New Delhi Weekly Econ Office Highlights for the Week of

UNCLAS SECTION 01 OF 02 NEW DELHI 002395 SIPDIS USDOC FOR ITA/MAC/OSA/LDROKER/ASTERN/KRUDD DEPT OF ENERGY FOR A/S KHARBERT, TCUTLER, CZAMUDA, RLUHAR DEPT PASS TO USTR MDELANEY/CLILIENFELD/AADLER TREASURY FOR OFFICE OF SOUTH ASIA MNUGENT TREASURY PASS TO FRB SAN FRANCISCO/TERESA CURRAN USDA PASS FAS/OCRA/RADLER/BEAN/FERUS E.O. 12958: N/A TAGS: ECON EFIN EINV ECIN EIND PK IR UZ TU TP IN SUBJECT: New Delhi Weekly Econ Office Highlights for the Week of November 23-27, 2009 REF: New Delhi 2120 NEW DELHI 00002395 001.2 OF 002 ¶1. Below is a compilation of economic highlights from Embassy New Delhi for the week of November 23-27, 2009, including the following: -- Industrial Growth on Path to Recovery -- RBI Warns Banks Dealing with Iran, Pakistan, and Others -- FATF Mutual Evaluation Spurs Tougher AML Regulations Industrial Growth on Path to Recovery -------------- ¶2. Continuing a three month trend (see reftel),industrial production was up 9.1 percent in September. Manufacturing, which accounts for 80 percent of the index of industrial production (IIP), grew by 9.3 percent. Mining and electricity sectors registered robust growth rates of 8.6 percent and 7.9 percent, respectively in September. Within manufacturing, basic chemicals and chemical products and machinery and equipment showed the highest growth in September. It was not all positive news for manufacturing, however, as five of the 17 manufacturing industries had negative growth. As in previous months, production in food products and jute, vegetables, and fibre textiles declined, but, for the first time since June, production in beverages and tobacco products, paper and printing products, and metal products also declined. ¶3. As in the past three months, all five use categories - basic goods, capital goods, intermediate goods, consumer durables, and consumer non-durables - had positive growth in September. Analysts point out that the rise in industrial growth over the past four months is due to the stimulus packages enacted by the government and the impact of the new hydrocarbon discoveries coming on stream, including the commencement of the Cairn India facilities and Reliance's KG facilities. RBI Warns Banks Dealing with Iran, Pakistan, and Others -------------- ¶4. In a November 20 notice, the Reserve Bank of India directed banks to keep a strict watch on customer's business transactions with entities or banks from Iran, Pakistan, Uzbekistan, Turkmenistan, and Sao Tome. The notification follows concerns raised by the Financial Action Task Force (FATF) regarding deficiencies in the anti-money laundering and countering financing of terrorism regimes in these countries. The FATF remains particularly concerned about Iran's failure to address the risk of terror financing and the serious threat this poses to the integrity of the international financial system. FATF Mutual Evaluation Spurs Tougher AML Regulations -------------- ¶5. On November 12, the Department of Revenue under the Ministry of Finance issued a notification amending certain clauses of the Prevention of the Money Laundering Act (PMLA),which would bring registered Non-Profit Organizations (NPOs) or non-governmental bodies including charitable trusts, temples, churches, mosques and educational institutions under the purview of the PMLA. The new rules would come into force after announcement in the Official Gazette. ¶6. Once enacted, NPOs will be required to disclose the source of their funds where transactions exceed more than one million rupees (approximately $21,000). The amendments will place NPOs under higher scrutiny by banks and financial institutions for large money transactions and suspicious transactions. ¶7. The Foreign Contribution (Regulation) Bill (FRCA) is one of the 62 scheduled pieces of legislation listed for consideration and passing in the current Parliament session, which began on November 19 and will conclude on December 22. The FRCA, replacing a similar 1976 Act, will regulate and monitor donations, grants, and gifts received from foreign sources by domestic charitable organizations NEW DELHI 00002395 002 OF 002 and NPOs. The FRCA is broader in scope than its predecessor, covering political organizations, electronic media organizations, and cultural, economic, educational, religious, and social programs. The Bill tightens registration requirements and allows the Financial Intelligence Unit to monitor foreign contributions to NPOs. ¶8. Comment: The GOI's goal of becoming a full member in the Financial Action Task Force (FATF) is the driving force behind many of these anti-money laundering bills and amendments. Despite NPO concerns that the amended PMLA may make receiving assistance more difficult, the GOI is working hard to make sure no stones are left unturned as it readies itself for the FATF mutual evaluation beginning at the end of November. Regardless of its motives, stricter oversight of NPOs is a welcome addition to the GOI's anti-money laundering. End comment. ¶9. Visit New Delhi's Classified Website: http://www.state.sgov/p/sa/newdelhi. ROEMER