VZCZCXRO1442
RR RUEHAST RUEHBI RUEHCI RUEHLH RUEHNEH RUEHPW
DE RUEHNE #3012/01 3331055
ZNR UUUUU ZZH
R 281055Z NOV 08
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 4412
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 003012 
 
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 EMIN ENRG EPET ETRD
BEXP, KIPR, KWMN, PHUM, SENV, ASEC, IN 
 
SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF 
NOVEMBER 24 TO NOVEMBER 28, 2008 
 
REF: NEW DELHI 2995 
 
¶1. (U) Below is a compilation of economic highlights from Embassy 
New Delhi for the week of November 24 to November 28, 2008, 
including the following: 
 
-- July-September GDP Growth Surprises at 7.6% 
-- Budget Session of Parliament Outlook 
-- GOI Restricts Steel Imports 
-- GOI Considering Currency Swaps 
-- FICCI Re-Affirms West Bengal's Investment Prospects Post 
Tata 
-- Despite Slowdown, Design and Engineering Firm Sees Increasing 
Outsourcing Opportunities 
 
July-September GDP Growth Surprises at 7.6% 
------------------------------------ 
 
¶2.  (U) The government released July-September (second quarter of 
the Indian fiscal year) GDP growth data this week, with modestly 
higher than expected 7.6% growth, slightly down from 7.9% in the 
April-June quarter.  Industrial growth slowed to 6.1% year on year 
for the quarter, compared to an annual growth rate of 8.5% last 
fiscal year.  Construction remained strong, coming in at 9.7% growth 
for the quarter, in line with last year's 9.8% annual growth rate. 
Services barely lost stride, with hotels and communications up 
nearly 11% and financing/insurance rising 9.2%.  Growth in 
investment was actually higher in the second quarter year on year 
than first quarter growth - 13% compared to 8.9%.  However, per 
reftel, there are signs of a slowdown in investment, while financial 
services are sure to be hit in the October-December quarter. 
 
Budget Session of Parliament Outlook 
------------------------------------ 
 
¶3. (SBU) Ministry of Finance Joint Secretary KP Krishnan on November 
26 told DepECouns that the government had finalized the dates for 
the special December session of Parliament for December 10-23, but 
the agenda for the session was not yet finalized.  Until that time, 
Krishnan explained, it was not clear whether any bills would be 
taken up for consideration and voted on during the session. 
Krishnan noted that a bill needed at least 2-3 days for both Houses 
to review and to schedule a vote on, even for bills with no 
opposition, such as the PFRDA pension bill.  Krishnan added that, if 
less than a day was given to consideration of pending legislation, 
then the December parliamentary session was likely to end earlier 
with no new legislation passed.  He predicted that, under the 
current political climate, it was unlikely that any legislation 
would be voted on, whether or not parliament stays in session as 
planned. 
 
¶4.  (SBU) When asked how the government would handle the annual 
budget exercise, ukually held in February, given that national 
elections have to be held by May 2009, Krishnan confirmed that there 
will be no further budget sessions until after national elections. 
If elections are heLd early, for example in March, then the new 
Government could hold a budget session as early as May 2009. 
Krishnan noted that the November 2008 parliament had already 
authorized a continuing-resolution type "vote on account" that will 
fund straight-line expenditures across the government until a summer 
Parliamentary session can be held.  Last month's session of 
Parliament had included supplementary budget authorizations (called 
grants), whose amounts were calculated to fund programs through the 
end of the fiscal year, March 31. 
 
GOI Restricts Steel Imports 
--------------------------- 
 
¶5.  (U) In a bid to protect local industry, the government of India 
(GOI) on November 24, 2008 placed restrictions on imports of 
seamless steel tubes and pipes, wood and wood products.  The move 
will mandate a license from the Directorate General of Foreign Trade 
(DGFT) under the Ministry of Commerce and Industry before a user 
 
NEW DELHI 00003012  002 OF 003 
 
 
(car, oil and construction companies) could import these items. 
While the fresh curbs may provide relief to local steel producers, 
it will act as an effective non-tariff barrier for user industries. 
Most of the car manufacturers and constructions companies have 
reportedly condemned the protectionist measure. 
 
¶6.  (U) According to industry estimates, the Indian steel industry 
has experienced a 30 percent decline in production since the 
outbreak of the global financial crisis.  Fearing tough competition 
from China, the domestic steel industry has been asking the GOI for 
protection.  In response, the GOI in mid-November put curbs on the 
import of hot-rolled coils and imposed a customs duty of 5 per cent 
on specific steel items.  China is the main supplier of steel inputs 
to India.  As global steel prices have fallen sharply because of 
lower demand, Chinese, Ukraine and Thai steel have become much 
cheaper.  Leading local steel producers have also demanded 
re-imposition of a countervailing duty (14 percent equivalent excise 
duty that the local industry pays as a manufacturing tax) in 
addition to the 5 percent basic customs duty on imports of steel 
bars/structures used in construction. 
 
GOI Considering Currency Swaps 
------------------------------ 
 
¶7.  (U) According to news reports, the GOI is considering a currency 
swap line of credit arrangement with the United States Federal 
Reserve Bank or the European Central Bank to boost the sentiments of 
India's foreign exchange market and also to give confidence to 
Indian companies who require dollar funding.  The facility will 
allow India's central bank - the Reserve Bank of India (RBI) - to 
get several billion in USD/euros by swapping equivalent rupees at a 
pre-set price.  The arrangement is not likely to affect the 
liquidity in the domestic market and will also be a cheaper source 
of credit.  The swap will also act as a cushion to India's foreign 
exchange reserves which have declined by $63 billion during the last 
six months to $246 billion as of mid-November, although nearly half 
of the depletion in reserves is on account of revaluation.  The 
currency swap deal would give dollar access without necessarily 
putting reserves on the line. 
 
FICCI Re-Affirms West Bengal's 
Investment Prospects Post Tata 
------------------------------ 
 
¶8.  (U) On November 26, the National Executive Committee of the 
Federation of Indian Chambers of Commerce and Industries (FICCI) met 
in Kolkata.  While convened 10 times per year, the committee's last 
such meeting in Kolkata was in September 2007 - before TATA's 
pullout from Singur.  At the session, FICCI leaders and members 
affirmed West Bengal's economic potential and displayed confidence, 
albeit tempered, in the current Communist Party of India - Marxist 
government's willingness and capacity to facilitate investment in 
the state.  FICCI's Chief Guest was Chief Minister Buddhadeb 
Bhattacharjee, who spoke passionately about his government's efforts 
to encourage investment and develop infrastructure, while at the 
same time tacitly acknowledging the state government's mistakes in 
Singur.  The Chief Minister minimized the impact of Tata Motor's 
withdrawal from Singur on West Bengal's reputation as a potential 
location for foreign investors.  Several FICCI members encouraged 
the Chief Minister to initiate an international communications 
campaign to re-establish West Bengal as an investment destination. 
 
Despite Slowdown, Design and Engineering Firm 
Sees Increasing Outsourcing Opportunities 
----------------------------------------- 
 
¶9.  (SBU) As U.S.-based construction companies look to minimize 
their costs in order to weather the current economic storm, several 
are turning to companies, such as Pinnacle Infotech Solutions, to 
outsource architectural and engineering services to ensure project 
profitability.  Based in Durgapur, West Bengal and with an office in 
Houston, Texas, the company employs 500 engineers and architects to 
service U.S.-based clientele, who make up 90 percent of the 
 
NEW DELHI 00003012  003 OF 003 
 
 
company's business.  During the Consul General's November 25 visit, 
Pinnacle's CEO, Mr. Bimal Patwari, spoke about his firm's growth 
opportunities despite the global downturn, as he continues with his 
expansion plans for a new $10 million facility that will employ an 
additional 1000 employees.  The Indian software services 
association, NASSCOM, has reduced its projected annual growth rate 
for the Indian IT services industry from 28% to 24% due to the 
global downturn in financial market activity. 
 
¶10.  (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi 
 
WHITE