VZCZCXRO6675
OO RUEHAST RUEHBI RUEHCI RUEHDBU RUEHLH RUEHNEH RUEHPW
DE RUEHNE #2087/01 2821326
ZNR UUUUU ZZH
O 091326Z OCT 09
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8229
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 02 NEW DELHI 002087 
 
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 
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 EFIN EINV ENRG ETRD ECPS BEXP PHUM PINR IN
SUBJECT: New Delhi Weekly Econ Office Highlights for the Week of 
October 2-8, 2009 
 
RE: New Delhi 2037 
 
¶1. (U) Below is a compilation of economic highlights from Embassy 
New Delhi for the week of October 2-8, 2009, including the 
following: 
 
-- Reserve Bank of India Warns Banks of Real Estate Risks 
-- Bombay Stock Exchange Rises on Improved Data, FII Inflows 
-- 3G Auction Delayed 
-- Telecom Expert Appointed Prime Minister's Advisor 
 
RBI Warns Banks of Real Estate Risks 
------------------------------------ 
 
¶2. (U) The Reserve Bank of India (RBI) directed banks to closely 
assess the inherent group risk of loans extended to real 
estate-related borrowers in a September 24 notification.  It also 
asked banks to carefully analyze the financial credentials and 
viability of borrowers on a consolidated basis when assessing the 
loan requirements of large builders/land developers.  The RBI's 
warning came as real estate companies' lending to their subsidiaries 
and other special purpose vehicles jumped to 54 percent of total 
loans from 13 percent between FY 2007-08 and FY 2008-09.  For 
example, DLF, India's largest developer with 308 subsidiaries and 41 
companies including partnerships and joint ventures, increased its 
loans to these related entities by 14 percent between FY 2007-08 and 
FY 2008-09. 
 
¶3. (U) The rise in lending to real estate industry entities is 
attributable to the backlog of demand after the tightening of bank 
credit towards the end of 2008, regulations against lending directly 
for purchase of land combined with banks' desire for benefits from 
increases in land prices, and developers' difficulty in raising 
equity for such purchases (note: despite improving market 
conditions, many equity investors still perceive real estate 
investments as too risky).  As a result, developers borrow for 
general corporate purposes but transfer the loan proceeds to a 
subsidiary, which in turn buys the land.  The end result is an 
increase in the real estate company's exposure and indirectly the 
lenders exposure to the related entities. 
 
BSE Sensex Rises on Improved Data, FII Inflows 
--------------------------------------------- - 
 
¶4. (U) The Bombay Stock Exchange (BSE) Sensitive Index, the 
barometer of Indian capital markets jumped over the psychological 
level of 17,000 on September 30 for the first time in 17 months, a 
109 percent increase since April when the global crisis was at its 
peak.  (Note: The BSE slipped to slightly below 17,000 on October 6. 
End note.)  Improved outlook for the financial sector and the global 
economy, and renewed interest from foreign investors in Indian 
markets contributed to the rise in the BSE.  The Reserve Bank of 
India (RBI) reported that portfolio investments by foreign 
institutional investors in the Indian equity markets totalled $13.6 
billion between April-September 2009 compared with outflows of $5.2 
billion in the corresponding period of 2008(reftel). 
 
¶5. (U) The Indian market has been witnessing abundant liquidity in 
the last two-three months due to soft monetary policy and the fiscal 
stimulus packages provided by the government.  As a result, Indian 
companies are rushing to list initial public offerings (IPOs) and 
Qualified Institutional Placements.  Thirty companies filed draft 
prospectuses with the Securities and Exchange Board of India for 
IPOs in September alone, compared with six in August and three in 
July.  About $2.7 billion was raised through IPOs during 
June-September 2009.  Merchant bankers expect another $10.4 billion 
to be raised during the second half of the FY 2009-10. 
 
3G Auction Delayed 
------------------ 
 
¶6. (SBU) The Department of Telecommunications (DoT) failed to 
release the information memorandum (IM) detailing the modalities of 
 
NEW DELHI 00002087  002 OF 002 
 
 
the 3G auction by September 29, as originally announced.  DoT 
officials told the press that the delay is due to their inability to 
map out the availability of 3G airwaves across most circles because 
the armed forces have refused to adhere to the agreed timelines to 
vacate the airwaves.  Consequently, the GOI has once again indicated 
that the auction for third-generation mobile services will be 
concluded by the end of the financial year, making it evident that 
it will miss the December 7 date for holding the auction.  Minister 
of Information, Communication and Technology A. Raja spoke told 
reporters during the ITU World Summit in Geneva that various foreign 
companies have expressed interest in participating in the 3G auction 
and he expected the auction to generate Rs. 25,000 crore (about $5 
billion) for the Indian government.  He also stated that the winners 
of the 3G auction will be issued a universal access service license 
(UASL) and will be allocated 2G spectrum when it becomes available. 
(Comment: DoT will be under intense pressure to meet the March 31 
fiscal year deadline, since DoT officials told us earlier that 
proceeds from the auction have been counted in this year's budget. 
End comment.) 
 
Telecom Expert Appointed Prime Minister's Advisor 
--------------------------------------------- ---- 
 
¶7. (U) Well-known telecom expert Satyanarayan Gangaram Pitroda was 
appointed Advisor to Prime Minister Singh on October 6.  Pitroda who 
was chairman of the National Knowledge Commission (NKC), will hold 
the rank of a Cabinet Minister and advise Prime Minister Singh on 
integrating information and communication technology (ICT) in the 
areas of infrastructure, health, justice and information.  As soon 
as Pitroda became Advisor, he issued a statement saying that he 
intends to develop an action plan for the next decade which would 
bring broadband connectivity to more citizens of India.  As head of 
the NKC, Pitroda spearheaded reforms in higher and elementary 
education, health, agriculture, traditional medicine and ICT.  Based 
on his recommendations, the government plans to set up an 
overarching education body incorporating other regulatory 
institutions, like the University Grants Commission.  With his 
support, the National Knowledge Network has already provided 
broadband connectivity to about 100 science laboratories and 
research institutions. 
 
¶8. (U) Pitroda, an electrical engineer from the University of 
Chicago, has played a major role in India's communications 
revolution.  A technocrat with a vision, Pitroda succeeded in 
introducing telephones to the remotest corners of India.  He came to 
limelight in 1987 when he became late Prime Minister Rajiv Gandhi's 
advisor in shaping India's foreign and domestic telecom policies. 
He was awarded the Padma Bhushan, the third highest national award 
for Indian civilians, this year for his contributions to science and 
engineering. 
 
¶9. (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi. 
 
 
ROEMER