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O 011416Z OCT 09
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8146
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 03 NEW DELHI 002037 
 
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 29-October 1, 2009 
 
REF: New Delhi 1903 
 
¶1. (U) Below is a compilation of economic highlights from Embassy 
New Delhi for the week of September 29-October 1, 2009, including 
the following: 
 
-- Foreign Equity Investment Passes $10 Billion Mark 
-- FIPB Approves 13 Proposals in September 2009 
-- Air India Strike Ends 
-- India's Small but Important Centre for WTO Studies 
 
Foreign Equity Investment Passes $10 Billion Mark 
--------------------------------------------- ---- 
 
¶2. (U) According to the Securities and Exchange Board of India, 
foreign institutional investors (FIIs) have invested $11.2 billion 
in equity since the start of 2009.  Qualified institutional 
placements and initial public offerings contributed almost half of 
the foreign investment.  This compares with a net outflow of $12 
billion in 2008 and an all-time record inflow of $17.7 billion in 
¶2007.  As of mid-March, there was a nearly $2 billion net outflow, 
as the effects of the global financial crisis was still being felt. 
However, since then, FIIs have pumped in over $12 billion, an 
average of $2 billion per month since April. 
 
¶3. (U) The market expects robust FII inflows to continue, as 
institutional investors - both foreign and domestic - are expected 
to increase their holdings of Indian equities and foreign pension 
funds are likely to buy into Indian shares.  Also, the market is 
expecting several large companies, particularly real estate 
companies, to list shares on the Indian stock exchanges, which would 
also likely boost FII inflows.  The confidence of foreign investors 
in Indian equities is much more positive now relative to 2007 as the 
fundamentals of the Indian economy are strong.  The only threat to 
the FII inflows would be if global central banks resort to monetary 
tightening. 
 
¶4. (U) FIIs have shown little interest in the Indian corporate debt 
market, despite the GOI increasing the limit for corporate debt 
investment by FIIs from $6 billion to $15 billion in February, 2009. 
 Net FII inflows on corporate debt for 2009 totaled only $81 million 
as of September 22.  Comment: This reflects both arbitrage 
conditions (interest rate and inflation rate expectations relative 
to bond prices in India and elsewhere) and the difficulties of 
operating in the Indian bond markets.  End comment. 
 
FIPB Approves 13 Proposals in September 2009 
-------------------------------------------- 
 
¶5. (U) India's Foreign Investment Promotion Board (FIPB) approved 13 
FDI proposals worth approximately $82 million in September.  Of the 
total amount approved, approximately 62 percent was for the 
information and broadcasting sector.  Other investments approved 
were for technology, shipping, and cash and carry trading.  The FIPB 
deferred on eight proposals and rejected two proposals including one 
by ICICI Investment Management Company's request to invest in an 
Indian fund company through a foreign fund. 
 
¶6. (U)  In response to FIPB's prior deferral, the Agriculture 
Ministry approved Monsanto India's plan to pursue business in 
genetically engineered planting materials, stating the company can 
deal with genetically modified seeds/planting material in compliance 
with the existing environment protection law, paving the way for 
FIPB approval.  The FIPB had deferred on Monsanto's application in 
August, asking Monsanto to seek the views of the Department of 
Biotechnology and the Ministry of Environment.  The company can now 
look forward to integrate its agro-chemical business in India with 
its U.S. parent's seed business. 
 
Air India Strike Ends 
--------------------- 
 
 
NEW DELHI 00002037  002 OF 003 
 
 
¶7. (U) National carrier Air India resumed normal operations after a 
four-day pilot strike.  The strike ended after Prafel Patel, 
Minister of Civil Aviation, assured striking pilots that the 
airline's decision to cut productivity-linked incentives would be 
put on hold and that that any cuts would be decided in consultation 
with the pilots.  Patel also announced his Ministry would formulate 
a panel to consider the incentive payments. 
 
¶8. (SBU) The strike came at a particularly bad time for Air India. 
The airline is in serious financial trouble facing reported 
accumulated losses of between two to three billion dollars and a 
directive from the Government of India to develop a credible 
turnaround plan as a precondition to receiving additional funds. 
While the strike's end may have alleviated passenger concerns in the 
short-term, the fundamental financial problems Air India faces are 
far from over.  As DGCA Director General Nasim Zaidi recently 
commented to Econoffs, the air carrier must implement serious cost 
saving measures or it will have no hope of survival.  Zaidi noted 
that labor costs were the real problem at Air India, both with pay 
being higher for various positions than for other airlines and with 
overall staffing, with Air India having an average of 250 employees 
per aircraft, compared to the 130/aircraft average of India's other 
carriers. 
 
India's Small but Important Centre for WTO Studies 
--------------------------------------------- ----- 
 
¶9. (SBU) On September 30, Deputy Econ M/C and Econoff met with 
Shanshank Priya, one of three professors at India's Centre for WTO 
Studies at the Indian Institute of Foreign Trade (IIFT); the Center 
is apparently recruiting to fill a fourth position.  Priya explained 
that the IIFT Director, K.T. Chacko, serves as the Centre's 
director.  IIFT is supported by government funding, tuition 
payments, and consultancy fees, while the Centre relies purely on 
government funding (from the Ministry of Commerce and Industry), 
since it does not have a legal status of its own.  Priya is a civil 
servant belonging to the Indian Revenue Service and was Deputy 
Secretary/Director in the Trade Policy Division at the Commerce 
Ministry from 2000-2005.  He covers customs and non-agriculture 
market access.  Professor Madhukar Sinha covers services and TRIPS 
(intellectual property) and Professor Rajan Ratna (who is drafting a 
report on barriers to agricultural imports in the United States, 
reftel)) covers agriculture, sanitary and phyto-sanitary issues, and 
technical barriers to trade. 
 
¶10. (SBU) Priya is currently analyzing gaps in India's trade 
facilitation.  He was the primary drafter of the recently-released 
first annual report on the trade barriers of India's major trading 
partners (reftel).  Acknowledging that he relied primarily on 
third-party reports and well as trade policy reviews in the WTO, 
Priya asked for advice on how to make the report more robust, like 
the U.S. National Trade Estimate Report on Foreign Trade Barriers. 
After Deputy M/C explained our process, he said he hoped to solicit 
more input from India's embassies but was not optimistic that other 
ministries would be responsive to contributing.  The Centre produces 
a number of trade-related newsletters and publications targeted 
toward GOI officials and academics that are available on its website 
(http://wtocentre.iift.ac.in). 
 
¶11. (SBU) Comment: While clearly limited in size and resources, The 
Centre for WTO Studies appears to be a useful voice in pushing for 
economic reform from within the Indian government.  The Centre's 
role as an internal think tank that develops longer-term projects 
for the Commerce Ministry allows its professors to be more 
forward-leaning andreform-minded than India's average bureaucrats. 
The Embassy will look at potential international visitor programs 
for the professors. 
 
¶12. (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi. 
 
 
 
NEW DELHI 00002037  003 OF 003 
 
 
ROEMER