NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF

UNCLAS SECTION 01 OF 03 NEW DELHI 001049 SIPDIS SIPDIS SENSITIVE USDOC FOR ITA/MAC/OSA/LDROKER/ASTERN/KRUDD DEPT OF ENERGY FOR A/S KHARBERT, TCUTLER, CZAMUDA, RLUHAR DEPT PASS TO USTR CLILIENFELD/AADLER DEPT PASS TO TREASURY FOR OFFICE OF SOUTH ASIA ABAUKOL TREASURY PASS TO FRB SAN FRANCISCO/TERESA CURRAN STATE FOR SCA/INS AND EB/TRA JEFFREY HORWITZ AND TOM ENGLE USDA PASS FAS/OCRA/RADLER/BEAN/CARVER/RIKER E.O. 12958: N/A TAGS: EAGR EFIN EINV EPET ETRD SENV IN SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF APRIL 7-11, 2008 NEW DELHI 00001049 001.2 OF 003 ¶1. (U) Below is a compilation of Economic highlights from Embassy New Delhi for the week of APRIL 7-11, 2008, including the following items: -- INDIA'S INDUSTRIAL PRODUCTION BACK UP IN FEBRUARY -- INDIAN CIVIL AVIATION TO GET A REGULATOR BY OCTOBER 2008 -- INDIA LOSES $14.5 BILLION OF FOOD ANNUALLY -- US ELECTRONICS MANUFACTURER OPENS SHOP IN INDIA -- TIRUCHI AIRPORT TO EXPAND INTERNATIONAL OPERATIONS INDIA'S INDUSTRIAL PRODUCTION BACK UP IN FEBRUARY -------------- ¶2. (U) India's core sector, with a combined weight of 26.7% in the index of industrial production (IIP),rose in February to 8.7% compared to 7.5% in the same month of the previous year, and sharply higher than the 3.1 % growth registered in January 2008. This is the second-highest growth in the index during FY 2007-08, next to the 9.2% growth registered in August 2007 and suggests there may be a reversal of the declining trend. A part of this rise can be explained by the base effect of last year. At the same time, though, the growth rate of coal and cement doubled, while electricity production grew almost three times faster than the same month in 2007. ¶3. (U) The upwards trend was reinforced by April 11 data showing that industrial production grew by 8.6% in February, led by electricity, manufacturing and mining. On a cumulative basis, industrial production was up 8.6% during April 2007-February 2008, compared to 11% growth during the same time the previous year. Capital goods production rebounded from 2.3% growth in January to 10.4% growth in February, compared to the same month in 2007. Capital goods for April 2007-February 2008 grew 17.5%, barely dipping from April 2006-February 2007 growth of 18.3%, suggesting that India's growth continues to be investment-led. INDIAN CIVIL AVIATION TO GET A REGULATOR BY OCTOBER 2008 -------------- ¶4. (U) The Indian government on April 7 announced that it will appoint an independent regulator for the aviation sector by October this year. Ministry of Civil Aviation Joint Secretary K. N. Srivastava, speaking to the press on the sidelines of the 'Aerodrome India 2008', said that the legislation had been presented to Parliament and was later referred to a standing committee. He expected it would be discussed during the second half of the Budget session when the recommendations of the standing committee would be available. After passage from Parliament, it would take about three months to set up the regulator, he said. The regulator would look into aspects like aeronautical charges, user development fees, and passenger fees. ¶5. (U) Srivastava also said that a Greenfield Airport Policy would be announced shortly that would seek to minimize the delay faced by developers of new airports in getting approvals. The policy is being considered by the Cabinet and is expected to be announced this month. He further indicated that the Indian government will soon come out with a Vision Document 2020 for the aviation sector. At present, a Group of Ministers (GoM) is looking into it. The document will contain plans for airport infrastructure, connectivity, security and other related issues. INDIA LOSES $14.5 BILLION OF FOOD ANNUALLY -------------- ¶6. (U) According to press reports, India's Ministry of Agriculture estimates that the country loses more than $14.5 billion (Rs 580 billion) worth of agricultural food items every year, due to lack of post harvesting infrastructure such as refrigerated transport, cold NEW DELHI 00001049 002.2 OF 003 chains, storage facilities, fragmented farming and poor management. This includes the 10% of food grains which is wasted because of inadequate and inefficient post-harvest storage and processing facilities, pilferage and inadequate transportation of grains from the farm to the market. The Central Institute of Post Harvest Engineering and Technology, a nodal research agency located in Punjab, similarly estimates that post-harvest losses of selected fruits and vegetables are about 25-40%. This drastically reduces India's per capita availability of fruits, while less that 2% of vegetables are commercially processed. The GOI also believes that wastage of food, which it estimates could feed the 232 million people below the poverty line, can be stopped through focusing on food processing industries, developing cold chains infrastructure, and filling the gaps in the supply chain system. US ELECTRONICS MANUFACTURER OPENS SHOP IN INDIA -------------- ¶7. (U) Maryland-based Patton Electronics, a leading producer of networking and Voice Over Internet Protocol (VoIP) equipment, entered the Indian market directly with its purchase of Microsense, its former distributor in India. The new head of Patton's operations in India told Consulate Chennai that the weak dollar and limited volumes of current local sales did not yet justify establishing the company's own production facility in India. He said that the current value of sales is only about $3 million, but that he expects this to increase to $50 million over the next three years, driven largely by India's burgeoning demand for computers and the devices to link them. The company does, however, plan to establish a $10 million testing center in Chennai to serve the company's worldwide operations. TIRUCHI AIRPORT TO EXPAND INTERNATIONAL OPERATIONS -------------- ¶8. (U) South India's regional director of the Airports Authority of India (AAI) told Consulate Chennai that the airport in Tiruchirapalli (also known as Tiruchi or Trichy) in central Tamil Nadu will increase its international operations once expansion of its terminal buildings are complete in March 2009. He said that the terminal will be able to accommodate 400 passengers at a time and that the airport currently operates flights to Colombo, the Arabian Gulf, Singapore, and Kuala Lumpur. He noted that many passengers from the southern districts of Tamil Nadu and Kerala flying to Europe or Southeast Asia use Tiruchi as their starting point, as connections via Dubai and Colombo are generally cost effective. NEW REPORT ON FINANCIAL SECTOR REFORM -------------- ¶9. (U) The Planning Commission has released the draft report of the Committee on Financial Sector Reforms, chaired by Eniversity of Chicago professor Raghuram Rajan. While the Government of India has plenty of thoughtful reports on various aspects of financial sector reform by reputable committees, which the authors admit, this report tries to offer new perspectives on India's financial sector, strongly equating financial inclusion with not just economic growth, but a stronger financial system as well. As the authors assert, the road to making Mumbai an international financial center "runs through every village and slum in India." To achieve such a goal, the committee recommends many smaller reform changes, rather than more comprehensive reforms suggested elsewhere. For example, it suggests better land titling and the removal of the restriction on landleasing, which ties rural residents to the countryside. Other proposals include limiting the RBI to a focus on inflation-fighting, the removal of bank branch license and ATM restrictions, and changing the process of directed lending. The report can be found at: http://planningcommission.gov.in/reports/. NEW DELHI 00001049 003.2 OF 003 ¶10. (U) Visit New Delhi's Classified Website: http://www.state.sgov/p/sa/newdelhi DEIKUN