NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF

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SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF
MARCH 17-20, 2008

REF: New Delhi 494

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1. (U) Below is a compilation of Economic highlights from Embassy
New Delhi for the week of March 17-20, 2008.

INDIA PLANS THIRD YEAR OF
GRAIN PURCHASES
--------------


2. (U) The growing demand for wheat in India has contributed to a
global price increase of the crop, which has more than doubled in
the last year. Despite last year's record yield of 75.8 million
tons, the government was forced to import 1.8 million tons of wheat
to meet its requirements in 2007. Official estimates suggest that
this year's output will be approximately 75 million tons, but the
government anticipates purchasing large quantities of the grain for
a third consecutive year. Foreseeing future volatility in wheat
prices, an unnamed official suggested the government could float a
call option tender soon to buy wheat from abroad. A call option
would allow the government to purchase wheat at a pre-set price
within a limited timeframe, in exchange for a nonrefundable payment.
The quantity of wheat required and the date of the purchase will
depend largely on the timing and yield of India's annual wheat
harvest this spring.

FEARS OF US RECESSION LOOM
IN INDIAN IT SECTOR
--------------


3. (U) The rupee fell to a low of 40.84 on March 17th, its lowest
level in six months, but recovered to end the following day at
40.51. The projected effect of a U.S. economic downturn appears to
be raising concerns in the Indian information-technology (IT)
industry. Rupee appreciation is expected to lead to delayed or
canceled projects for outsourcing and technology firms in India
whose primary business comes from U.S. clients. IT giant Tat
Consultancy Services (TCS) has recently reported that two of its
clients have delayed orders. Additionally, The Times of India
reports that approximately 100,000 Indian IT student recruits have
been placed in "indefinite wait" status by the technology firms they
would have joined this quarter.

MIXED SIGNALS ON GROWTH
--------------


4. (SBU) Recent economic data presents a mixed picture for the first
three months of 2008, although still in line with our recent
economic assessment (reftel). Advance taxes paid by Indian companies
for January-March 2008 more than doubled over the same period last
year, indicating that corporate earnings growth continues to be
robust. However, January production data showed that industrial
production moderated to 5.3% in January 2008, compared to 11.6%
growth recorded in January 2007. Cumulative industrial growth for
April-January 2007-08 was considerably higher than the January
one-month data, at 8.7%, albeit lower than 11.2% recorded last year.
Other January data shows that capital goods output decelerated in
January 2008 to 2% from a high of 20% during the first nine months
of FY 2007-08. Even so, nearly 30% of the capital goods items grew
by over 30% in the current year. More mixed signals on the economy
came in the form of slower growth in infrastructure industries for
January 2008 at 4.2%, compared with 8.3% for January 2007. The one
month data is not necessarily a trend; industrial production data in
FY 2006-07 revealed a one-month sharp slide to 4.5% in October 2006
but bounced back to 15.8% in the following month. The full fiscal
year's (2006-07) industrial production growth turned out to be
11.5%. Keeping this in mind, Post will continue to monitor India's
growth trends.

GM UNVEILS PLANS FOR NEW MINI CAR
--------------


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5. (U) General Motors announced its plan to release a second mini
car into the low-cost car segment within the next two years. The
new model would be priced between USD 3500 and 4000 in India, making
it cheaper than GM's least expensive model in the country, the
'Spark'. GM currently has a three percent share in the Indian auto
market and is targeting a 10% market share by 2010. GM Group
Vice-President David Reilly indicated that the cars will be built in
Maharashtra, where trial production began earlier this week.

FOREIGN EYES ON INDIA'S
BURGEONING FOOD SECTOR
--------------


6. (U) At an awards ceremony at the National Productivity Council on
March 19, Minister of State for Food Processing Industries Subodh
Kant Sahai urged potential stakeholders to invest in India's food
processing sector. Sahai stated that while the sector has nearly
doubled in growth in the last four years, an additional investment
of 100 billion rupees would be necessary to hit a target growth rate
of 20% by the year 2015. Media sources report that two-thirds of the
processed foods market is controlled by regional firms in India, and
that the total value of the market is estimated at USD 90 billion.
Several multinational firms, including Nestle and Yum Brands, have
leveraged the influence of rising incomes, changing culinary
preferences, and an increasingly female workforce to adapt their
products to suit Indian audiences. Nevertheless, tax rules and
insufficient storage and refrigeration infrastructure continue to
pose challenges to those firms interested in entering the market.

INDIA STILL NOT READY WITH
AMENDMENTS TO THE MONEY
LAUNDERING ACT
--------------


7. (SBU) Anand Bajaj, Director (External Markets) at the Department
of Economic Affairs, Ministry of Finance told Econoff on March 18
that India is reworking the amendments to the Prevention of Money
Laundering Act 2002, taking into account the international
recommendations as outlined by the Financial Action Task Force at
the last plenary in Paris in February. Although USG has not seen
the proposed amendments, Bajaj stated the changes to the amendments
will expand the number of new "scheduled offences" for money
laundering that do not require a predicate offence from less than
ten to approximately twenty. Bajaj said that the bill will take
some time to get ready and is not likely to be introduced in the
current budget session of parliament. Although Bajaj did not mention
specifics, previously discussed scheduled offences include those
currently addressed in the Unlawful Activities Prevention Act on
terror and terrorism proceeds, SEBI Act on insider trading,
Narcotics Act on preparing opium, Explosives Act to combat
terrorism, the Wildlife Protection Act related to hunting, the
Prevention of the Corruption Act on criminal misconduct by a public
servant, the Customs Act on import or export of goods prohibited
under the Customs Act and misdeclaration of value of exports or
imports or evasion of duty.

U.S. AGENDA ON PATENT ISSUE
CALLED INTO QUESTION
--------------


8. (U) Indian patent experts view the comments of some US academics
during a recent Chennai summit on intellectual property rights (IPR)
as a indication that the U.S. seeks to avoid protections for
traditional knowledge, to the detriment of developing countries such
as India and Brazil. Indian patent experts claim that Western firms
do not share the benefits of indigenous biological resources and
traditional knowledge with local communities where products
originated. One of the experts, Vibhudi Rangan, stated that the U.S
is using trade and media pressure to express to India that
traditional knowledge is separate from - and cannot be protected by
- patents. Recently, India has pushed for an amendment to WTO

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TRIPS, which would require patent applicants worldwide to state the
source of origin of data related to natural resources. During the
summit, George Washington University law professor Martin Adelman
stated that "traditional knowledge is not a patent issue... India's
wealth is not dependent on traditional knowledge," and instead
encouraged India to invest in entrepreneurship and continued
technological and scientific progress.

CIPLA TO MARKET LUNG CANCER
TREATMENT DRUG
--------------


9. (U) The Delhi High Court made an interim ruling that permits
domestic Indian pharmaceutical manufacturer Cipla to market a lung
cancer treatment drug which was developed by Roche and granted a
patent in India in July 2007. The generic name of the lung cancer
drug is Erlotinib, sold under Roche's trade name as Tarceva. Cipla
has branded the drug 'Erlocip' and will sell it at one-third the
price of Roche's drug. Roche is arguing that the Indian product
patent for Tarceva disallows other companies from manufacturing a
"copy-cat" version of the drug, but Cipla is questioning the
validity of the Roche patent. Prior to India's Patent Law of 2005,
the GOI only protected process patents, which permitted firms to
make the same drug through different processes. Lung cancer affects
approximately 160,000 Indians yearly. According to Cipla's lawyer
in the case, the court order stated that "given the price
difference, the court did not want patients to be deprived of a
low-cost alternative by staying sales of the generic product."

POWER SHORTFALL PROMPTS
SUGGESTION FOR NEW "WEEKENDS"
--------------


10. (U) The Tamil Nadu Electricity Board (TNEB) has asked
information technology companies in Chennai to stagger their weekly
holiday from the present Saturday-Sunday to either Sunday-Monday or
Friday-Saturday. TNEB expects a shortfall of 1000 MW this summer
due to underinvestment in power-generation capacity in recent years
and delays in completing a new nuclear power plant in the state.
TNEB told the companies that shifting the weekly holidays will ease
the load on the grid, leading to fewer unexpected power disruptions,
a cognizant official told Consulate Chennai. He also said that the
companies were considering TNEB's request, but that their responses
would depend upon their discussions with their clients.

KARNATAKA APPROVES INVESTMENT
PROJECTS WORTH USD 12 BILLION
--------------


11. (U) The State High Level Clearance Committee (SHLCC) of the
South India state of Karnataka approved on March 18 some 28
investment proposals valued at more than INR 490 billion (USD 12
billion),according to press reports. The projects, which involve
an array of sectors from power-generation to steel-production and
education to urban planning, are slated to generate more than
400,000 jobs. An official in the state governor's office told
Consulate Chennai that most of the project investors were Indian
entities working with international banks to provide the financial
backing.


12. (SBU) A former Karnataka government minister told Consulate
Chennai that many of these proposals were initiated during the
previous JD(S)/BJP coalition government (which collapsed in October
2007 and again in November),but had failed to gain approval. He
also said that many of the approved proposals were from business
groups closely aligned with the Congress Party. The SHLCC is
chaired by Governor Rameshwar Thakur, a Congress appointee who has
administered the state under "President's Rule" since the collapse
of the state's elected government.


13. (U) Visit New Delhi's Classified Website:

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http://www.state.sgov/p/sa/newdelhi

MULFORD