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DE RUEHNE #1808/01 2430253
ZNR UUUUU ZZH
O 310253Z AUG 09
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 7852
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
RUEHGV/USMISSION GENEVA 8529
RUEHBJ/AMEMBASSY BEIJING 7915

UNCLAS SECTION 01 OF 04 NEW DELHI 001808 
 
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 
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, DUNNE, AGIBBS 
 
E.O. 12958: N/A 
TAGS: ECON EAGR EAIR EFIN EINV ENRG ETRD BEXP PHUM PINR
IN 
 
SUBJECT: New Delhi Weekly Econ Office Highlights for the Week of 
August 24-28, 2009 
 
REFTEL: 
 
¶1. (U) Below is a compilation of economic highlights from Embassy 
New Delhi for the week of August 24-28, 2009, including the 
following: 
 
-- India Announces Foreign Trade Policy for 2009-2014 
-- ICRIER Seminar On Express Delivery Issues 
-- Washington Apples Bring Bonanza to Indian Importers 
-- CAT India Prepares for an Increase in Orders; Plans for 
Expansion 
-- Myanmar and Bangladesh Dispute India's Claim to Continental Shelf 
in the Bay of Bengal 
-- A Tale of Two Inflations 
 
India Announces Foreign Trade Policy for 2009-2014 
--------------------------------------------- --- 
 
¶2. (U) On August 27, Minister of Commerce and Industry Anand Sharma 
announced India's Foreign Trade Policy (FTP) for 2009- 2014. 
Against a backdrop of falling exports since October 2008, the 
Government of India's (GOI) FTP aims to address the slowdown by 
providing support to exporters.  Highlights of the policy include 
extension of fiscal concessions and additional subsidies for 
exporters, specific benefits for labor-intensive industries that are 
currently suffering due to the global economic recession, increased 
support for marketing schemes, and procedural changes to cut 
transaction costs and time.  Minister Sharma also called for 
diversification in exported products and markets to improve export 
competitiveness.  Text of the FTP is available at GOI's website: 
http://dgft.delhi.nic.in. 
 
¶3. (U) Comment: Domestic industry, exporters and trade analysts view 
the announcement as a positive step taken by the GOI to support the 
export sector, which although relatively small (only about 21 
percent of GDP in 2008), has been hard hit by the economic downturn. 
 Nonetheless, the continuing global economic recession and India's 
own infrastructural challenges will continue to be an obstacle to 
growth in Indian exports.  End Comment. 
 
ICRIER Seminar On Express Delivery Issues 
----------------------------------------- 
 
¶4. (U) The Indian Council for Research on International Economic 
Relations (ICRIER) hosted a seminar on August 26 entitled 
"Facilitating Trade and Global Competitiveness: Express Delivery 
Sector in India."  The seminar raised challenges within the express 
delivery services (EDS) industry and the potential impact that an 
improved express delivery sector would have for India's trade and 
economic growth.  Noteably, Minister of Commerce and Industry Anand 
Sharma was present for the opening session.  Dr. Rajiv Kumar, 
Director of ICRIER, opened the seminar noting that with the economic 
slowdown, now is an optimal time to examine the structure and policy 
related to EDS.  Ilse Wilczek, Chairperson of the Global Express 
Association and Director of Dutch-based express delivery company 
TNT, highlighted the role that express delivery plays as a 
facilitator of industry and trade, enabling manufacturers and 
traders to competitively engage in international trade and deal with 
"the demanding time frames of the global economy."  Wilczek 
described how unclear postal regulations, complex licensing 
requirements, inefficient customs procedures, limited ground 
handling systems and restrictions on both foreign investment and 
access to aviation markets impede EDS, and steps to remove such 
restrictions would increase trade, investment and productivity. 
 
¶5. (U) R.K. Saboo, Chairman of the Express Industry Council of 
India, presented specifically on the challenges to the development 
of EDS in India, including regulatory issues, the need for an 
amendment to the Indian Post Office Act to be passed, 
 
NEW DELHI 00001808  002 OF 004 
 
 
customs-related barriers (currently, express delivery companies are 
prohibited from making international commercial shipments) and 
infrastructure concerns, specifically airport and road 
infrastructure.  Saboo presented slides showing express delivery 
companies operating in open areas at airports, limiting the 
effectiveness of the companies and leading to frequent damage and 
loss of shipments during poor weather conditions.  Saboo requested 
that the Minister consider his recommendation to provide a 
"dedicated common user facility at all major airports for domestic 
movements."  Saboo also recommended that a policy be put into place 
to solve the problem of state border check posts, which cause 
significant traffic "bottlenecks," slowing the pace of delivery. 
Saboo jokingly referenced recent free trade agreements signed by the 
Government of India, and recommended that a similar agreement be 
drawn up between all the states of India.  He described a model 
on-line border clearance process in Uttar Pradesh (UP) which allows 
shipments to be cleared entirely in advance of boder crossings, to 
avoid the need to halt vehicles at checkpoints.  He suggested to the 
Minister that this system be adopted countrywide. For more 
information about the event, including presentation summaries, see 
ICRIER's website: http://www.icrier.org/Seminar/2009/26aug09.ht ml 
 
¶6. (SBU) UPS Asia-Pacific VP for Public Affairs Steve Okun privately 
discussed with Embassy officers plans for a joint industry, U.S. and 
EU symposium in India to spur progress on express delivery similar 
to events that been carried out on a bilateral basis in Japan and 
China.  He also planned to follow up with USTR about a possible 
agenda item on express delivery services for the upcoming Trade 
Policy Forum. 
 
Washington Apples Bring Bonanza to 
Indian Importers 
------------------------------------ 
 
¶7. (U) A poor apple harvest in the lower valley of Himachal Pradesh 
(HP) in the Himalayan foothills, combined with a Hindu holiday that 
traditionally features apples as part of an offering, has brought a 
windfall for South Indian importers of Washington apples.  A 
Delhi-based representative of the Washington Apple Commission told 
Consulate General Chennai that a poor apple crop in HP's lower 
valley region (near Shimla) meant there was little domestic 
production to meet the large South Indian demand.  He added that 
consumption of apples, particularly in western and South India, 
typically increases around the time of the Vinayaka Chathruthi 
holiday.  (Note: the 10-day festival is also known as Ganesha 
Chathruthi, when Hindus celebrate the birthday of Lord Ganesha, and 
generally takes place in August and/or September.  Apples are a 
traditional part of the offerings from the faithful.  End Note.) 
Usually, Indian apples from HP harvested in July reach South India 
markets during the second week of August, just in time for the 
festival.  The poor HP crop, however, did not allow supply to match 
demand, resulting in steep price increases - and an opportunity for 
U.S. exporters and Indian importers. 
 
¶8. (SBU) The President of Chennai's Fruit Merchants Association told 
Consulate General Chennai that three importers made excellent 
profits when their containers cleared customs in Chennai the second 
week of August, facing virtually no competition from domestic 
apples.  He said that the wholesale price of Washington apples in 
Chennai increased from USD 33 per crate in the last week of July to 
USD 45 per crate in the second week of August.  The importers, he 
said, had paid approximately USD 28 per crate in July for their 
supply.  He cautioned that the importers' "bonanza" would not be 
particularly long-lasting, noting that arrivals from HP's upper 
valley region would soon force a drop in apple prices. 
 
CAT India Hard-hit by Economic Downturn 
and Power Shortages, But Still Plans 
for Expansion 
 
NEW DELHI 00001808  003.2 OF 004 
 
 
------------------------------------------- 
 
¶9. (U) U.S.-based Caterpillar, Inc (CAT) has been doing business in 
India since the 1930s.  After enjoying a successful licensing 
relationship with Hindustan Motors (HM) since 1984, Caterpillar 
India Private Ltd became a wholly owned subsidiary with the 
acquisition of HM's share of the venture in 2001.  Caterpillar India 
produces 60-ton and 100-ton trucks for the domestic market and for 
export to Southeast Asia, Russia and Mongolia; front-end loaders and 
backhoes for the Indian market; and large-scale generators used 
mainly by office parks, hotels and shopping malls in India. 
 
¶10. (SBU) During a recent visit to the company's facility on the 
outskirts of Chennai (Thiruvallur), Caterpillar India Operations 
Manager M. Premkumar told Consulate General Chennai that all aspects 
of the company's business have dropped sharply since 2008.  Orders 
for most products were down by more than half, with backhoe orders 
in particular falling from 794 in 2008 to 267 in 2009.  Premkumar 
stressed, however, that numbers for the second half of 2009 are 
improving, and 2010 should surpass 2008.  He said total machine 
shipments from the Thiruvallur plant in 2010 are expected to reach 
3140, up from 2168 in 2008 and 1289 in 2009.  CAT Chairman and CEO 
James Owens announced in 2008 a new USD 200 million investment in 
India, with USD 125 million going to the Thiruvallur facility. (CAT 
also has facilities in Bangalore, Chennai, and Hosur, directly 
employing some 2800 people in India, 1100 of them in Thiruvallur.) 
Caterpillar India plans to use this investment to expand the 
Thiruvallur facility into adjacent properties it already owns. 
 
¶11. (SBU) While orders for its products are increasing, CAT still 
faces obstacles in India, particularly in assuring a reliable supply 
of electricity for its facilities.  Premkumar told us that CAT has 
signed an agreement with the Tamil Nadu government that should 
secure a more reliable supply.  Currently, the Thiruvallur plant can 
rely on only four hours of electricity supply per day from the grid. 
 Premkumar complained that that new investors in Tamil Nadu receive 
the most attention from the state government in terms of 
infrastructure and utilities, leaving more established corporate 
citizens neglected, even those seeking to increase their 
investments.  The recently signed MOU, he said, may be a signal that 
the state government recognizes the need to counter this trend. 
 
Myanmar and Bangladesh Dispute India's Claim 
To Continental Shelf in the Bay of Bengal 
-------------------------------------------- 
 
¶12. (U) Local media reports that a recent claim made by India for 
300,000 square kilometers of seabed in the Bay of Bengal is being 
disputed by both the Government of Myanmar and the Government of 
Bangladesh.  While the section of continental shelf is unlikely to 
be rich in oil, it could potentially be a significant source of gas 
hydrates.  The Government of Myanmar issued a letter to the United 
Nations (UN) on August 4, 2009, complaining that India had 
unilaterally extended the maritime boundary between the two 
countries in violation of a 1986 bilateral agreement.  On June 18, 
Bangladesh Prime Minister Sheikh Hasina noted that her government 
planned to contest both India's and Myanmar's claims to the area of 
continental shelf.  According to media reports, India's Ministry of 
External Affairs will likely hold bilateral discussions with Myanmar 
and Bangladesh rather than take up the issue at the UN. 
 
A Tale of Two Inflations 
------------------------ 
 
¶13. (U) India has no single broad-based consumer price index (CPI) 
for measuring retail inflation, but rather uses three CPI indices 
focusing on different segments of the population - agricultural 
workers, rural workers, and industrial workers.  Recently released 
statistics show stubbornly high inflation for all three CPIs due to 
 
NEW DELHI 00001808  004 OF 004 
 
 
increased food prices, which has a significant weight (varying 
between 46 and 69 percent) in each CPI basket.  While the CPI for 
agricultural and rural laborers averaged 11 percent for the past 
twelve months, it rose to 12.9 percent and 12.7 percent respectively 
in July.  The CPI for industrial workers averaged 9.2 percent in the 
past year and stood at 9.3 percent in July.  In contrast, inflation 
as measured by the wholesale price index (WPI) ended in July at 
-1.53 percent, down from its peak of 12.9 percent from August, 2008. 
 The WPI has a smaller weight in food than the three CPIs, but a 
higher weight in fuel and power, accounting for the difference in 
the rates.  Analysts expect the WPI inflation to reach seven percent 
by March 2010. 
 
¶14. (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi. 
 
 
ROEMER