TREASURY U/S ADAMS MEETS WEST BENGAL FINANCE MINISTER AND

UNCLAS SECTION 01 OF 03 CALCUTTA 000201

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E.O. 12958: N/A
TAGS: PGOV PREL EINV ECON SOCI ETRD IN
SUBJECT: TREASURY U/S ADAMS MEETS WEST BENGAL FINANCE MINISTER AND
CALCUTTA BUSINESS COMMUNITY



1. (U) Summary: May 2-3, 2006 U.S. Department of the Treasury
Under Secretary for International Affairs Mr. Timothy D. Adams
visited Calcutta as part of his trip to India for the Asian
Development Bank's Annual meeting in Hyderabad. During his time
in Calcutta, U/S Adams met with West Bengal Finance Minister Dr.
Asim Dasgupta, CEO Forum Member Y.C. Deveshwar and members of
the Indo-American Chamber of Commerce (IACC) and the newly
formed American Chamber of Commerce (AMCHAM). In addition, he
visited a micro-credit nongovernmental organization (NGO)
Bandhan and U.S. biotechnology company Chembiotek, which is
conducting immunology research as part of a National Institute
of Health (NIH) USD 26 million grant. In U/S Adams' meetings,
business leaders and government officials highlighted the
positive economic trends in West Bengal (WB) and East India but
all emphasized the need for greater foreign investment in
infrastructure. Other areas that were seen as attractive
investment opportunities included information technology,
biotechnology, chemicals and petrochemicals, and mineral based
manufacturing. While contacts expressed positive views on the
economic trends in India's Eastern region, they also commented
on the importance of spreading the benefits of economic growth
and opportunity to the poor and disenfranchised. As one of the
more senior USG officials to visit the Calcutta in recent years,
U/S Adams' visit generated significant media attention. Through
his interactions, U/S Adams gained clearer picture of the
economic and social developments in East India, the positive
experience of U.S. businesses as well as corporate India's
residual protectionism. End Summary

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West Bengal Government's Perspective on Economic Development
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2. (SBU) In U/S Adams' meeting with Finance Minister (FM) Dr.
Asim Dasgupta, the FM stressed that West Bengal (WB) was
experiencing rapid growth, faster than the national average, and
it was the commercial hub for a market of 400 million people.
However, infrastructure was the key to sustaining the state's
economic growth rate of over 7 percent. The road network is
being improved in WB and the region, with projects like the
"Golden Quadrilateral," linking Mumbai, New Delhi, Chennai and
Calcutta and links with East Asia planned through the Trans
Asean Highway and the Nathula Pass on the border with Tibet. An
elevated light rail transit system is planned to handle growing
traffic congestion within Calcutta. India's Planning Commission
is presently carrying out a feasibility study for a deep-sea
port on Sagar Islands in the Bay of Bengal, while a new airport
financed by private investors is being proposed to handle
increasing flights. FM Dasgupta emphasized the importance of a
public-private-partnership (PPP) model to develop WB's
infrastructure, implicitly contradicting the position of the
FM's Communist Party of India (Marxist) (CPM) leadership at the
national level, which has opposed private investment in Mumbai
and New Delhi airports.


3. (U) FM Dasgupta also reflected on the importance of power
generation for West Bengal's future economic development. The
state has 7500 MW of existing capacity, which is only in slight
deficit during the hot, peak season of demand. The state will
be installing additional capacity of 5500 MW of power in the
next five years. While coal-based power remains the main source
of generation, a 900 MW pump water storage hydroelectric project
in Purulia district is due to come online in early 2007. WB is
also planning on expanding land irrigation for the key
agriculture sector from 69% of total area under cultivation to
85% in the next couple of years. To meet this target, the WB
government has initiated the Teesta river project at a cost of
USD 227 million.


4. (U) FM Dasgupta emphasized that the state's rapid economic

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growth should be inclusive and the benefits extended to the
rural poor. Therefore, the WB government hopes to improve
delivery of primary health and education services. He noted
that WB's Infant Mortality Rate (IMR) is 40 per 1000 as opposed
to the national average of 60 per 1000. The FM added that just
by decentralizing health services facilities in some of the
areas in the state, the IMR fell drastically to below 10 per
1000 in those areas. The decentralizing policy involved greater
involvement from local administrative officers and by
propagating preventive practices through village and women
counselors.

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Business Positive About Economic Growth in East India
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5. (SBU) Local industry leaders echoed FM's optimism about the
economic growth and prospects of WB and the East Indian region.
In his discussions with U/S Adams, CEO Forum Member and India
Tobacco Corporation (ITC) CEO Deveshwar commented favorably on
recent trends in economic development in East India. He also was
encouraged by the growing Indo-U.S. relationship but stressed
that the proposed agreement on civilian nuclear cooperation has
become a symbol of the partnership between the two countries and
its final approval would be critical to an enhanced bilateral
relationship. However, Deveshwar cautioned that fundamental
social and poverty related issues are not being fully addressed
by the private sector economic growth. He added India needed to
create 9-10 million jobs annually and this was the biggest
challenge for the country. As a member of the CEO Forum,
Deveshwar expressed views that were surprisingly protectionist.
Possibly reflecting his company, ITC's future retail plans,
Deveshwar opposed the entry of foreign retail firms such as
Wal-Mart in India, claiming Wal-Mart had a bad reputation in the
U.S. and its purchases of agricultural products would put added
pressure on already suffering farmers to keep prices low.
PricewaterhouseCoopers (PwC)-Calcutta Managing Director Roopen
Roy, also in attendance at the meeting, countered that FDI in
retail would enable Indian farmers to receive better farm prices
by improving the supply and distribution infrastructure.
Deveshwar further complained that in other sectors presently
open to FDI, such as financial services and insurance, foreign
companies only serviced the upper and middle classes, ignoring
India's poor. In the discussions, new technologies in
agriculture, biotech, private participation in civilian nuclear
energy, and alternative dispute redressal mechanisms (ADR) were
identified as future areas of collaboration between US and
India.


6. (SBU) The message of East India's strong economic potential
was repeated in U/S Adams' interaction with representatives of
IACC and AMCHAM. The group of approximately twenty chamber
members included such notables as Bank of America, Ernst & Young
and Quaker Chemicals. The corporate representatives were
bullish about the business prospects in this region and enhanced
links with the US. They noted that while there is a significant
focus on investment by US companies in IT and IT-enabled
services, the region is also an investment destination for
biotechnology and petrochemicals. U/S Adams' visit to the
office of U.S. Company Chembiotek provided a firsthand
opportunity to see U.S. investment in biotechnology research in
the region. In addition, part of a USD 26 million NIH grant is
funding Chembiotek's work in typhoid and cholera immunology
research. The USG funding is being used to map the genetic
profile of diseases in India and to test the efficacy of
existing vaccines.
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Poor Women Also Seek Economic Opportunity
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7. (U) U/S Adams balanced his exposure to the economic and
social development in Calcutta and East India by visiting
micro-credit NGO Bandhan to understand the needs and
circumstances of the society's disenfranchised. The ability of
the poor to lift themselves out of poverty has been hampered by
the lack of affordable credit. Bandhan, funded by Ford
Foundation and other NGOs, has demonstrated great success in
providing micro-loans of USD 40-70 to poor women. From its
beginning in 2002, Bandhan has grown from 2 branches in West
Bengal to 155 and has increased its loan disbursals from USD
60,000 to USD 17.5 million. On time loan repayment is 99.98
percent. Bandhan plans to increase its number of women
borrowers from 529,250 to 2,775,000 by 2010. By partnering with
the Small Industrial Development Bank of India (SIDBI) and the
UK Department for International Development (DFID),Bandhan
hopes to become a full-fledged bank for the poor by 2020.
Meeting some of the women borrowers and seeing their projects,
U/S Adams was able to see the desire by India's poor to also
benefit from economic liberalization and growth.

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Strong Media Interest
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8. (U) As one of the few senior USG officials to travel to
Calcutta in recent years, U/S Adams' visit generated significant
media interest. Four television channels, with a combined
viewership of 64 million people, provided primetime coverage.
Seven newspapers, with a combined circulation of over one
million, and two wire services published stories on the visit as
well. Lead English daily "The Telegraph" published a
four-column headline "Official Visit, Stronger Ties" and
reported, "Adams' visit to the city highlighted the
strengthening bonds between two nations."
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COMMENT
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9. (SBU) Comment: U/S Adams' visit was an opportunity to
assess the generally positive public and private sector
perspectives on economic opportunities in Calcutta and East
India. It also served to highlight the expanding US investment
and engagement with this region. As noted by FM Dasgupta, that
investment will be critical to WB's plans for infrastructure
development. The meeting with FM Dasgupta again showed the
persistent disconnect between the CPM national leadership's
ideological stance against private investment, and the WB
government's more pragmatic position. The interaction with CEO
Forum member Deveshwar and his criticism of foreign investment
demonstrated that some Indian corporate leaders retain their
predilection for protectionism. The members of the "Bombay
Club" that encouraged and prospered under the old "Licensing
Raj" are still not apparently convinced of the benefits of FDI
and can with little irony, assume the arguments of the Leftists
to question whether the poor are being left behind, to justify
blocking foreign investors.
JARDINE