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FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 7927
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RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RHEHNSC/NSC WASHDC
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RUEATRS/DEPT OF TREASURY WASHDC
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RHMCSUU/FAA NATIONAL HQ WASHINGTON DC
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UNCLAS SECTION 01 OF 03 NEW DELHI 001861 
 
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, KDUNNE, 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 31 - September 4, 2009 
 
REFTEL: 
 
¶1. (U) Below is a compilation of economic highlights from Embassy 
New Delhi for the week of August 31 - September 4, 2009, including 
the following: 
 
-- India Hosts WTO Mini-Ministerial to Re-energize Doha 
-- India's Own Trade Continues to Plunge 
-- More Investment Options for Foreign Venture Capital Funds 
-- Parliamentary Standing Committee of Finance Finalized 
 
India Hosts WTO Mini-Ministerial 
to Re-energize Doha 
---------------------------------- 
 
¶2. (SBU) India's Minister of Commerce and Industry Anand Sharma 
hosted a mini-Ministerial in Delhi September 2-4 entitled 
"Re-energising Doha - a Commitment to Development," which was 
attended by Ministers from more than 45 WTO member countries as well 
as more than 100 lower level delegations.  The Ministry's press 
release said "the objective of the meeting was to discuss the 
contours and the content of the Ministerial engagement and to decide 
on issues to be presented to Ministers or receiving their guidance." 
 Informally, Sharma said he was seeking a "rainbow coalition" of 
support to reenergize the Doha Round and bring about a successful 
conclusion. 
 
¶3. (SBU) At an event hosted by the Federation of Indian Chambers of 
Commerce and Industry (FICCI) for WTO Director General Lamy on 
September 3, FICCI's Secretary General Amit Mitra commented that as 
India is viewed widely as the spoiler that caused the breakdown in 
the July 2008 negotiations, its hosting of this event represents a 
"tectonic shift."  In a bilateral meeting, Ambassador Kirk and 
Minister Sharma joked that with India hosting the event and the 
United States in attendance, there was much less opportunity for 
other countries, such as China or Brazil, to hide behind them. 
 
¶4. (SBU) Following the conclusion of the formal program this 
afternoon, the USTR delegation provided an informal readout, noting 
that Ambassador Kirk was pleased with the outcome and that Minister 
Sharma had made a conscious effort to improve the dynamics of 
U.S.-Indian trade relations.  Despite those warm feelings, there 
remain "significant substantive issues that will militate against" 
harmonious resolution.  The final conference document was written 
with a high level of abstraction.  It states that the multilateral 
approach will be the main focus in the future, because it ensures 
inclusivity and transparency. However, bilateral meetings may also 
be required since they can provide better understanding of national 
positions.  Although all participants endorsed this statement, the 
U.S. view of how bilateral negotiations should proceed remains very 
different from others and the issue remains unresolved.  This 
evening, a small group Ministerial dinner will take place, which may 
allow for a bit more progress or at least a more frank exchange of 
views.  Comment: Good conference, useful discussion, improvement in 
Indo-U.S. atmospherics, but no major breakthrough.  End Comment. 
 
India's Own Trade Continues to Plunge 
------------------------------------- 
 
¶5. (U) India's merchandise exports fell 28.5 percent to an estimated 
$13.6 billion in July 2009 on an annual basis, according to the 
latest Government of India (GOI) data.  This prolongs India's export 
decline for the tenth consecutive month.  April - July 2009 exports 
contracted 34 percent annually to $49.6 billion.  The GOI blames the 
contraction on consistently depressed demand.  Imports also dropped 
significantly (37 percent) to $19.6 billion in July from $31.2 
billion a year ago, due to decreased demand and the fall in oil 
prices.  Non-oil imports fell 24 percent during April-July 2009, 
hinting at sluggish domestic industrial activity.  Oil imports 
 
NEW DELHI 00001861  002 OF 003 
 
 
decreased 48 percent to $22 billion from $42 billion in same period 
in 2008-09, mainly due to reduced crude oil prices.  Since imports 
fell more than exports, the trade gap during the same period 
narrowed to $29 billion from $41 billion. 
 
¶6. (U) India's total exports grew a mere 3.4 per cent to $169 
billion in fiscal 2008-09 (April 1, 2008 to March 31, 2009).  The 
Planning Commission announced to the media that "exports would 
recover as industrialized countries return to positive growth of one 
percent in 2010 with further acceleration in 2011."  The GOI and 
industry groups hope the measures announced on August 27 in India's 
Foreign Trade Policy to promote exports, including continuation of 
export subsidies, will help mitigate the downturn in global demand. 
The Federation of Indian Export Organizations, however, expects the 
decline to continue for several more months. 
 
More Investment Options for Foreign 
Venture Capital Funds 
------------------------------------ 
 
¶7. (U) The GOI and the Reserve Bank of India (RBI) recently 
broadened the scope of investment options available to Foreign 
Venture Capital Funds (FVCFs), albeit through foreign direct 
investment (FDI).  Currently, the 129 FVCFs operating in India are 
allowed to invest only in ten defined sectors such as 
infrastructure, biotechnology, nano-technology, biofuel, IT-related 
activities for hardware and software, dairy, and poultry sectors. 
FVCFs have not been allowed to invest in more attractive sectors 
such as technology, media and entertainment, and business process 
outsourcing. 
 
¶8. (U) In a recent ruling, the RBI granted permission to FVCFs 
registered in India to invest in almost any sector in the country, 
subject to FDI regulations.  To buy into companies that are outside 
the permissible ten sectors, FVCFs will have to either receive 
approval from the Ministry of Finance's Foreign Investment Promotion 
Board (FIPB) or directly invest in sectors where FDI is permitted 
under the automatic route, where approval by the FIPB is not 
required.  FVCFs will still be forbidden from investing in the real 
estate market. 
 
¶9. (U) Comment: Reaction has been generally positive.  The new rules 
will allow FVCFs to diversify risk in India across sectors as well 
as providing an opportunity to increase returns on equity through 
investments in more profitable sectors.  If the liberalization 
works, it may also help India attract additional FDI. As would-be 
investors tell us, however, the right market conditions still need 
to exist, including transparent predictable policies and the right 
market conditions to generate competitive returns on investment. 
End Comment. 
 
 
Parliamentary Standing Committee on 
Finance Finalized 
------------------------------------- 
 
¶10. (U) Parliamentary Speaker Ms. Miera Kumar nominated leading 
opposition member Dr. Murli Manohar Joshi as Chairman of India's 
Parliamentary Standing Committee of Finance for fiscal year 2009-10. 
 The Finance Committee is important to foreign investors because it 
is expected to consider several economic reform bills affecting the 
insurance, pension, and banking sectors.  It also oversees domestic 
financial matters including the income tax code, which may be 
revamped this year.  Although there is no fixed schedule, the 
Finance Committee generally meets between parliamentary sessions in 
order to debate various bills before making recommendations for 
votes in Parliament. 
 
¶11. (U) Note: Important committees like finance, industry, defense, 
 
NEW DELHI 00001861  003 OF 003 
 
 
external affairs and home affairs are traditionally headed by the 
senior opposition members of Parliament in order to provide them 
certain privileges and benefits such as office space in the 
Parliament house.  The current Finance Committee consists of 31 
Members of Parliament - 21 from the Lok Sabha (lower house of 
Parliament) and 10 from the Rajya Sabha (upper house of Parliament). 
 Although the Chairman is from the opposition party, the ruling 
coalition will have a majority of the 31 seats in the Finance 
Committee.  End Note. 
 
¶12. (SBU) Chairman Joshi is best known for his views on Indian 
socio-politics and for his affiliation with the right-wing Hindu 
nationalist party RSS.  He was appointed as Chairman of the 
Manifesto Preparation Board of the Hindu nationalist BJP party in 
¶2009.  With a doctorate degree in science, Dr. Joshi held important 
ministerial positions during the 1998-2004 National Democratic 
Alliance BJP-led coalition government, including at the Ministries 
of Human Resources Development, Science & Technology, Ocean 
Development and Home Affairs.  He has been a member of many Standing 
Committees including those responsible for public accounts, finance, 
defense and agriculture.  A representative from U.S. insurer MetLife 
told Econoff that Dr. Joshi was a BJP hardliner but a good choice as 
he understands "the big picture."  He did not think Dr. Joshi would 
hold up the insurance reform bill. 
 
¶13. (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi. 
 
 
ROEMER