VZCZCXRO2117
RR RUEHAST RUEHBI RUEHCI RUEHDBU RUEHLH RUEHNEH RUEHPW
DE RUEHNE #0596/01 0861203
ZNR UUUUU ZZH
R 271203Z MAR 09
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 5930
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 02 NEW DELHI 000596 
 
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: ECON EAGR EAIR ECPS EFIN EINV EMIN ENRG EPET ETRD
BEXP, KIPR, KWMN, IN 
 
SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF 
MARCH 23 TO MARCH 27, 2009 
 
¶1. (U) Below is a compilation of economic highlights from Embassy 
New Delhi for the week of March 23-27, 2009, including the 
following: 
 
-- Much Ado: Tata Nano Finally Launched 
-- Infosys Postpones Hiring; IBM Plans to Shift Jobs to India 
-- Wind-power Producers in Tamil Nadu Can Charge More 
-- Congress Manifesto Offers Incrementally More Populism 
 
Much Ado: Tata Nano Finally Launched 
--------------------------------------- 
 
¶2. (U) The long-awaited Tata Nano, also dubbed the "one lakh car," 
(Note: one lakh equals 100,000) and "the people's car," was launched 
on Monday, March 23 in Mumbai, seven months behind schedule.  The 
basic model of the car is priced at one lakh rupees, approximately 
$2,000, per Tata CEO Ratan Tata's stated goal to produce a car that 
would reach consumers that were previously unable to purchase 
vehicles.  The path to the launch has not been without obstacles: 
the company was forced to abandon its original manufacturing site in 
West Bengal (an investment of $292 million) due to land disputes. 
Tata Motors relocated the site to Gujarat, which is expected to 
begin producing vehicles towards the end of 2009.  Just after the 
company's purchase of Jaguar Land Rover (JLR) through a $2 billion 
bridge loan (due to be repaid or refinanced in June 2009), the 
global liquidity crunch hit, resulting in the company's first net 
losses in seven years.  In turn, the company is reported to have a 
funding gap of $3.4 billion for this year, which it hopes the Nano 
will ease. 
 
¶3. (SBU) While the new Nano manufacturing site is under 
construction, vehicles are being assembled at plants in Pune and 
Pantnagar at a rate of 50,000 a year, far below the expected demand 
of one million units per year.  According to Jalaj Gupta, North 
India Regional Director of Tata's Passenger Car Unit, dealers will 
be receiving bookings (customers must place a deposit close to the 
car's price) through the month of April.  To address high demand in 
the first months of the launch, Tata will deliver the first batch of 
Nanos to customers selected via a computer-generated lottery, most 
likely in July.  Customers who do not receive a car in the first 
lottery may have to wait until the end of the year or longer. 
 
¶4. (SBU) According to Gupta, there have been a lot of inquiries 
about the car, but now the challenge is to get the vehicles out to 
showrooms and delivered.  "The real story," Gupta notes, "will be in 
the month of April when we see how many bookings are made."  The 
Nano is launching amidst a tough sales period.  Although car sales 
picked up in January and February (due to new model launches, 
dealership promotions, and interest rate cuts), the high numbers 
from these months may not be enough to boost the industry's low 
numbers from the preceding six months.  SIAM (Society of Indian Auto 
Makers) director, Dilip Chenoy, estimates that the auto industry is 
likely to end the fiscal year with either negative or flat growth. 
 
Infosys Postpones Hiring; IBM Plans 
to Shift Jobs to India 
------------------------------------- 
 
¶5. (U) Infosys, India's second largest software exporter, has 
postponed hiring plans by six months for engineering graduates, 
citing lower demand for software services in its US and European 
markets.  Typically, the company hires at least a year in advance, 
but the economic slowdown is causing the company to reduce its 
numbers, especially on its "bench" of employees that do not yet have 
a designated assignment.  For the December quarter, Infosys and its 
subsidiaries hired 5,597 employees, just over half of number it 
hired in the previous quarter.  The company usually maintains a 
bench of 20 percent of the total number of employees, which it will 
reduce to ten percent in the upcoming fiscal year as growth of the 
company has slowed. 
 
¶6. (U) Meanwhile, a media report announced IBM's plans to lay off 
about 5,000 US employees, with many of the jobs to be shifted to 
 
NEW DELHI 00000596  002 OF 002 
 
 
India.  The report stated that the company was making cuts to the 
global business-services unit and quoted US employees as saying they 
have been providing training to India-based IBM workers to do work 
that will be shifted overseas.  Foreign workers already account for 
71 percent of IBM's 400,000 employees. 
 
Wind-power Producers in Tamil Nadu 
Can Charge More 
------------------------------------ 
 
¶7. (SBU) The Tamil Nadu Electricity Regulatory Commission (TNERC) 
announced that privately owned wind-power producers can raise the 
price they charge per unit from INR 2.9 (about USD 0.06) to INR 3.39 
(USD 0.07), effective April 1.  The announcement enthused potential 
invesors.  The manager of a group of companies currently operating 
several wind-power turbines told Consulate General Chennai that the 
new tariffs will encourage producers to shift to newer units with 
greater capacities.  He noted that many turbines in Tamil Nadu -- 
India's leader in wind power, with 43 percent of the country's 
installed capacity -- are more than ten years old and require 
refurbishment and upgrades.  He predicted that this rise in 
allowable tariff will lead to a rapid increase in wind power 
capacity in the state.  A scientist at Chennai's Center for Wind 
Energy Technology told us he expected that Tamil Nadu's wind-power 
producers can add an additional 1000 MW of installed capacity simply 
by upgrading existing turbines with more modern technology. 
 
Congress Manifesto Offers 
Incrementally More Populism 
----------------------------- 
 
¶8.  (SBU) Congress Party President Sonia Gandhi released the party's 
33-page election manifesto on March 23, continuing its populist 
pledges to "aam aadmi", the common man.  Mainly more of the same, 
such as further expansion of the rural employment scheme and 
existing food subsidy program, the new promises - if even 
implemented - would increase only marginally the current central 
government fiscal deficit of nearly 6%.  The extension of the rural 
employment guarantee to all individuals, rather than the current 
provision to all households, could increase the program's cost by as 
much as 50%, but that would be $3 billion, or just 0.003% of GDP. 
The food subsidy proposal would lower the price of government-sold 
wheat and rice from roughly Rs 5/kg to Rs 3/kg, but the estimated 
additional cost is just $350 million a year.  Promises for social 
security and health insurance are vague additions to existing, 
modest-cost programs. 
 
¶9.  (SBU) Some relatively constructive promises include a pledge to 
reform subsidies so that they reach only the truly needy sections of 
society.  On privatization, while the Congress Party has signaled 
that it will not seek to fully privatize existing state-owned 
enterprises, it has stated it is open to reducing the government 
stake to 51% by allowing shares to be sold to the public.  The 
Manifesto also recognizes that small and medium enterprises (SMEs) 
employ a significant number of workers, but at low wages and 
productivity.  The Congress Party has pledged to improve 
infrastructure, financing and marketing to already-existing SME 
clusters, which could help grow export markets, sales, and wages. 
An interest waiver for all farmers' debt if they repay their loans 
on time should cost considerably less than the $17 billion farm debt 
waiver program that the Congress-led UPA enacted last year, and 
encourages repayment rather than the moral hazard of loan 
forgiveness, which can encourage irresponsible borrowing. 
 
¶10.  (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi. 
 
WHITE