Identifier
Created
Classification
Origin
08NEWDELHI96
2008-01-11 11:00:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy New Delhi
Cable title:  

NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF

Tags:  EFIN EINV EPET ETRD SENV IN 
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VZCZCXRO9709
RR RUEHAST RUEHBI RUEHCI RUEHLH RUEHPW
DE RUEHNE #0096/01 0111100
ZNR UUUUU ZZH
R 111100Z JAN 08
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 9966
INFO RUEHCG/AMCONSUL CHENNAI 2222
RUEHCI/AMCONSUL KOLKATA 1538
RUEHLH/AMCONSUL LAHORE 4261
RUEHBI/AMCONSUL MUMBAI 1331
RUEHPW/AMCONSUL PESHAWAR 4732
RUEHIL/AMEMBASSY ISLAMABAD 4400
RHEBAAA/DEPT OF ENERGY WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RHMFIUU/FAA NATIONAL HQ WASHINGQN DC
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
UNCLAS SECTION 01 OF 03 NEW DELHI 000096 

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

E.O. 12958: N/A
TAGS: EFIN EINV EPET ETRD SENV IN
SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF
JANUARY 7-11, 2008

NEW DELHI 00000096 001.2 OF 003


UNCLAS SECTION 01 OF 03 NEW DELHI 000096

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

E.O. 12958: N/A
TAGS: EFIN EINV EPET ETRD SENV IN
SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF
JANUARY 7-11, 2008

NEW DELHI 00000096 001.2 OF 003



1. (U) Below is a compilation of Economic highlights from Embassy
New Delhi for the week of January 7-11, 2008.

FORD PLANS USD 500 MILLION
UPGRADE TO ITS CHENNAI PLANT
--------------


2. (SBU) Ford India announced on January 8 that it will invest USD
500 million in its Chennai production facility over the next three
years. The investment will allow the plant to double its production
capacity to 200,000 cars per year, giving it the volume necessary to
enter India's small-car market by 2010. Ford will also use the
investment to build a diesel-engine assembly plant that can produce
50,000 units per year. A senior Ford India executive told Consulate
Chennai that the investment should create some 12,000 new jobs
(directly and indirectly) and that Ford's investment will spur its
suppliers to invest an additional USD 500 million to keep up with
the Chennai facility's increase production capacity.

SOUTH INDIA'S BIG NAMES TAKE A BEATING
IN US MARKETS
--------------


3. (SBU) Some of South India's most famous companies took a Wall
Street drubbing in the first week of 2008. Rupee appreciation and
fears of an economic slowdown punished U.S.-listed IT majors like
Infosys, Cognizant, and Wipro during the first week of 2008. Senior
executives from these companies told Consulate Chennai that share
prices began to tumble immediately after conference calls with
analysts held to discuss quarterly results. They told us that
analysts repeatedly demanded information about the companies'
strategies to increase productivity, handle wage inflation, and
manage the negative effects of an appreciating rupee, and that the
analysts seemed generally dissatisfied with the companies'
responses. A local analyst with a major international bank told us

that Wall Street-listed Indian companies lost close to USD 6 billion
in valuation during the first week of 2008. He expects these firms'
share prices to perform poorly this quarter.

MCDONALD'S LOSES TRADEMARK
CASE TO INDIAN COMPANY
--------------


4. (U) The Indian Supreme Court ruled on January 7 that the
Bangalore-based "Sterling's MAC Fast Food" did not violate
McDonald's intellectual property rights (IPR) by using "MAC" in its
logo. The original court case, filed by McDonald's in 1998, was
decided in McDonald's favor, but was overturned by the Karnataka
High Court, whose decision was upheld on January 7 by the Supreme
Court. A Chennai-based IPR lawyer told Consulate Chennai that this
ruling could encourage Indian companies to adopt logos for products
and firms that sound or look similar to the logos of established,
internationally recognized brands.

NEW FINANCIAL SERVICES
SECRETARY AT MOF

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--------------


5. (U) Effective January 9, 58-year old Arun Ramanathan was
appointed the new Secretary of the Ministry of Finance's Department
of Financial Services, replacing Vinod Rai who took over as
Comptroller and Auditor General of India earlier this month.
Ramanathan, an Indian Administrative Officer of the 1973 batch, is
from the Andhra Pradesh cadre. Prior to this position, he was
Secretary at the Department of Chemicals and Petrochemicals,

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Ministry of Chemicals and Fertilizers since June 2007, overseeing
the implementation of the Reddy Data Protection Committee Report and
the issue of pharmaceutical pricing in India. Ramanathan has held
several important assignments in various ministries in Andhra
Pradesh, including the Department of Food & Civil Supplies, and the
Ministries of Fisheries, Finance, and Transport. He holds a number
of graduate degrees including Nuclear Physics from Andhra

NEW DELHI 00000096 002.2 OF 003


University, Business Management from Madras University and
Development Economics from Cambridge University. He is also an
Associate of the Institute of Cost and Works Accountants of India.


FDI INFLOWS SURGING
--------------

6. (U) A year end annual review by India's Department of Industrial
Policy and Promotion (DIPP) indicates that foreign direct investment
(FDI) inflows (including reinvested earnings) into India rose
fivefold to $19.5 billion from $4.3 billion between fiscal years
2003-04 and 2006-07. FDI inflows totaled $15.7 billion in FY
2006-07. From April to September 2007, FDI inflows totaled $7.2
billion, with most funds coming through Mauritius, because of its
pass-through tax benefits. The services sector witnessed the
highest FDI inflow, followed by the telecom and the real estate
sectors. A good portion of the newer FDI has also come in the form
of private equity, which reached $17 billion in 2007. India's
position in the World Bank's ranking of "Doing Business" has
improved to 120 in 2008 from 138 in 2006. The DIPP review further
notes that as a percentage of total investment, the share of FDI
rose to 6.42% in 2006-07 from 2.55% in 2003-04. FDI contributed
2.31% to India's GDP last year, up from 0.77% in 2004.
TATA MOTORS LAUNCHES THE NANO -
CHEAPEST CAR IN THE WORLD
--------------


7. (U) After nearly four years of anticipation, India's largest
auto manufacturer Tata Motors launched the Nano or the "People's
Car" at this week's Auto Expo in New Delhi. With the basic model
priced at INR 1 lakh or 100,000 (USD 2554),the Nano runs on petrol
and is being marketed in the smaller cities for nuclear sized
families whose primary means of transportation are motorbikes and
two wheeler scooters. Tata hopes that by offering the most
competitively priced car in the Indian market today to create a new
class of buyers in India's lower income groups, rural areas, as well
as among the rising middle class looking for a second or third car.
The Nano costs less than half the price of the second lowest priced
car by competitor Maruti.


8. (U) However, industry observers are already predicting future
price wars in the cheap car segment, not just in India but possibly
internationally. Critics of the People's Car raise concerns about
the car's safety and load capacity as well as broader concerns about
the impact of this car in India, including road congestion,
inadequate infrastructure, pollution, and increased demand for
petroleum despite rising gas prices. Tata Motors has countered
these claims by ensuring the public that the vehicle meets all the
appropriate safety, environment, and emissions standards.

HIGH POWERED ADVISORY GROUP ON
MANUFACTURING
--------------


9. (U) Aiming at long-term sustained growth in the manufacturing
sector, Prime Minister Singh has established a High Powered Group.
Dr. V. Krishnamurthy, Chairman of the National Manufacturing
Competitiveness Council (NMCC),will head the group to recommend
measures to help accelerate growth in manufacturing. The group's
mandate includes making recommendations on current policy and
suggestions for steps to a) devise a mechanism to ensure sustained
growth of the Indian manufacturing industries for the next 10-15
years; b) address the recent deceleration in the growth of the
manufacturing industries; c) boost exports of labor intensive
manufactured goods in light of the appreciating rupee and high
interest rates; and d) leverage foreign investment to modernize
manufacturing in India and create a strong technological base.
Other members of this High Powered Committee include the Secretaries
of Finance, Revenue, Commerce, Textiles, and Industrial Policy &
Promotion and the Member Secretary of the NMCC. The group will
submit its final recommendations to the Prime Minister within three
months (by about mid-April) but is also likely to present interim

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recommendation in the short term.


10. (U) Visit New Delhi's Classified Website:
http://www.state.sgov/p/sa/newdelhi

MULFORD