NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF

UNCLAS SECTION 01 OF 03 NEW DELHI 000333 SIPDIS SENSITIVE SIPDIS 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 JANUARY 28 - FEBRUARY 1, 2008 NEW DELHI 00000333 001.2 OF 003 ¶1. (U) Below is a compilation of Economic highlights from Embassy New Delhi for the week of January 28 - February 1, 2008. CARREFOUR COMING TO INDIA -------------- ¶2. (U) French retail giant Carrefour, after several abortive attempts to reach a deal with an Indian partner over the past few years, has announced that it is close to finalizing a franchisee pact with one of its three short-listed Indian candidates for multi-brand retail outlets. The company has not revealed the identities of its three potential partners. Carrefour also plans to open wholly owned cash-and-carry outlets, a format for which foreign direct investment of 100 percent is permitted in India. NOVARTIS CASE DELAYED -------------- ¶3. (U) The Indian Supreme Court Monday stayed the order of the Madras High Court regarding the constitution of the Intellectual Property Appellate Board (IPAB) set to handle Novartis's appeal of its patent rejection for the leukemia drug Glivec. The appeal was scheduled for Monday but will now be delayed until the matter is resolved. Novartis had objected to the inclusion of technical expert S. Chandrasekharan on the IPAB because Mr. Chandrasekharan had been the Controller General of Patents at the time when the original patent application for Glivec was refused. The Madras High Court had subsequently ruled that the IPAB could hear Novartis's appeal without a technical expert. This prompted generic-drug manufacturer Natco Pharma to appeal to the Supreme Court that an IPAB without a technical expert could not effectively evaluate the case. CFA INSTITUTE RESUMES REGISTRATIONS FOR OUTSIDE TEST CENTERS -------------- ¶4. (U) In December, the Delhi High Court dismissed the CFA Institute's petition requesting that the ban placed on its operations by the All India Council for Technical Education (AICTE) be lifted. CFA offered training and testing in India for Chartered Financial Analyst (CFA) certification from 1995 until May 2007, when the AICTE, prompted by complaints from ICFAI (an Indian competitor of CFA that CFA was suing for trademark infringement in Indian Courts) ordered CFA closed because it was operating without prior AICTE authorization. CFA has more than 10,000 enrollees in India, and their Director for Asia Pacific Operations indicated in a meeting with Econoffs that CFA is eager to reach an accommodation with AICTE. During CFA's most recent meeting with AICTE, AICTE granted CFA permission to accept registrations in India for exams that will take place outside of the country, a small but positive sign that AICTE is willing to work with the CFA Institute to resolve this issue. TATA CHEMICAL BUYS U.S. SODA-ASH COMPANY -------------- ¶5. (U) Tata Chemical, which previously had an 8-percent share of the global market for soda ash, increased its share to 14 percent with the purchase, announced Thursday, of U.S. company General Chemical Industrial Products, making Tata the world's second-largest producer of soda ash. The USD-1-billion purchase gives Tata a share in the Green River Basin (Wyoming) mines, the world's only known source for commercially viable, natural trona ore, from which soda ash is made. Soda ash accounts for 70 percent of the materials that go into the manufacture of glass, as well as 30 percent for powdered detergents. (Comment: Post requested a drop in the tariff on soda ash from 7.5 percent to 5 percent in its annual budget non-paper to the GOI. Tata's purchase is likely to improve the chances of such a reduction. End comment.) NEW DELHI 00000333 002.2 OF 003 FINANCE MINISTRY TO CONSIDER SOVEREIGN WEALTH FUND -------------- ¶6. (U) Despite Finance Minister Chidambaram's recent announcement that India would not pursue a sovereign wealth fund (SWF),business daily The Economic Times reported Thursday that the Ministry of Finance is planning to set up a committee to analyze the pros and cons of an SWF. Supporters point out that India gets less than 5 percent on its USD 266.5 billion in foreign-exchange reserves by investing in U.S. treasury bills, while Singapore gets more than 20 percent with its SWF. The argument in favor of an SWF has gained steam since September, when China floated the USD-200-billion China Investment Corporation, but opponents point out that China is drawing from a current account surplus, while India runs a current account deficit. PANEL DEBATES PREFERENTIAL TRADE AGREEMENTS -------------- ¶7. (U) The CUTS Center for International Trade, Economics and Environment, a prominent non-government research institute, organized a panel of GOI figures, economists, and industry representatives January 29 to discuss India's approach to both bilateral and multilateral free trade agreements (FTAs). Department of Commerce Additional Secretary Rahul Khullar stressed the importance of unilateral liberalization while aggressively pursuing bilateral trade agreements, especially given "the backdrop of a hazy outlook from Geneva (Doha)," with the broad objective of increasing India's share of global trade in goods. He emphasized that success in the Doha Round is still crucial to India while noting that regional economic engagement also promotes economic cooperation, citing the successes of NAFTA and EU. ¶8. (U) Economists cautioned Indian policy makers that trade diversions and distortions can result from overlapping bilateral trade agreements. Rajeev Kumar, an eminent economist heading the Indian Council of Research on International Economic Relations (ICRIER),believes India should liberalize itself first, then work with neighboring countries and then with the rest of the world. Prof T. N. Srinivasan of Yale University also advocated the Doha global forum for liberalization as the best option. He was very skeptical about gains from the "mad rush" to conclude FTAs and flagged his doubts over complex negotiations such as the Indo-EU FTA where negotiations have commenced. GOI PEGS 2006-2007 GROWTH RATE AT 9.6 PERCENT -------------- ¶9. (U) On January 31, the GOI revised its estimate of India's growth rate for 2006-2007 from 9.4 to 9.6 percent and for 2005-2006 from 9.0 to 9.4 percent, raising the average annual growth rate over the past four years to 8.8 percent. The revised rate of 9.6 percent is the highest annual rate in 18 years. The higher estimate stems from higher growth than projected in the mining, manufacturing, financial, construction, and services sectors. Additionally, the agriculture sector experienced higher growth than expected, but slower growth than in the previous year. Finance Minister Chidambaram projected India's economy to grow at 9.0 percent in 2007-2008, with the help of rising foreign and domestic investment, and stated that he is prepared to make rapid policy adjustments to sustain high levels of growth in a time of global economic uncertainties. U.S. REAL ESTATE AND MORTGAGE WOES ECHO IN SOUTH INDIA -------------- NEW DELHI 00000333 003.2 OF 003 ¶10. (U) Wage cuts and interest rate hikes are softening South India's real estate market and realtors are encountering difficulties in selling space. The formerly booming markets of Bangalore, Cochin and Hyderabad have seen real estate price declines of 5 to 10 percent, according to the business press. Primary residential sales in Bangalore have reported dropped by 30 percent over the past year and decreasing demand is forcing developers to use innovative schemes to attract potential buyers. ¶11. (SBU) The regional head of a major real estate company told Consulate Chennai that there was a visible slump in demand for real estate, particularly in the housing segment. A top executive at an international bank told us that many of his customers are seeking modifications in their repayment schedule, due mainly to increases in interest rates and recent wage cuts at some of India's big-name information technology firms, including Tata Consultancy Services (TCS) and Wipro. He said that his bank is increasing repayment periods and reducing monthly payments for many of these customers. BOEING FORMS PUBLIC-PRIVATE AEROSPACE RESEARCH CONSORTIUM -------------- ¶12. (SBU) Boeing signed a tripartite agreement with the Indian Institute of Science in Bangalore (IIS-B),Wipro Technologies, and Hindustan Computers Limited (HCL) to develop wireless and network technologies for aerospace applications. A Boeing press release announced the agreement, calling it the Aerospace Network Research Consortium and describing it as the first of its kind in India. The project's leader for WIPRO told Consulate Chennai that IISC will undertake basic research while Wipro and HCL will work more on applications. Our interlocutor, noting his company's non-disclosure agreement with Boeing, did not wish to elaborate further on the specifics of the arrangement. INTERNET DISRUPTION HURTS SOME OUTSOURCING COMPANIES -------------- ¶13. (U) Business-process outsourcing firms (BPOs) in South India faced disruptions following damage to an undersea cable in the Mediterranean on January 30, but smaller firms were hit harder than big ones. Smaller firms, which make up 12 to 15 percent of the sector, often lack the connectivity redundancy of larger firms, making them especially vulnerable to these sorts of disruptions. Firms located in smaller cities also faced greater disruptions than those in India's metropolitan centers, according to the business press. ¶14. (SBU) One BPO executive told Consulate Chennai that the disruption prevented his company from delivering services within its usual timeframe. He also told us that the disruption prevented his company from working effectively on projects that involved detailed graphics, which depend on the high-speed transfer of large amounts of data. He added that his company had to send these kinds of projects to its Sri Lanka branch, which remained unaffected. An executive for an even larger BPO told us that his company was able to route its traffic through cables connecting India with the United States via Singapore and Guam, allowing it to continue to operate largely unaffected. ¶15. (U) Visit New Delhi's Classified Website: http://www.state.sgov/p/sa/newdelhi MULFORD