Identifier
Created
Classification
Origin
09NEWDELHI596
2009-03-27 12:03:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy New Delhi
Cable title:  

NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF

Tags:  ECON EAGR EAIR ECPS EFIN EINV EMIN ENRG EPET ETRD 
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VZCZCXRO2117
RR RUEHAST RUEHBI RUEHCI RUEHDBU RUEHLH RUEHNEH RUEHPW
DE RUEHNE #0596/01 0861203
ZNR UUUUU ZZH
R 271203Z MAR 09
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 5930
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RHMFIUU/FAA NATIONAL HQ WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHDC
UNCLAS SECTION 01 OF 02 NEW DELHI 000596 

SIPDIS
SENSITIVE

STATE FOR SCA/INS AND EEB
USDOC FOR ITA/MAC/OSA/LDROKER/ASTERN/KRUDD
DEPT OF ENERGY FOR A/S KHARBERT, TCUTLER, CZAMUDA, RLUHAR
DEPT PASS TO USTR CLILIENFELD/AADLER/CHINCKLEY
DEPT PASS TO TREASURY FOR OFFICE OF SOUTH ASIA MNUGENT
TREASURY PASS TO FRB SAN FRANCISCO/TERESA CURRAN
USDA PASS FAS/OCRA/RADLER/BEAN/CARVER/RIKER
EEB/CIP DAS GROSS, FSAEED, MSELINGER

E.O. 12958: N/A
TAGS: ECON EAGR EAIR ECPS EFIN EINV EMIN ENRG EPET ETRD
BEXP, KIPR, KWMN, IN

SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF
MARCH 23 TO MARCH 27, 2009

UNCLAS SECTION 01 OF 02 NEW DELHI 000596

SIPDIS
SENSITIVE

STATE FOR SCA/INS AND EEB
USDOC FOR ITA/MAC/OSA/LDROKER/ASTERN/KRUDD
DEPT OF ENERGY FOR A/S KHARBERT, TCUTLER, CZAMUDA, RLUHAR
DEPT PASS TO USTR CLILIENFELD/AADLER/CHINCKLEY
DEPT PASS TO TREASURY FOR OFFICE OF SOUTH ASIA MNUGENT
TREASURY PASS TO FRB SAN FRANCISCO/TERESA CURRAN
USDA PASS FAS/OCRA/RADLER/BEAN/CARVER/RIKER
EEB/CIP DAS GROSS, FSAEED, MSELINGER

E.O. 12958: N/A
TAGS: ECON EAGR EAIR ECPS EFIN EINV EMIN ENRG EPET ETRD
BEXP, KIPR, KWMN, IN

SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF
MARCH 23 TO MARCH 27, 2009


1. (U) Below is a compilation of economic highlights from Embassy
New Delhi for the week of March 23-27, 2009, including the
following:

-- Much Ado: Tata Nano Finally Launched
-- Infosys Postpones Hiring; IBM Plans to Shift Jobs to India
-- Wind-power Producers in Tamil Nadu Can Charge More
-- Congress Manifesto Offers Incrementally More Populism

Much Ado: Tata Nano Finally Launched
--------------


2. (U) The long-awaited Tata Nano, also dubbed the "one lakh car,"
(Note: one lakh equals 100,000) and "the people's car," was launched
on Monday, March 23 in Mumbai, seven months behind schedule. The
basic model of the car is priced at one lakh rupees, approximately
$2,000, per Tata CEO Ratan Tata's stated goal to produce a car that
would reach consumers that were previously unable to purchase
vehicles. The path to the launch has not been without obstacles:
the company was forced to abandon its original manufacturing site in
West Bengal (an investment of $292 million) due to land disputes.
Tata Motors relocated the site to Gujarat, which is expected to
begin producing vehicles towards the end of 2009. Just after the
company's purchase of Jaguar Land Rover (JLR) through a $2 billion
bridge loan (due to be repaid or refinanced in June 2009),the

global liquidity crunch hit, resulting in the company's first net
losses in seven years. In turn, the company is reported to have a
funding gap of $3.4 billion for this year, which it hopes the Nano
will ease.


3. (SBU) While the new Nano manufacturing site is under
construction, vehicles are being assembled at plants in Pune and
Pantnagar at a rate of 50,000 a year, far below the expected demand
of one million units per year. According to Jalaj Gupta, North
India Regional Director of Tata's Passenger Car Unit, dealers will
be receiving bookings (customers must place a deposit close to the
car's price) through the month of April. To address high demand in
the first months of the launch, Tata will deliver the first batch of
Nanos to customers selected via a computer-generated lottery, most
likely in July. Customers who do not receive a car in the first
lottery may have to wait until the end of the year or longer.


4. (SBU) According to Gupta, there have been a lot of inquiries
about the car, but now the challenge is to get the vehicles out to
showrooms and delivered. "The real story," Gupta notes, "will be in
the month of April when we see how many bookings are made." The
Nano is launching amidst a tough sales period. Although car sales
picked up in January and February (due to new model launches,
dealership promotions, and interest rate cuts),the high numbers
from these months may not be enough to boost the industry's low
numbers from the preceding six months. SIAM (Society of Indian Auto
Makers) director, Dilip Chenoy, estimates that the auto industry is
likely to end the fiscal year with either negative or flat growth.

Infosys Postpones Hiring; IBM Plans
to Shift Jobs to India
--------------


5. (U) Infosys, India's second largest software exporter, has
postponed hiring plans by six months for engineering graduates,
citing lower demand for software services in its US and European
markets. Typically, the company hires at least a year in advance,
but the economic slowdown is causing the company to reduce its
numbers, especially on its "bench" of employees that do not yet have
a designated assignment. For the December quarter, Infosys and its
subsidiaries hired 5,597 employees, just over half of number it
hired in the previous quarter. The company usually maintains a
bench of 20 percent of the total number of employees, which it will
reduce to ten percent in the upcoming fiscal year as growth of the
company has slowed.


6. (U) Meanwhile, a media report announced IBM's plans to lay off
about 5,000 US employees, with many of the jobs to be shifted to

NEW DELHI 00000596 002 OF 002


India. The report stated that the company was making cuts to the
global business-services unit and quoted US employees as saying they
have been providing training to India-based IBM workers to do work
that will be shifted overseas. Foreign workers already account for
71 percent of IBM's 400,000 employees.

Wind-power Producers in Tamil Nadu
Can Charge More
--------------


7. (SBU) The Tamil Nadu Electricity Regulatory Commission (TNERC)
announced that privately owned wind-power producers can raise the
price they charge per unit from INR 2.9 (about USD 0.06) to INR 3.39
(USD 0.07),effective April 1. The announcement enthused potential
invesors. The manager of a group of companies currently operating
several wind-power turbines told Consulate General Chennai that the
new tariffs will encourage producers to shift to newer units with
greater capacities. He noted that many turbines in Tamil Nadu --
India's leader in wind power, with 43 percent of the country's
installed capacity -- are more than ten years old and require
refurbishment and upgrades. He predicted that this rise in
allowable tariff will lead to a rapid increase in wind power
capacity in the state. A scientist at Chennai's Center for Wind
Energy Technology told us he expected that Tamil Nadu's wind-power
producers can add an additional 1000 MW of installed capacity simply
by upgrading existing turbines with more modern technology.

Congress Manifesto Offers
Incrementally More Populism
--------------


8. (SBU) Congress Party President Sonia Gandhi released the party's
33-page election manifesto on March 23, continuing its populist
pledges to "aam aadmi", the common man. Mainly more of the same,
such as further expansion of the rural employment scheme and
existing food subsidy program, the new promises - if even
implemented - would increase only marginally the current central
government fiscal deficit of nearly 6%. The extension of the rural
employment guarantee to all individuals, rather than the current
provision to all households, could increase the program's cost by as
much as 50%, but that would be $3 billion, or just 0.003% of GDP.
The food subsidy proposal would lower the price of government-sold
wheat and rice from roughly Rs 5/kg to Rs 3/kg, but the estimated
additional cost is just $350 million a year. Promises for social
security and health insurance are vague additions to existing,
modest-cost programs.


9. (SBU) Some relatively constructive promises include a pledge to
reform subsidies so that they reach only the truly needy sections of
society. On privatization, while the Congress Party has signaled
that it will not seek to fully privatize existing state-owned
enterprises, it has stated it is open to reducing the government
stake to 51% by allowing shares to be sold to the public. The
Manifesto also recognizes that small and medium enterprises (SMEs)
employ a significant number of workers, but at low wages and
productivity. The Congress Party has pledged to improve
infrastructure, financing and marketing to already-existing SME
clusters, which could help grow export markets, sales, and wages.
An interest waiver for all farmers' debt if they repay their loans
on time should cost considerably less than the $17 billion farm debt
waiver program that the Congress-led UPA enacted last year, and
encourages repayment rather than the moral hazard of loan
forgiveness, which can encourage irresponsible borrowing.


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

WHITE