazine content will be permitted to be 
identical to the parent foreign magazine, and the Indian publisher 
would be free to add local content and advertisements.  At present, 
only technical, specialized, and educational foreign magazines are 
allowed to be published in India on identical conditions.  The 
Department of Industrial Policy and Promotion is expected to 
implement the new policy in the near future. 
 
¶22.  (U) In addition to the FDI limit remaining unchanged at 26 
percent (which is also the ceiling for all news media in print and 
TV), many other conditions still apply.  Indian partners will have 
to be registered under the Indian Companies Act, 1956.  Although 
they would be allowed to enter into financial arrangements (royalty 
payment) with the owners of the foreign magazines, permission would 
be conditional on at least three-fourths of the directors on the 
board of the Applicant Indian Company and all key executives and 
editorial staff would have to be resident Indians.  Further, the 
title of the magazine would have to be registered by the Indian 
company with the Registrar of Newspapers for India.  A record of 5 
years of "continuous publication" and circulation of at least 10,000 
paid copies in the country of origin will be required. 
 
¶23.  (U) With the notification of the decision, Indian versions of 
magazines like Time and Newsweek may be published in India with 
local content; however, the top editorial and management staff would 
have to be resident citizens of India.  The move will provide Indian 
readers access to foreign magazines at cheaper rates in comparison 
to the same magazines imported at much higher rates. 
 
--------------------------------------------- -- 
BUREAUCRATIC APPOINTMENTS AT THE MINISTRY OF FINANCE 
--------------------------------------------- - 
 
¶24.  (SBU) The government has designated Ashok Chawla, the Civil 
Aviation Secretary, as the new Secretary of the Department of 
Economic Affairs (DEA), replacing Arun Ramanathan who was given the 
additional charge for a period of three months.  With the 
appointment of Chawla so soon, Ramanathan goes back to his original 
position of Financial Services Secretary at the MOF.  The position 
of Finance Secretary, the top bureaucrat position at the Ministry, 
remains unfilled and it is doubtful whether the UPA government will 
fill this senior-most position in its present term.  In the past, 
there have been instances that the government has kept the position 
of Finance Secretary vacant, with the DEA Secretary taking care of 
the issues of the Ministry of Finance.  Ramanathan is the senior 
most secretary and the normal practice is to appoint the senior most 
secretary as the finance secretary, but Ramanathan is scheduled to 
retire in April 2009.  There is a possibility that Chawla may 
eventually be appointed as Finance Secretary, once Ramanathan 
retires. But all this depends upon which government comes into power 
 
NEW DELHI 00002533  006 OF 006 
 
 
after elections next May.  Chawla is considered to be close to 
Finance Minister P Chidambaram. 
 
¶25. (U) Chawla is an Indian Administrative Services officer of the 
1973 batch from the Gujarat cadre. Prior to becoming the Civil 
Aviation Secretary in January 2007, Chawla was Additional Secretary 
at DEA from April 2005 looking after the issues of external economic 
relations, foreign investment, infrastructure financing, currency 
and coinage. His long and outstanding bureaucratic career includes 
working as Additional Secretary and Financial Adviser in the 
Ministry of Chemicals and Fertilizers, Chairman and Managing 
Director of the Security Printing and Minting Corporation of India 
Limited, Joint Secretary in Department of Chemicals and 
Petrochemicals and Chairman and Managing Director of the Indian 
Petrochemicals Corporation Ltd.  He also was on the Board of the Oil 
and Natural Gas Corporation as a part-time Director.  Chawla has 
served in many key positions in his cadre state of Gujarat. He holds 
a Masters degree in Economics and English Literature. 
 
¶26.  (U) The Appointments Cabinet Committee also promoted Additional 
Secretary Ms. Sindushree Khullar as Special Secretary of the DEA. 
Khullar took over as DEA's Additional Secretary in April 2007. 
Prior to that, she was Chairperson of the New Delhi Municipal 
Council.  In her long and outstanding career, she has held many 
prestigious positions like Development Commissioner of Delhi, 
Managing Director of Delhi Cooperative Housing Finance Corporation 
and Secretary at the Ministry of Environment and Forests. Ms Khullar 
is an Indian Administrative Services officer of the Union Territory 
cadre of 1975 batch. She holds a number of post graduate degrees 
including Public Administration from Harvard University, Development 
Economics from Boston University, and Sociology from Jawaharlal 
University.  She is the wife of Dr. Rahul Khullar, who also has been 
promoted as Special Secretary at the Ministry of Commerce. 
 
----------------------------------------- 
NAMBIAR APPOINTED CIVIL AVIATION SECRETARY 
------------------------------------------ 
¶27.  (U) On September 17, M. Madhavan Nambiar, Special Secretary in 
the Ministry of Communications and Information Technology (MCIT), 
Department of Information Technology (DIT), assumed charge as the 
new Secretary in the Ministry of Civil Aviation, replacing Ashok 
Chawla who has been appointed to be Secretary of the Department of 
Economic Affairs in the Ministry of Finance.  In his former 
position, Secretary Nambiar was co-chair of the U.S.-India 
Information, Communication & Technology (ICT) Working Group over the 
last three years and played a significant role in forging closer 
cooperation in the development and formulation of policy in for 
information technology, as well as in telecommunications and 
broadcast and media issues.  Within the MCIT, he promoted India's 
booming information technology sector.  Nambiar is a well-respected 
bureaucrat, good interlocutor and close contact of the Embassy and 
USG.  We expect to continue having a close working relationship with 
Nambiar in his new capacity. 
 
¶28. (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi 
 
MULFORD