VZCZCXRO9949
RR RUEHAST RUEHBI RUEHCI RUEHDBU RUEHLH RUEHNEH RUEHPW
DE RUEHNE #1330/01 1771322
ZNR UUUUU ZZH
R 261322Z JUN 09
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 7143
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
RHMCSUU/FAA NATIONAL HQ WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHDC

UNCLAS SECTION 01 OF 03 NEW DELHI 001330 
 
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 EMIN ENRG EPET ETRD
BEXP, KBIO, KIPR, KWMN, IN 
 
SUBJECT: New Delhi Weekly Econ Office Highlights for the Week of 
June 22 to June 26, 2009 
 
¶1.  (U) Below is a compilation of economic highlights from Embassy 
New Delhi for the week of June 22-26, 2009, including the 
following: 
 
-- India To Be Fastest Growing Economy in 2010 
-- India Signals Openness to Re-Start 
Doha Round Negotiations 
-- GOI Announces New PPP Norms 
-- GOI Announces Educational Reforms Agenda 
 
India To Be Fastest Growing Economy in 2010 
----------------------------------- 
 
¶2.  (SBU) The World Bank updated its Global Development Finance 
publication this week and predicted that India will surpass China to 
be the fastest growing economy in the world in 2010.  The 
development bank forecast Indian growth at 8% with China's economic 
growth a bit slower at 7.5%.  The forecast for both the countries in 
2011 was to hit 8.5% growth, as the bank expects most of the global 
economy to return to normal by then. If the World Bank's forecast 
proves true, this would mark the first time in decades that India's 
growth outpaced China's.  This year, most local economists expect 
India to grow between 6.5-7%. 
 
¶3.  (SBU) Such growth may be threatened, however, if the summer 
monsoon rains do not start up soon.  The rains, on which much of the 
summer crops are dependent, were expected to begin around June 13, 
but they are now nearly two weeks late.  Although agriculture 
contributes less than 20% to GDP, it is the source of employment to 
more than half the labor force.  Citi estimates that a bad monsoon, 
depending on how delayed it is and how deficient the amount of 
rainfall, could cut GDP in the coming year by 50 to 100 basis 
points. 
 
India Signals Openness to Re-Start 
Doha Round Negotiations 
------------------------------------ 
¶4.  (U) Media reported extensively Commerce Minister Anand Sharma's 
take on the multilateral trade talks.  Since the time of his taking 
over the charge in the Commerce Ministry of the newly formed 
government of India (GOI), the minister has been making positive 
statements on the revival of the WTO talks.  With the economic 
downturn in the global economy, India views an opportunity in the 
successful completion of the Doha round of talks; however, India has 
not indicated a definitive position on the contentious agriculture 
market access and NAMA issues.  After his recent meeting with USTR 
Kirk in Washington, Sharma has been quoted as saying that, for now, 
the GOI's focus is not so much on the details, but on reviving the 
process.  He told media that in the "present economic backdrop, 
there is a need to re-energize and not re-invent, since much effort 
has been invested over years to reach a broader convergence on a 
large number of issues." 
¶5.  (U) After his recent remarks in Washington that New Delhi is 
ready for "give and take" without being "frozen in [a] 
pre-negotiating position" in the interest of global trade, and the 
initiative of his ministry to call off the impasse in negotiations, 
there were speculation, in general, that India is ready to offer 
concessions and has softened its position.  Clarifying his stance on 
the talks, Sharma has told media that India's position would 
continue to be guided by national interest, especially "livelihood 
concerns and subsistence farmers."  Commenting on the two draft 
reports of the working group on agriculture and NAMA, Sharma earlier 
indicated that these drafts may be used as the "base" for the 
resumption of multilateral talks.  According to press reports, 
Sharma will convey India's position at the upcoming OECD meeting, 
and will also meet his counterparts from France, Australia and 
Canada. 
GOI Announces New PPP Norms 
--------------------------- 
 
¶6.  (U) The Ministry of Finance (MOF) has revised the Request for 
Qualification (RFQ) norms for public private partnership (PPP) 
projects.  Under prior norms, a prospective bidder needed to 
 
NEW DELHI 00001330  002 OF 003 
 
 
demonstrate execution of projects equivalent to the cost of the 
proposed project in the last five years.  Per the new norms, the 
threshold technical capacity of bidders has been enhanced by almost 
twice the estimated cost of projects under the PPP model.  For 
example, a developer bidding for a PPP project worth Rs 500 crore 
(USD 100 million) should have a record of executing projects worth 
at least Rs 1,000 crore (USD 200 million).  The cross holding limit 
for investors has also been raised to 5% from the prior 1%. 
Therefore, an investor holding equity in two companies, which are 
partners in a project, can now hold up to 5 percent in each company. 
 However, financial institutions are exempt from this rule. 
Increasing the cross holding limit is expected to improve investor 
confidence and bring in more investments. 
 
¶7.  (U) In addition, each of the members of a consortium, in 
addition to holding 26 percent equity in the special purpose vehicle 
floated to bid for the project, will also be required to hold equity 
equal to at least 5 percent of the total project cost for a period 
of two years after the commissioning of the project.  The norms have 
also increased the number of short-listed bidders from five to six 
for projects over INR 500 crore (USD 100 million) and from five to 
seven for projects under 500 crore (USD 100 million) or for 
repetitive projects, although this relaxation of sorts is seen as 
counter-productive by the industry. 
 
¶8.  (U) The GOI continues to retain its authority to restrict the 
number of projects awarded to a single bidder.  Though this limit 
seems to be a move by the GOI to prevent cartelization, it is also 
seen as a retrograde step by industry.  According to industry, 
establishing a threshold criterion will be enough of a deterrent for 
trivial bidders.  Many analysts continue to argue that retention of 
these two clauses will continue to create confusion with 
infrastructure project bids and lead to delays which have repeatedly 
plagued the road development sector.  These factors have made it 
difficult for the National Highways Authority of India (NHAI) to 
attract road and highway project bids.  From here forward, the 
pending thirty-seven road sector projects, which will adhere to 
these new bidding norms, will provide an interesting test case for 
the GOI to determine the efficacy of the new PPP norms. 
 
 
GOI Announces Educational Reforms Agenda 
---------------------------------------- 
¶9.  (U) Announcing a 100-day mandate for his ministry, the new Human 
Resource Development (HRD) Minister Kapil Sibal, on June 25 declared 
his plans to allow foreign direct investment (FDI) in education. 
Sibal, known for strongly favoring FDI in India's education sector, 
told press reporters that "FDI must come into India.  Entry into the 
education sector must neither be limited nor over-regulated.  I want 
the system to be accessible from outside too."  He stated that 
allowing private investment, including FDI, in education "does not 
mean you have fly by night operators.  The country should not 
prevent quality learning from coming".  Explaining his position, he 
pointed to a significant number of Indian students studying abroad 
(160,000) at an overall cost of seven billion dollars, visa 
problems, and issues like the recent attacks on Indian students in 
Australia.  He further reasoned "When the demand exists, why should 
we send our children out? Foreign universities can come at our 
doorstep; India has the potential to become a global provider of 
quality graduates." 
¶10.  (U) Elaborating on his plans for revamp of the education 
system, the minister has reportedly said that he would take forward 
the Foreign Educational Institutions (Regulation of Entry and 
Operations, Maintenance of Quality and Prevention of 
Commercialization) Bill, which was cleared by the cabinet in 
February 2007 but has been stalled.  The pending legislation seeks 
to permit but regulate the entry, operation and maintenance of 
foreign education. 
¶11.  (U) Countering claims of the political opposition on the 
subject, Sibal emphasized that "The Left is not against foreign 
universities per se; they are concerned about fly by night 
operators. Everything has to be regulated and it will be." He made 
it clear that the government cannot handle everything, and the 
 
NEW DELHI 00001330  003 OF 003 
 
 
players will include corporate investment in school education, joint 
ventures, public-private partnerships.  Another important step 
forward that the HRD Minister announced includes structural reforms 
to relax procedures and to end the licensing regime in the sector. 
¶12.  (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi. 
 
BURLEIGH