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DE RUEHNE #1903/01 2570240
ZNR UUUUU ZZH
O 140240Z SEP 09
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 7984
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 8554
RUEHIL/AMEMBASSY ISLAMABAD 6302

UNCLAS SECTION 01 OF 03 NEW DELHI 001903 
 
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 
September 8-11, 2009 
 
REFTEL: New Delhi 1861 
 
¶1. (U) Below is a compilation of economic highlights from Embassy 
New Delhi for the week of September 8-11, 2009, including the 
following: 
 
-- Possible Warming of India-Pakistan Bilateral Trade Ties 
-- India's First Annual Foreign Trade Barriers Report 
-- Jet Airways Pilots Strike - An End in Sight 
-- GOI Adopts Fiscal Austerity Measures 
 
Possible Warming of India-Pakistan 
Bilateral Trade Ties 
----------------------------------- 
 
¶2. (SBU) Pakistani Commerce Secretary Shuleman Ghani told the press 
on September 8 that he and his Indian counterpart, Commerce 
Secretary Rahul Khullar, had agreed to "to restore bilateral trade 
immediately" during talks on the margins of the September 3-4 Doha 
mini-ministerial (reftel).  Ghani also indicated Pakistan would 
extend most favored nation (MFN) status to India once the composite 
dialogue process resumed.  At a September 10 meeting, trade 
economists informed EEST M/C and Econoffs that this announcement did 
not appear to represent a real breakthrough; but rather was more of 
an indicator of a gradual political rapprochement.  They explained 
businesspeople in both India and Pakistan were more than ready for 
warmer ties; it was politics that was the barrier.  They noted that 
meanwhile, despite the ban, bilateral trade continued indirectly 
through Dubai - and directly unofficially. 
 
¶3. (SBU) Rajeev Anantaram, Senior Fellow at the Indian Council for 
Research on International Economic Relations, told Econoff on 
September 11 that he "will believe it when I see it" on Pakistan 
officially opening up to trade from India.  He explained that 
experts estimated Pakistan and India already traded approximately 
$7-10 billion annually through Dubai (and also through smuggling 
along the borders of Rajasthan and Punjab).  (Note:  Official 
figures put bilateral trade at just $1.9 billion in 2007.) 
Anantaram opined that the primary obstacle to Pakistan providing 
India with MFN status was not Pakistan industry groups concerned 
about competition, but rather political groups which opposed any 
warming toward India.  He surmised that the announcement could have 
been predicated by a quid pro quo during India-Pakistan peace talks 
in late August in Sharm el-Sheikh, with India possibly making MFN 
status one of the conditions for restarting the composite dialogue. 
 
¶4. (SBU) Comment:  India gave Pakistan MFN status in 1995 when 
joining the World Trade Organization, but Pakistan has refused to 
grant the status to India, even making this an exception when it 
ratified the South Asian Free Trade Agreement in 2006.  It would be 
a welcome breakthrough if Pakistan were to grant India MFN status in 
the near future, regardless of the status of political talks. 
Warming on the economic front could generate significant good will 
for political discussions.  End Comment. 
 
 
India's First Annual Foreign 
Trade Barriers Report 
------------------------------- 
 
¶5. (SBU) India's Centre for WTO Studies at the government-sponsored 
Indian Institute of Foreign Trade (IIFT) on September 8 released its 
first annual report on the trade policies of India's major trading 
partners.  The 75-page report discussed tariff and non-tariff market 
access barriers for Indian exports to 23 countries and the EC, with 
the latter taking up one-third of the report.  Most of the data on 
U.S. policies, such as pest risk analyses, labeling requirements, 
prudential banking regulations, and security-related procedures, was 
taken directly from the 2008 WTO U.S. Trade Policy Review. 
 
NEW DELHI 00001903  002 OF 003 
 
 
 
¶6. (SBU) Rajan Ratna, a professor at the Centre who worked on the 
report, told econoffs on September 10 that the report was meant to 
mirror the United States' National Trade Estimate Report on Foreign 
Trade Barriers and would be released annually.  He expected next 
year's report to be more comprehensive, with extensive data on 
bilateral trade and investment flows.  Ratna said the Centre 
completed the report over one month ago, but the GOI delayed its 
release at least twice.  Most recently, the GOI decided to wait 
until the Doha Mini-ministerial was over so that the report would 
not be perceived as an attack on visiting trade partners.  Ratna 
added that the GOI also had commissioned the Centre for WTO Studies 
to write a report on U.S. barriers to Indian agricultural exports, 
in response to the U.S. Congress' January 2009 request for the U.S. 
International Trade Commission (ITC) to complete a study of the 
effects of Indian tariff and non-tariff measures on U.S. 
agricultural exports.  Ratna said the Centre had begun its research 
in August and would complete the study by October (one-month ahead 
of the expected release of the ITC study). He explained that his 
team had already identified 200 agricultural items where India was 
worldwide competitive but did not currently export to the United 
States. The team was also looking at whether this was due to U.S. 
domestic subsidies, sanitary and phitosanitary measures, and/or U.S. 
preference programs with other countries. 
 
Jet Airways Pilots Strike - An End in Sight 
------------------------------------------- 
 
¶7. (U) As the Jet Airways pilot strike marked its fourth day, media 
reported the strike was near resolution with management reportedly 
agreeing to reinstate the four pilots it fired and the striking 
pilots agreeing to resume duty.  The parties are scheduled to meet 
at the Labor Commissioner's office in New Delhi on Friday, September 
11 and a formal statement is expected after the meeting.  Resolution 
came after Congress MP Sanjay Nirupam urged the central government 
to nationalize Jet to prevent the possibility of it closing down. 
In a letter to Prime Minister Manmohan Singh, Nirupam urged him to 
intervene not only to save the jobs of thousands of Jet Airways 
employees but to end large scale disruption of domestic and 
international flights.  So far, the four-day strike has led to the 
cancellation of almost 700 flights affecting over 28,000 passengers, 
with rival airlines charging exorbitant prices because of the 
drastic reduction of available seats.  Media also reported pressure 
from Praful Patel, Minister of Civil Aviation on Jet owner Naresh 
Goyal as a deciding factor leading to resolution of the strike. 
 
GOI Adopts Fiscal Austerity Measures 
------------------------------------ 
 
¶8. (U) In a notification on expenditure management issued on 
September 7, the Ministry of Finance indicated that due to the 
government's weak fiscal status and the prevailing drought 
situation, there was a need to rationalize resources. (Note: The 
centre's fiscal deficit as a percentage of GDP is expected to exceed 
the target of 6.8 percent for FY 2009-10. End note.)  AS a result, 
the Finance Ministry requested that all government ministries and 
departments cut non-Plan spending by 10 percent for the current 
year.  The cut is applicable on domestic and foreign travel 
expenses, publications, professional services, advertising, office 
expenses, petroleum (except security-related) and administrative 
expenses.  The remaining portion of non-Plan expenditures (excluding 
interest payments, repayment of debt, defense capital, salaries, 
pension and fiscal grants to the states) would also be reduced by 5 
percent. 
 
¶9. (U) The new financial management measures impose a complete ban 
on holding meetings and conferences at five-star hotels, restrict 
air travel to only economy class, pose strict limits on foreign 
travel, and ban purchases of vehicles except for operational 
 
NEW DELHI 00001903  003 OF 003 
 
 
requirements of defense forces.  The measures also prescribe limits 
to spending on seminars and conferences, along with a 10 percent 
reduction on budget allocations for seminars and conferences. 
Exhibitions and conferences held abroad are also being discouraged, 
except for trade promotion purposes.  According to the notification, 
government employees are able to participate in study tours and 
conferences abroad provided they are fully funded by the sponsoring 
agencies.  The Ministry of Finance's earlier instructions, which 
restricted the usage of telephones, imposed a ban on the creation of 
jobs and called for observance of fiscal discipline by states, 
state-owned enterprises and local bodies, will continue to remain in 
force. 
 
¶10. (SBU) Along with the notification, Finance Minister Mukherjee 
requested that ministers and bureaucrats reduce wasteful costs. 
(Note: In a colorful illustration of the new austerity measures, 
local media reported that the Finance Minister asked External 
Affairs Minister S. M. Krishna and his Deputy, Shashi Tharoor, to 
vacate their residences at five-star hotels.  Tharoor denied that 
his stay at the hotel was publically financed.  End Note.)  At a 
highly-publicized recent meeting of the Congress Working Committee, 
chaired by Sonia Gandhi, a resolution was adopted asking all elected 
representatives of the party to participate in an "austerity drive" 
and donate 20 percent of their salaries as a means of showing 
solidarity with drought-affected Indians. 
 
¶11. (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi. 
 
 
ROEMER