ECONOMIC GROWTH DRIVES THE STORY IN SOUTH INDIA

UNCLAS SECTION 01 OF 02 CHENNAI 000353

SIPDIS

SIPDIS

USDOC FOR ANESA/OSA/LDROKER/ASTERN
STATE FOR EB AND SCA/INS

E.O. 12958: N/A
TAGS: ECON EIND EINV EFIN PGOV CVIS CMGT IN
SUBJECT: ECONOMIC GROWTH DRIVES THE STORY IN SOUTH INDIA

REF: CHENNAI 0317


1. SUMMARY: During a May 14-15 visit to Chennai, Charge d'Affaires
Geoffrey R. Pyatt surveyed the dynamic economic climate in south
India. Mr. Pyatt visited Ford India's manufacturing facility
outside of Chennai, Cognizant Technology Solutions' campus in
Chennai's IT corridor, and had lunch with members of Chennai's
American Chamber of Commerce. Mr. Pyatt also inaugurated a new
pre-screening building to help serve Chennai's rapidly increasing
visa clientele, and he visited medical and agricultural institutions
in the city. END SUMMARY.


2. Ford's managing director told Mr. Pyatt that India's automotive
market is poised for dramatic growth. According to Ford, 1.13
million vehicles were sold in India in 2006. Ford expects India's
automobile market to increase to 2 million per year by 2010 and 3
million per year by 2015. For its part, Ford currently produces
50,000 vehicles per year in Chennai. Ford plans to expand into the
small car market and double its production within three to four
years, which will take the plant to its maximum current output of
100,000 vehicles per year. With its eye on further growth, Ford is
already taking steps to expand the plant's maximum capacity beyond
100,000 per year.


3. Representatives of Cognizant Technology Solutions described
their company's remarkable growth story to Mr. Pyatt. Cognizant
went from 175 employees in 1994 to more than 40,000 in 2006; over
the same period its revenues grew from $1.7 million to $1.42
billion. Headquartered in New Jersey, Cognizant is now one of the
two largest U.S. employers in India, and the majority of Cognizant's
India staff is located in Chennai. Separately, members of the
American Chamber of Commerce from a diverse spectrum of industries,
including chemicals, pharmaceuticals, business process outsourcing,
and electronics manufacturing, echoed the optimism expressed by Ford
and Cognizant. They told Mr. Pyatt that they expect to see
year-over-year growth rates ranging from 15% to 45% over the next
five years.


4. Despite the overall atmosphere of optimism, the business leaders
with whom Mr. Pyatt met did express concerns over impediments to
continued economic growth. Above all, they pointed to meeting human
resource requirements as their major challenge (reftel). The
president of Ajuba International, a business process outsourcing
firm, said that his company faces 15% wage growth and 25% attrition
on a yearly basis. These concerns were not limited to the
information technology sector: the representatives of the chemical,
pharmaceutical, and manufacturing firms said they are facing
shortages of engineers, management professionals, and salespeople.
All pointed to attrition as a major problem and laughed heartily at
a joke that in south India employees who last 18 months usually win
their companies' length of service awards. The business leaders
also mentioned that increasingly strained infrastructure,
particularly roads, as well rising prices for electricity and water
hamper business growth in south India.


5. The economic boom described above and the resulting prosperity
are the major factors driving non-immigrant visa demand in south
India. Non-immigrant visa processing in Chennai is running 73%
above the previous year and will easily top 300,000 applications for
FY-2007. At the Consulate, Mr. Pyatt inaugurated a new
pre-screening building that doubles the number of pre-screening
windows to twelve and which, along with six new interview windows
recently added, will help post sustain the effort that has cut visa
appointment waiting times in Chennai from over five months to under
two weeks.


6. In addition to meeting with businesses, Mr. Pyatt toured India's
largest HIV/AIDS care center, the Government Hospital of Thoracic
Medicine in Tambaram, which is the recipient of substantial support
from the U.S. Centers for Disease Control. Mr. Pyatt also met with
Dr. M.S. Swaminathan, India's "Green Revolution" pioneer and a newly
named member of the Raja Sabha, whose center has combined genes from
the mangrove to product a salt resistant BT rice that now awaits GOI
regulatory approval. Dr. Swaminathan's foundation also highlighted
their efforts to develop India's agriculture sector through distance
learning and biotechnology.


7. COMMENT: Separated by a great deal of distance and culture,
south Indians have entirely different concerns than their fellow
citizens in the north. While New Delhi focused on the Bahujan Samaj
Party's victory in the Uttar Pradesh elections, Tamil Nadu was
consumed with news of Dayanadhi Maran's fallout with Chief Minister
Karunanidhi and his subsequent ouster as Union IT and
Telecommunications Minister. Although Maran's removal was big news,
contacts in the IT industry were confident that policy would be
unchanged and the environment would remain strong for their

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businesses. END COMMENT.

HOPPER