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
July 20-24, 2009


1. (U) Below is a compilation of economic highlights from Embassy
New Delhi for the week of July 20-24, 2009, including the
following:

-- GOI Releases Online Customs and Tariff Database
-- Report on Benefits to India of Increasing FDI in Higher Ed
-- Minister Sharma on Retail Growth and Agricultural Challenges
-- Auto Component Industry Fares Well Despite Lower Exports

-- India-ASEAN FTA Finalized, But Opposed in Parliament
-- India and China Agree to Further Strengthen Trade Ties
-- New Disinvestment Secretary Announces Privatization Plan
-- India to Receive $4.5 Billion SDRs from the IMF
-- Infrastructure Sector Growing

GOI Releases Online Customs
and Tariff Database
--------------


2. (U) The Government of India (GOI) launched its first ever
"Customs Tariff Database Online" on July 21, 2009. Department of
Economic Affairs advisors in the Ministry of Finance collaborated
with the Academy of Business Studies, a private research publisher,
to design the comprehensive database. Chief Economic Adviser Arvind
Virmani told reporters that the database will prove helpful in
analysis of issues related to customs tariffs. The user-friendly
database is expected to provide the business community as well as
researchers with reliable online data. The online database consists
of two sections: the main database provides information on India's
Customs Tariff Schedule, including 11,000 tariff codes covering all
customs duties, including countervailing duties (CVD) of excise, CVD
of VAT, and anti-dumping and safeguards duties. The first section
also contains information related to import policy restrictions,
non-tariff barriers such as labeling and country preferences, as
well as import and export values from Ministry of Commerce data.
The second section provides information related to India's 13
regional and bilateral trade agreements. The database will be
available on a subscription basis. Post will provide more
information about the database as it becomes available.

Report on Benefits to India of
Increasing FDI in Higher Ed
--------------


3. (U) According to local media, the Department of Education within
the Ministry of Human Resource Development (HRD) will soon present
legislation entitled the "Foreign Educational Institutions
(Regulation of Entry and Operations, Maintenance of Quality and
Prevention of Commercialization) Bill" to the Cabinet for clearance.
According to GOI estimates, India's education sector requires $80
billion of investment. HRD Minister Kapil Sibal has publicly made a
strong pitch for greater private investment and allowing foreign
universities with strong regulatory mechanisms to enter the sector.
According to a report issued by the government-sponsored National
Knowledge Commission, if passed, the proposed legislation will
increase the number of foreign students traveling to India for
higher education. An influx of approximately 50,000 foreign
students, paying fees at an average of $10,000 per year, would yield
$500 million per year in profits.


4. (U) The HRD Ministry has reportedly admitted to not having
accurate statistics on the extent of existing cooperation between
Indian and foreign higher education institutions. However, higher
education representatives cite that in 2004, 131 Indian institutions
had partnerships with foreign institutions. Currently, there are
around 31 foreign universities are partnering with Indian
institutions, of which 11 are UK-based and 13 are U.S.-based.

Minister Sharma on Retail Growth
and Agricultural Challenges
--------------

NEW DELHI 00001544 002 OF 004




5. (U) In an address at a conference held by the Federation of
Indian Chambers of Commerce and Industry (FICCI),Minister of
Commerce and Industry Anand Sharma noted the success of the growing
Indian retail sector despite the global economic slowdown. In his
remarks, Sharma highlighted the significance and size of the retail
sector in the Indian economy, citing the sector's high projected
growth of $521 billion by 2012. Mentioning GOI stimulus packages
and rural development programs including the farmer debt waiver
program and the National Rural Employment Guarantee (NREG) program,
Sharma pointed to the role of GOI in developing the Indian rural
economy, which in turn, has allowed for growth in the retail sector.
He was also quick to observe that challenges remain to achieving
"inclusive growth," including the development of infrastructure and
agriculture. While increases to minimum support prices (MSP) to
farmers are controversial, he stated, they were necessary. "Our
farmers need this," remarked Sharma, "and if required, the
government will do more." He suggested that India needs a "special
effort in agro-based industries" and that development in the food
processing industry would increase employment and enhance food
security, as Sharma claimed, 40 percent of food produced in India
currently is wasted post-harvest due to inadequacies in agricultural
infrastructure and the supply chain.

Auto Component Industry Fares
Well Despite Lower Exports
--------------


6. (U) The Automotive Component Manufacturers Association of India
(ACMA) announced this week that it plans to reevaluate business
forecasts as domestic sales have been higher than originally
expected, despite falling export sales. A 2004 McKinsey report
predicted Indian auto component makers would reach revenues as high
as $33-40 billion by 2015, comprised of $20-25 billion in exports
and $13-15 billion in domestic sales. However, at the end of FY
08-09, local auto component manufacturers reported $14.4 billion in
domestic sales, superseding targets earlier than expected. Exports,
however, lagged behind the target of $3.6 billion. ACMA attributed
the faster growth in domestic sale revenues to launches of several
new cars being manufactured in India, including Tata's Indica and
Nano as well as the Mahindra Xylo.

India-ASEAN FTA Finalized, But
Opposed in Parliament
--------------


7. (U) India and the Association of South East Asian Nations (ASEAN)
have concluded the Free Trade Agreement (FTA) document, which now
awaits signatures by the two sides. On the sidelines of the NAM
Summit in Phuket, Prime Minister Manmohan Singh discussed the
signing of the India-ASEAN FTA with his Malaysian counterpart, which
is scheduled to be implemented beginning January 1, 2010. The FTA
will eliminate tariffs on over 4,000 products over six years,
including chemicals, electronics and some agriculture products.
(Note: India in 2008 announced that the India-ASEAN FTA would be
signed at the ASEAN Summit, initially scheduled for December 2008.
However, the Summit was postponed to February 2009 due to political
turmoil in Thailand. The signing was further delayed by Indian
general elections, as PM Manmohan Singh halted the FTA signing until
the new government was formed. The Cabinet must approve the
agreement before it can be signed. End Note.)


8. (U) Local media reports that the FTA was informally discussed in
Parliament earlier this week. Opposition members of Parliament are
reported to have opposed the FTA, claiming that that signing the
agreement would be devastating to millions of Indian farmers due to
the terms of duty reduction for items including pepper, coffee, tea,
rubber, palm oil and cashews, among others. While the Indian
Constitution does not mandate an FTA approval from Parliament,
opposition parties (CPI, BJP) have collectively demanded that the
government take Parliament into confidence before signing the FTA,

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given "present protectionist measures taken by different economies
to address global economic recessionary conditions." Foreign
Minister Krishna indicated recently that FTA, also known as the
Comprehensive Economic Cooperation Agreement (CECA),with ASEAN may
be signed in October 2009 at the Indo-ASEAN summit in Thailand.

India and China Agree to Further
Strengthen Trade Ties
--------------


9. (U) India's External Affairs Minister S.M. Krishna met with his
Chinese counterpart Yang Jiechi on the sidelines of a conference of
Foreign Ministers of two dozen countries in New Delhi. The two
agreed to increase discussions on major issues such as climate
change, the Doha Round of trade talks and the global financial
crisis. According to media reports, both Ministers referred to
their common approach to the financial crisis, which they expect to
be a focus at the third G-20 summit on the global financial crisis
in September in Washington, DC. Krishna later told reporters that
there was enough space for both China and India to grow without
competing with each other and described the meeting as "very
useful," with "cordial and friendly exchange of views." Government
officials later told the press that the purpose of the "almost
impromptu" meeting was fourfold: to get acquainted with each other;
to deepen the interaction; review the growth of economic ties; and
coordinate action on global economic issues. India and China have
agreed to try to double bilateral trade to $60 billion by 2010.

New Disinvestment Secretary Announces
Privatization Plan
--------------


10. (U) West Bengal Power Secretary Sunil Mitra has replaced current
Commerce Secretary Rahul Khullar as the Secretary of the Department
of Disinvestment (i.e. privatization) under the Ministry of Finance.
Mr. Mitra was involved in the formulation of disinvestment policy
for 26 public sector undertakings (PSUs) in West Bengal during his
tenure as Joint Secretary for Industry and Public Enterprises. Mr.
Mitra has been named Disinvestment Secretary at a time when the
Ministry of Finance is busy finalizing the modalities for offloading
its equity in PSUs.


11. (U) Mr. Mitra could be busy as Finance Secretary Ashok Chawla
(acting Disinvestment Secretary) publicly stated that the
disinvestment program would roll out with the sale of government
equity in listed entities where the general public owns less than
2-5 percent. The media has also reported that the Indian government
is investigating possible initial public offerings or sales of up to
10 percent of 15 PSUs, mainly in the energy, power, and mining
sectors. In addition, the Ministry of Finance's Economic Survey
recommended that the government should raise approximately Rs 250
billion ($5.2 billion) from disinvestment, but the 2009-10 budget
currently being debated by Parliament only set a target of Rs 11.2
billion ($233 million)from disinvestment in PSUSs.


12. (U) Disinvestment proceeds go to the National Investment Fund
(NIF),75 percent of which is used to finance social sector schemes
promoting education, health and employment. The remaining 25 percent
is used for meeting the capital investment requirements of
profitable and revivable central PSUs that yield adequate returns to
finance expansion/diversification.

India to Receive $4.5 Billion from the IMF
to Boost Forex Reserves
-------------- --------------


13. (U) Based on its IMF quota, India would receive $4.5 billion
from the IMF plan to inject $250 billion of Special Drawing Rights
(SDR) into the global economy to augment member countries' foreign
exchange reserves as a response to the global financial crisis. The
SDR allocation is a part of a $1.1 trillion plan agreed at the G-20

NEW DELHI 00001544 004 OF 004


summit in London in April and endorsed by the International Monetary
and Financial Committee. The funds, likely to be available by end
August, would boost India's foreign exchange reserves, which
currently stand at $263.9 billion. If India does not need this
money, it has the option to trade the money with other countries,
which are in need of international funds to boost their economic
condition.

Infrastructure Sector Growing
--------------


14. (U) India's infrastructure sector, with a combined weight of
26.7 percent in the index of industrial production (IIP) registered
growth of 6.5 percent in June 2009. For the first quarter of fiscal
year 2010 (April-June),infrastructure growth was 4.8 percent versus
3.5 percent growth seen during the same period last year. Growth in
June was due to robust production in cement, coal, electricity, and
crude. According to Minister of Commerce and Industry, Anand
Sharma, infrastructure growth shows that the three GOI stimulus
packages are yielding results.


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

WHITE