VZCZCXRO0740
RR RUEHAST RUEHBI RUEHCI RUEHDBU RUEHLH RUEHNEH RUEHPW
DE RUEHNE #1048/01 1421042
ZNR UUUUU ZZH
R 221042Z MAY 09
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 6695
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 001048 
 
SENSITIVE 
SIPDIS 
 
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/FERUS 
EEB/CIP DAS GROSS, FSAEED, MSELINGER 
 
E.O. 12958: N/A 
TAGS: ECON EAGR EAIR ECPS EFIN EINV ELAB EMIN ENRG EPET
ETRD, BEXP, KBIO, KIPR, KWMN, IN 
 
SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF MAY 
18 TO MAY 22, 2009 
 
¶1.  (U) Below is a compilation of economic highlights from Embassy 
New Delhi for the week of May 18-22, 2009, including the following: 
 
-- Ministry of Finance Reorganization 
-- Insurance Bill Passage Likely in Winter Parliament 
-- CCI Goes Live 
-- India Notifies Initiation of Safeguard Duty Investigations 
-- Nath Says India to Work on FDI Irritants 
-- Exporters Demand Another Stimulus Package 
-- Two-day MTNL Strike Disrupted Delhi's Communication Networks 
 
Ministry of Finance Reorganization 
---------------------------------- 
 
¶2.  (SBU) Ministry of Finance contacts have confirmed to Emboffs 
recent media reports that the newly appointed Finance Secretary 
Ashok Chawla is reorganizing several Joint Secretary portfolios to 
create a division of infrastructure and investment.  This reflects 
the greater push that the government wishes to give to 
infrastructure development, as bureaucratic hurdles and the global 
financial crisis have crimped performance in key infrastructure 
sectors.  Joint Secretary Govind Mohan will now head investment in 
the MoF, including the Foreign Investment Promotion Board (FIPB) and 
bilateral investment treaties.  His division will also handle 
infrastructure policy-related issues in the areas of railways, 
telecom, roads, ports, shipping, civil aviation, power, coal, energy 
and water transport, as well as all mergers and acquisitions of an 
Indian company.  Foreign investment policies will continue to be 
framed as before by the Department of Industrial Policy and 
Promotion under the Ministry of Commerce and Industry.  Joint 
Secretary Anup Pujari, who was head of investment, the FIPB and 
bilateral investment treaties, will now oversee India's engagement 
with multilateral organizations, including the World Bank and IMF. 
Joint Secretary Alok Sheel, who had some overlapping 
responsibilities, will now focus on G-20 issues. 
 
Insurance Bill Passage Likely 
in Winter Parliament 
------------------------------ 
 
¶3.  (SBU) An insurance contact told Econoff that he heard from the 
Ministry of Finance this week that they expect the Insurance 
Amendment Bill, which raises the foreign direct investment cap from 
26% to 49%, and was just introduced in the February Budget Session 
of Parliament, to be sent to the Standing Committee on Finance by 
June 15.  The Standing Committee would have three months to issue 
its report, a standard step in passage of legislation.  The 
government could then finalize the bill and offer it for passage in 
the Winter Session of Parliament, which usually starts in early to 
mid November. 
 
CCI Goes Live 
-------------- 
 
¶4.  (U) India's new competition body, the Competition Commission of 
India (CCI), became operational on May 20, 2009.  The GOI notified 
certain provisions of the Competition Act 2002 relating to 
anti-competitive agreements and abuse of dominant market position, 
which gives CCI the power to commence enforcement actions.  However, 
the GOI has yet to notify sections dealing with mergers and 
acquisitions, although it is expected that these sections will 
eventually be notified.  In addition to appointing a CCI chairman 
and two members in February, the GOI has also established a 
Competition Appellate Tribunal.  The tribunal will be headed by 
retired Supreme Court of India Justice Arijit Pasayat.  The tribunal 
will hear appeals of the decisions of the CCI and also adjudicate 
compensation claims related to anti-competitive practices.  The CCI 
would ultimately replace the Monopolies and Restrictive Trade 
Practices Commission (MRTPC).  The MRTPC will continue to deal with 
pending cases on its docket for two years before being wound up.  No 
new cases will be adjudicated by the MRTPC. 
 
India Notifies Initiation of 
 
NEW DELHI 00001048  002 OF 003 
 
 
Safeguard Duty Investigations 
------------------------------ 
 
¶5.  (U) India has notified its decision to initiate investigations 
that could result in the imposition of safeguard duties on 
hot-rolled steel, certain automobile parts, acrylic fiber, and 
coated paper at the World Trade Organization (WTO).  In the 
notification submitted to the WTO, India reportedly indicated that 
domestic industry, in all four cases, has claimed that their sales 
have dropped because of a surge in imports which has caused injury 
(losses and market disruption) to them.  Despite the WTO 
notification, the GOI's Board of Safeguard Approvals (a body of 
secretaries headed by the Commerce Secretary) recently rejected 
applications for the imposition of interim duties on the four 
products since the Board found insufficient evidence for the 
domestic industry's claims of injury due to import surges.  The 
GOI's designated safeguards authorities had recommended imposition 
of the interim duties on the four products without consulting the 
user industry.  The Board directed the safeguard authorities to 
consult with all stakeholders and the user industry to come up with 
findings. 
 
Nath Says India to Work on FDI Irritants 
------------------------------ 
 
¶6.  (U) Former Commerce Minister Kamal Nath told media this week 
that the new government will soon start work on removing procedural 
bottlenecks for foreign investors; however, allowing FDI in 
multi-brand retail will not be on its immediate agenda.  Commenting 
on the trends in FDI inflows during the last year, he reportedly 
said that the FDI inflow to India has "not dried up ... but (getting 
it) has become competitive."  Independent think-tank Indian Council 
of Research on International Economic Relations (ICRIER) conducted a 
government-sponsored study in 2008 on the impact of FDI in retail on 
neighborhood grocery shops, which highlighted that big stores and 
mom-and-pop shops (kiranas) can generally co-exist, with some 
negative impact to kiranas that are in close proximity to big store 
outlets. 
 
Exporters Demand Another Stimulus Package 
----------------------------------------- 
 
¶7.  (U) Facing its worst crisis in over a decade, India's dipping 
export sector is ready with a wish-list for the new government. 
Exporters have demanded a stimulus package including a 3-year tax 
holiday and subsidized loans for the textile sector.  Some experts 
estimate there are nearly 20 million direct jobs in the industry. 
The Commerce Ministry is lobbying the Finance Ministry to approve 
the proposed tax concession and other similar measures to help 
assist India's exporters during the global downturn.  India missed 
its export target for the previous fiscal year, registering only 
three percent growth for the year.  Industry and the GOI have 
repeatedly attributed the dismal export performance to an 
appreciating rupee, falling global demand, the high cost of credit, 
and alleged protectionism by some economies. 
 
¶8.  (U) Some of the proposals the government is considering include 
increased duty drawback rates; exemption of fringe benefit tax and 
service tax for exporters to offset the cost of export marketing; 
cheaper export credit; tax benefit on investment in new plant and 
machinery; and creation of an export development fund.  In addition, 
the Apparel Export Promotion Council (AEPC) requested fiscal 
incentives specifically for the garment segment of the textile 
sector, establishment of a product development fund, and 
simplification of export-import norms.  Garment exports account for 
nearly six percent of India's total exports. 
 
Two-day MTNL Strike Disrupted Delhi's 
Communication Networks 
------------------------------------- 
 
¶9.  (U) Except for top officials, most employees of the GOI-owned 
Mahanagar Telephone Nigam Limited (MTNL), which runs telecom and 
 
NEW DELHI 00001048  003 OF 003 
 
 
Internet services in the country's two main metro cities Delhi and 
Mumbai, went on a strike on May 19-20 disrupting communications 
networks.  The MTNL Executives Association demanded that the Sixth 
Pay Commission's recommendation of a 30% pay increase be 
implemented.  The strike crippled landline phones and internet 
services affecting operations at the airport, banks, hospitals and 
other essential services.  U.S. Embassy's local telephone lines 
experienced intermittent service outages. 
 
¶10.  (U) MTNL Chairman RSP Sinha said striking employees had cut or 
sawed telecom cables carrying Subscriber Trunk Dialing (STD) 
long-distance traffic and optical fiber cables carrying broadband 
traffic and direct-to-home (DTH) television services.  The 
disruption of telecom and data services severely affected operations 
at Indira Gandhi International Airport, leading to flight delays of 
several hours.  Internet services interruption also affected the 
sale of air tickets as many airline websites and travel portals went 
down.  Card swiping machines at various outlets and petrol pumps 
stopped functioning.  The MTNL Executives Association called off the 
strike on Wednesday (May 20) after the MTNL management agreed to 
resolve the pay revision issue, thereby allowing telecom services to 
return to normal. 
 
¶11. (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi. 
 
BURLEIGH