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OO RUEHAST RUEHBI RUEHCI RUEHDBU RUEHLH RUEHNEH RUEHPW
DE RUEHNE #1489/01 2010737
ZNR UUUUU ZZH
O 200737Z JUL 09
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 7434
INFO RHEHAAA/WHITE HOUSE WASHDC IMMEDIATE
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RHEHNSC/NSC WASHDC
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 04 NEW DELHI 001489 
 
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 MDELANEY/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 FSAEED, KDUNNE, AGIBBS 
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 
July 13-17, 2009 
 
REFTEL: NEW DELHI 1401 
 
¶1.  (U) Below is a compilation of economic highlights from Embassy 
New Delhi for the week of July 13-17, 2009, including the 
following: 
 
-- Informal WTO Talks to be Held in September 
-- EGoM to Help Steer the Long Delayed 3G Spectrum Auction 
-- Adequacy of India's Foreign Exchange Reserves 
 
-- Cabinet Committee on Infrastructure Established 
-- GOI Considers Regulatory Body for Biologics Sector 
-- Pawar on Biotech Foods in India 
-- Minister of Steel Wants to Limit Iron Ore Exports 
-- India Rejects Novartis Patent for Cancer Drug Glivec 
-- Industrial Production Points to Recovery 
 
Informal WTO Talks to be Held in September 
------------------------------------------- 
 
¶2.  (U) In a bid to revive the stalled Doha Round of trade talks, 
India has sent invitations to key World Trade Organization (WTO) 
Trade Ministers for initiating an "informal round" of talks in New 
Delhi in the first week of September.  WTO Director-General Pascal 
Lamy will attend the talks, which seek to bridge gaps between 
developing and developed countries on market access issues. 
Commerce and Industry Minister Anand Sharma - at his recent meeting 
with world leaders during the Cairns Group meeting at Bali, and with 
USTR Kirk in Washington late last month - has stated that India is 
committed to breaking the impasse in the Doha Round of trade talks. 
Official sources have told media that the meeting would comprise 
ministers from the member countries of the G20 (a grouping of 
developing nations with offensive interests in agriculture, not to 
be confused with the Group of Twenty countries that will meet in 
Pittsburgh September 25-25) as well as some members of the G-33 (an 
alliance of emerging economies with a defensive interest in 
agriculture). 
 
EGoM to Help Steer the Long Delayed 
3G Spectrum Auction 
--------------------------- 
 
¶3. (U) The Government of India announced the establishment of a 
nine-member Empowered Group of Ministers (EGoM) on July 13 to 
resolve issues blocking the auction of third generation (3G) 
spectrum services.  The EGoM will be headed by Finance Minister 
Pranab Mukherjee and include Defence Minister AK Antony, Telecom 
Minister A Raja, Agriculture Minister Sharad Pawar, Law Minister 
Veerappa Moily, Information and Broadcasting Minister Ambika Soni, 
Planning Commission Deputy Chairman Montek Singh Ahluwalia, and 
Minister of State in the Prime Minister's Office Prithviraj Chavan. 
The EGoM will decide on the quantum of 3G spectrum to be auctioned, 
annual spectrum charges, additional administrative charges and the 
reserve price for 3G and Broadband Wireless Access (BWA) spectrum. 
It will also examine spectrum and allocation of band for Evolution 
Value Data Optimised (EVDO), a high-end data application service, 
which India hopes to roll out in the near future. 
 
¶4.  (U) The Prime Minister met with Telecom Minister A. Raja and 
Finance Minister Pranab Mukherjee in June and decided to double the 
3G auction reserve price from Rs 2,020 to Rs 4,040 crore.  The three 
also decided to permit up to seven operators (including BSNL and 
MTNL) per circle to offer 3G services.  By doing so, GoI is hopeful 
that about Rs 35,000 crore ($7.2 billion) may be raised from the 
auction of 3G and WiMAX spectrums.  With the establishment of the 
EGoM, government officials reportedly hope to avoid controversies 
that may hinder the already complex process.  Wireless Advisor Ashok 
Chandra, at the Department of Telecom, confirmed that the EGoM will 
likely meet at the end of July.  Chandra noted the Department is 
hopeful the 3G auction will commence by October or November this 
year.  (Comment: Even if the EGoM is able to sort out the remaining 
issues and make a recommendation, the process would likely have to 
 
NEW DELHI 00001489  002 OF 004 
 
 
be endorsed by the Union Cabinet before the long-delayed auction can 
move forward. End Comment.) 
 
Adequacy of India's Foreign Exchange Reserves 
--------------------------------- 
 
¶5.  (U) The latest Reserve Bank of India (RBI) Report on Management 
of Foreign Exchange Reserves indicates that the import cover of 
foreign exchange reserves was down to 10.2 months at the end of 
March 2009 compared to 14.4 months at the end of March 2008.  The 
import cover ratio has fallen in sync with foreign exchange 
reserves, which fell by $57.7 billion to $252 billion during the 
period from March 31, 2008, to March 31, 2009. (Note: On June 19, 
foreign exchange reserves stood at $263.7 billion. End note.) 
 
¶6.  (U) In FY 2007-08, reserves rose by $110.5 billion to $286 
billion.  Since that period, reserves have declined primarily due to 
a valuation loss due to foreign exchange fluctuations.  An outflow 
from foreign institutional investors was the other major source 
contributing to the fall in reserves.  The ratio of short-term debt 
to forex reserves increased to 19.6 percent as of March 31, 2009 
from 15.2 percent in the previous year.  The ratio of volatile 
capital flows (defined as cumulative portfolio investments and 
short-term debt) to India's foreign exchange reserves increased to 
51 percent at March 31,2009 from 45.4 percent a year ago.  Bankers 
quoted in local media noted that though the ratio has shot up in FY 
2008-09, it is not a great concern as the outstanding level of 
foreign exchange level is robust.  The RBI holds about 357 tons of 
gold forming 3.8 percent of the total reserves in value terms as at 
end March 2009. 
 
Cabinet Committee on Infrastructure Established 
--------------------------------------------- -- 
 
¶7.  (U) A 13-member Cabinet Committee on Infrastructure, headed by 
Prime Minister (PM) Manmohan Singh has been established to 
fast-track the implementation of infrastructure projects.  In 
addition to PM Singh, Committee members include Finance Minister 
Pranab Mukherjee, Minister of Agriculture Sharad Pawar, Railways 
Minister Mamta Banerjee, Minister of Power Sushil Kumar Shinde, 
Minister of New and Renewable Energy Farooq Abdullah, Minister of 
Urban Development Jaipal Reddy, and others.  The Committee will 
issue requests for proposals for infrastructure projects above Rs 
150 crore ($31 million) in various areas including energy, railways, 
roads, ports, airports, telecommunications, information technology, 
irrigation, housing and urban development sectors.  The Committee 
will also suggest fiscal, financial, institutional and legal 
measures needed to enhance infrastructure investment, facilitate 
private investment, lay down performance targets and review the 
progress of the projects. 
 
GOI Considers Regulatory Body for Biologics Sector 
--------------------------------------------- ----- 
 
¶8.  (U) India's Department of Biotechnology (DBT) officials have 
reportedly announced that the government is planning to formulate 
new guidelines for biologics and will set up a National 
Biotechnology Regulatory Board to specify and regulate the 
development of drugs and vaccines from natural sources such as 
humans, animals or micro-organisms.  At present, both pharmaceutical 
products and biologics are regulated by the Drug Controller General 
of India (DCGI).  (Note: Biotechnology is an emerging sector in 
India and major domestic biotech companies including Biocon, 
Wockhardt, and Panacea Biotech are engaged in manufacturing 
biologics such as insulin, monoclonal antibody products, and 
vaccines. End Note.)  According to media reports, the new regulatory 
body will operate in the pre-clinical stage before applications are 
forwarded to the DCGI for final approval. 
 
Pawar on Biotech Foods in India 
------------------------------- 
 
 
NEW DELHI 00001489  003 OF 004 
 
 
¶9.  (U) Agriculture Minister Sharad Pawar announced in Parliament 
that the government of India (GOI) plans to introduce new 
genetically modified (GM) food crops in the country within the next 
three years.  Pawar stated that the Indian Council of Agricultural 
Research and Department of Biotechnology has approved testing and 
development of three biotech crops (tomato, brinjal, and 
cauliflower) in institutes across India.  At the conclusion of these 
tests, the final clearance for cultivation of GM varieties will be 
given by the Review Committee on Genetic Manipulation and the 
Genetic Engineering Approval Committee. 
 
Minister of Steel Wants to Limit Iron Ore Exports 
--------------------------------------------- ---- 
 
¶10.  (U) In a bid to conserve raw material for domestic production, 
the Minister of Steel has told media that his Ministry is in favor 
of restricting iron ore exports.  He added that the Steel Ministry 
would discuss the issue with both the Prime Minister and the Finance 
Minister in the near future.  "Iron ore exports should be encouraged 
only in value-added form and that too in a limited quantity," the 
Minister opined at a press conference. "The government will ensure 
that reserves of iron ore are made available to domestic steel 
makers at reasonable prices." 
 
¶11.  (U) At present, iron ore lumps have an export duty of 5 percent 
while there is no duty on exports of refined iron ore.  India 
produces approximately 200 million tons of iron ore every year, of 
which half is exported, with China as the major destination.  The 
Steel Ministry has also formed a committee, which will consider 
possible restructuring and revival of public sector steel and iron 
ore companies.  According to GOI estimates, India's steel production 
is expected to double to 124 million tons a year by 2011-12 from 65 
million at present.  This growth is related to massive expansion 
programs going on in both the public and the private steel sector. 
The Indian steel industry has largely been unaffected by the global 
meltdown and its steel consumption has increased. 
 
 
India Rejects Novartis Patent 
for Cancer Drug Glivec 
---------------------- 
 
¶12.  (U) The Intellectual Property Appellate Board (IPAB) rejected 
the grant of a patent for Glivec, a drug for cancer treatment 
developed by German multinational Novartis.  Five pre-grant 
oppositions were filed in the period May-July 2005 against the 
Glivec patent application.  Novartis filed a writ petition 
challenging the constitutionality of Section 3(d) of the 1970 
Patents Act before the Madras High Court.  As a result, the Supreme 
Court ordered GOI to hire a technical member within the IPAB to 
judge the Novartis appeal to the five opposition orders of the Drug 
Controller of Indiathat declined to pursue the patent application. 
 
 
¶13.  (U) On June 26, the IPAB ruled against the grant of the patent 
due to its lack of "significantly enhanced efficacy," claiming that 
only "therapeutic efficacy" qualified under Section 3(d) and 
properties claimed to be displayed by Glivec did not amount to an 
increase in "therapeutic efficacy".  (Note: IPAB's decision stands 
in contrast to Glivec's approved patents in 35 countries.  The court 
also did not accept additional supporting material from Novartis, 
stating that only material supplied on the date of applying for the 
patent could be considered while deciding the present challenge to 
the Controller's decision.  End Note.) 
Industrial Production Points to Recovery 
---------------------------------------- 
 
¶14.  (U) Industrial output rose by 2.4 percent in fiscal year 
2008-09 (April-March), sharply lower than the 8.5 percent registered 
in FY 2007-08, as the global economic crisis and high interest rates 
hurt domestic demand and exports.  Nevertheless, the latest data 
shows that the index of industrial production (IIP) improved to 2.7 
 
NEW DELHI 00001489  004 OF 004 
 
 
percent in May - the highest since September last year - fueling 
positive expectations that the economy has entered a recovery phase. 
 This is also an improvement over April's revised growth of 1.2 
percent, which was preceded by four successive months of negative 
growth. 
 
¶15.  (U) Manufacturing, which accounts for 80 percent of the IIP, 
grew by 2.5 percent in May over the same month of the previous year. 
 A survey of 500 companies showed that manufacturing activity 
expanded for a third straight month in June.  Cement production 
on 
growth remained robust at 10.8 percent in May and analysts expect 
cement prices to fall on the back of an unprecedented increase in 
capacity.  The mining and electricity sector witnessed decent growth 
rates of 3.7 percent and 3.3 percent respectively in May compared to 
the corresponding period of last year. 
 
¶16.  (U) Consumer goods production grew by 1.2 percent (after three 
months of negative growth), primarily due to demand for consumer 
durables.  Car sales, an indicator of consumer demand, rose by 7.8 
percent in June, climbing for the fifth month, as lower tax rates 
and easier funding lured consumers.  Intermediate and basic goods 
both were up 6.1 percent and 3.8 percent respectively in May. 
However, capital goods continued to fall for the third month in a 
row and in May declined 3.6 percent versus negative 7.6 percent in 
April 2009.  Consumer non-durables declined 2.3 percent in May 2009, 
albeit lower than the 9.1 percent decline seen in April. (Note: 
Analysts expect further increases in industrial growth, averaging 
around 5 percent in FY 2009-10, due to an improvement in the 
investment climate, coupled with the government's focus on 
infrastructure development.  The increase in production of consumer 
goods is possibly a result of the implementation of the Sixth Pay 
Commission, which increased disposable income and the National Rural 
Employment Guarantee Scheme which potentially resulted in increased 
rural demand.  End Note.) 
¶17.  (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi. 
 
ROEMER