VZCZCXRO5565
RR RUEHAST RUEHBI RUEHCI RUEHLH RUEHNEH RUEHPW
DE RUEHNE #2879/01 3121126
ZNR UUUUU ZZH
R 071126Z NOV 08
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 4088
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 002879 
 
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 
 
E.O. 12958: N/A 
TAGS: EAGR EAIR ECON ECPS EFIN EINV ENRG EPET ETRD BEXP
KIPR, KWMN, PHUM, SENV, ASEC, IN, EMIN 
 
SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF 
NOVEMBER 3 TO NOVEMBER 7, 2008 
 
¶1. (U) Below is a compilation of economic highlights from Embassy 
New Delhi for the week of November 3 to November 7, 2008, including 
the following: 
 
-- IMF Lowers World, Indian Growth 
-- Jet Airways Serves Notice to Expat Pilots 
-- GE Commercial Air Services Files for Repossession of Kingfisher 
Aircraft 
-- Indian Government Reduces Taxes on Air Turbine Fuel 
-- Textile Industry Braces for a Slow-down 
-- Pawar Says 2MT Wheat to Get Export Ban Waiver 
-- GOI Retains Ban on Non-Basmati Rice Export 
-- WB Chief Minister Inaugurates USD 7 Billion Steel Plant 
-- A Chinese Car Factory in Singur? 
 
 
IMF Lowers World, Indian Growth 
------------------------------- 
 
¶1. (U) Just a month after issuing its semi-annual World Economic 
Outlook, the IMF issued an update, downgrading growth for the world 
and India as a result of the financial crisis.  Specifically, the 
IMF cited significant deleveraging by households and firms that are 
cutting back consumption demand and investment.  It now projects 
world growth in 2008 at 3.7% compared to last month's 3.9% 
projection, with even lower growth in 2009 at 2.2% versus 3.0% 
envisioned just one month ago.  For India, the IMF expects growth in 
2008 at 7.8% rather than 7.9% anticipated last month, and GDP growth 
in 2009 at 6.3%, compared to a projection of 6.9% in October.  The 
0.6 percentage point reduction in 2009 growth is amongst the 
smallest revisions the IMF did to countries' growth. 
 
¶2. (U) The Fund report claimed that monetary policy may not be 
sufficient because of the deleveraging and lower purchasing power 
leading to falling demand. As such, it suggested that countries 
provide fiscal stimulus to help support growth.  The IMF called for 
better policy coordination and consistency, pointing to the need to 
develop cooperative arrangements for large cross-border institutions 
and to consider the cross-border effect of national policies. 
 
Jet Airways Serves Notice to Expat Pilots 
----------------------------------------- 
 
¶3. (U) The Indian airline industry is undergoing a sharp economic 
downturn and is expected to post losses of around $2 billion during 
the current financial year.  To reduce overcapacity and costs, 
leading Indian carrier Jet Airways will let go 35 foreign pilots. 
Jet has about 258 expatriate pilots, with 198 flying B-777s and 
A-330s and 60 piloting the 737s.  Expat pilots are paid higher 
salaries and the falling rupee has added an additional 15-20 per 
cent in salary costs for expat pilots.  Earlier this year the civil 
aviation regulator, Director General Civil Aviation (DGCA) issued a 
directive to all India carriers asking them to phase out expat 
pilots by July 31, 2010. 
 
GE Commercial Air Services Files for Repossession of Kingfisher 
Aircraft 
----------------------- 
 
¶4. (SBU) GE Commercial Aviation Services (GECAS) has filed a 
complaint with India's aviation regulator DGCA against Kingfisher 
Airlines for default on lease payments for four A320 aircraft.  The 
lessor has asked for permission to repossess the aircraft and asked 
that the aircraft be de-registered from the airline.  According to a 
senior GE official, although the company understands the current 
financial crunch faced by the sector, it needs to preserve its legal 
rights and lay down a marker that lease defaults are not acceptable. 
 Negotiations between the two companies are ongoing to arrive at an 
amicable solution. 
 
Indian Government Reduces Taxes on Air Turbine Fuel 
--------------------------------------- 
 
 
NEW DELHI 00002879  002 OF 003 
 
 
¶5. (U) Indian oil companies have reduced aviation turbine fuel (ATF) 
prices by 17 percent and the Central Government has abolished 
another 5 per cent customs duty on ATF.  Although ATF prices have 
come down progressively over the past few months, most observers 
believe domestic Indian airlines are unlikely to reduce high fuel 
surcharges on tickets given continued losses in the industry. 
 
Textile Industry Braces for a Slow-down 
--------------------------------------- 
 
¶6. (U) According to local media sources, garment exporters in India 
are temporarily closing down factories and reducing workforces in 
order to secure themselves from the global financial crisis.  Local 
news reports that exports of readymade garments, which totaled $9.69 
billion for 2007/08, dropped 6.59 percent in September over the same 
period in 2007.  Thirty-three percent of the industry's exports go 
to the U.S., which is by far the sector's largest importer.  The 
textile industry on the whole is the second largest employment 
generating sector in India after agriculture, with the ready-made 
garment industry providing over four million jobs. 
 
¶7. (SBU) In an interview with EconOff, Mr. Vijay Mathur, Deputy 
Secretary of the Apparel Export Promotion Council (AEPC), said that 
Council members are concerned that the slowing economy will have a 
substantial negative impact on the Indian textile industry.  Mathur 
added that several of the main companies that import Indian garments 
in the US and Europe have been slowing down business and closing 
stores.  As a result, garment exporters have idle capacity and are 
being forced to temporarily close factories in order to keep costs 
down.  Mathur predicted that the slow down will be felt the most by 
smaller exporters, some of which may not be able to survive.  In 
addition, ASSOCHAM reports that the credit crunch is preventing 
textile companies from implementing plans to expand or modernize. 
 
¶8. (U) Aside from the slowing U.S. economy, the dollars rise against 
the rupee has not been as helpful as expected to textile exporters. 
According to industry reports, a large number of exporters sought to 
hedge their exposure when the rupee was appreciating against the 
dollar; thus, while they have been protected during the dollar's 
fall, they are not reaping the benefits of its rise.  Industry 
sources predict that many contracts set earlier this year will 
likely be renegotiated. 
 
Pawar Says 2MT Wheat to Get Export Ban Waiver 
--------------------------------------- 
 
¶9. (U) On the sidelines of an international agricultural business 
summit on November 5, Agriculture Minister Sharad Pawar told press 
that the GOI has decided to exempt two million tons (MT) of wheat 
from the government's export ban to meet the requirements of 
countries that have approached India through diplomatic channels. 
However, the overall wheat export ban will continue.  The GOI 
imposed a blanket ban on all wheat exports in 2007, following a drop 
in procurement by state agencies.  Falling local procurement 
compelled India to import almost 5.5 MT and 1.8 MT of wheat in 2006 
and 2007, respectively.  Indian state agencies have procured 23 MT 
of wheat in 2007-08 - more than double the previous year's level. 
Trade analysts believe that robust output and higher stocks at 
government warehouses have enabled India to set aside some of the 
grain for overseas supplies.  [Comment: Pawar's statements are most 
likely for domestic political consumption given that South Asian 
neighbors can procure higher quality wheat on the international 
market at a lower price than Indian wheat.  Indian wheat is 
currently priced at $270 per ton while the landed cost of U.S. 
Western White wheat in Bangladesh or Pakistan is currently $245 per 
ton.  Wheat exports are even more unlikely given the continued ban 
on non-basmati rice exports, since most observers feel India is in a 
better position to export the latter commodity.  End comment]. 
 
GOI Retains Ban on Non-Basmati Rice Export 
--------------------------------------- 
 
¶10. (U) The Government of India (GOI) on November 4 decided to 
 
NEW DELHI 00002879  003 OF 003 
 
 
continue the ban on export of non-basmati rice in view of the 
prevailing high rate of inflation.  In a bid to forestall escalating 
food prices, India took several measures in March this year to 
improve the domestic availability of food grains, including a ban on 
non-basmati rice exports and a reduction of import duties on edible 
crude oils to zero percent and refined oils to 7.5 percent.  The 
Group of Ministers (GOM) for Food Security, which was established in 
March 2008 during the height of the food price crisis, discussed the 
food grain scenario in the country and also reviewed various export 
bans.  Many local traders had anticipated the GOI would lift the 
rice export ban and increase import duties on edible oils to earlier 
levels given falling international rice prices and a comfortable 
domestic stock position.  In addition, India is expecting a record 
rice crop this year.  Despite this backdrop, the GOM, headed by 
Foreign Minister Pranab Mukherjee, and with the Ministers of 
Agriculture, Commerce, and Finance and the Planning Commission 
Deputy Chairman as members, decided against lifting the ban because 
of reported inter-ministerial differences over the issue. 
 
WB Chief Minister Inaugurates USD 7 Billion Steel Plant 
-------------------------- 
 
¶11. On November 2, JSW Bengal Steel Limited and West Bengal Chief 
Minister (CM) Buddhadeb Bhattacharjee broke ground on a 10 million 
ton green-field integrated steel plant in Salboni, about 100 miles 
west of Kolkata.  JSW Steel (89 percent) and the West Bengal 
Industrial Development Corporation (9 percent) are partners in the 
USD 7 billion project.  The joint venture worked closely with local 
residents to ensure that land acquisition did not become an issue. 
Eager to demonstrate the viability and attractiveness of investment 
in West Bengal after the highly-publicized pullout of TATA motors in 
Singur, the governing Communist Party of India - Marxist party 
marshaled an impressive crowd (estimated at 300,000) for the 
launch-cum-political rally.  Unfortunately, the happy tenor of the 
day was overshadowed by an improvised explosive device attack, 
attributed to leftist extremists (known as Naxalites/Maoists), on 
the CM's convoy shortly after departure, leaving several police 
officers severely injured. 
 
A Chinese Car Factory in Singur? 
-------------------- 
 
¶12. On November 4, officials from China's First Automobile Works 
(FAW) met the West Bengal Chief Minister Buddhadeb Bhattacharjee to 
seek 600 acres of land for a new small car factory according to 
post's contacts in the West Bengal Industrial Development 
Corporation.  The company, in partnership with Ural India (an 
Indo-Russian joint venture), plans to invest USD 300 million in a 
new automobile plant.  Singur is one of four sites under 
consideration.  A memorandum of understanding is expected as early 
as next week. 
 
¶13. (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi 
 
MULFORD