Voluntary Report - public distribution

**Date:** 4/29/2005

**GAIN Report Number:** IN5045

IN5045

**India**

**Agricultural Situation**

**Weekly Highlights & Hot Bites, #16**

**2005**

**Approved by:**

![](media/image1.wmf)Chad R. Russell

U.S. Embassy, New Delhi

**Prepared by:**

Santosh Kr. Singh

**Report Highlights:**

\*India is first choice: Wal Mart\*, \*Retail FDI set to flow freely\*,
\*Decision on Delhi\'s VAT wish\*, \*Commodities no longer essential
forever\*, \*Parliament Panel wants food labs in all states\*.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

New Delhi \[IN1\]

\[IN\]

Welcome to Hot Bites from India, a weekly summary of issues of interest
to the U.S. agricultural community. The report includes information that
has been garnered during travel within India, reported in the local
media, or offered by host country officials and agricultural analysts.
Press articles are included in this report. Significant issues will be
expanded upon in subsequent reports from this office.

DISCLAIMER: Any press summary contained herein does NOT reflect USDA's,
the U.S. Embassy's, or any other U.S. Government agency's point of view
or official policy.

# INDIA IS FIRST CHOICE: WAL MART

While the government is still debating whether to allow 26% or 49%
foreign direct investment (FDI) in the retail sector, Wal Mart Stores
Inc. has declared India as its first choice for expansion. Elaborating
on the company\'s international expansion plans, the chief executive of
Wal-Mart said he saw India well ahead of all other markets, including
Russia and Turkey. Although Wal-Mart does not have a retail presence in
India, its Bangalore office sourced over \$300 million worth of goods
directly and \$800 million worth through third party suppliers from
India in 2004. With the large manufacturing base catering to India\'s
growing consumer market, Wal-Mart sees excellent opportunities for
expanding its supplier base in India. (Source: Financial Express,
4/23/05)

# RETAIL FDI SET TO FLOW FREELY

The government wants minimal restrictions while allowing up to 49
percent foreign direct investment (FDI) in the retail sector. FDI will
not be limited to metropolitan areas or restricted to branded dedicated
retailing. All types of retailing, irrespective of product categories
and size of shopping units would be eligible to receive FDI. According
to a policy paper prepared by the Department of Industrial Policy and
Promotion, FDI must result in backward linkages of production and
manufacturing and spur domestic retailing as well as exports. (Source:
Financial Express, 4/23/05)

# DECISION ON DELHI\'S VAT WISH

Delhi state is waiting for the outcome of the meeting of the Empowerment
Committee of State Finance Ministers on Monday (April 25), which will
consider the Delhi government\'s request to lower value added tax (VAT)
on many goods, including almonds. The Delhi government had announced the
lowering of tax rates on several items, but cannot implement the
decision due to the Empowerment Committee\'s objection. The Delhi
government had announced the lowering of VAT on dry fruits (including
almonds) from 12.5 percent to four percent. The Empowerment Committee,
however, declared that if other states do not have any objections, then
Delhi will be allowed to go ahead with the concessions. The Empowerment
Committee had earlier identified a list of 46 items of importance, out
of which any state could decide on the tax structure on ten items, which
Delhi exceeded. (Source: Hindustan Times, 4/25/05)

*Post Comments*: The proceedings of the meeting of the Empowerment
Committee are still not available. Market sources report that the Delhi
government forcefully argued for the tax concessions, but it may be
difficult to convince the other states to agree.

# COMMODITIES NO LONGER ESSENTIAL FOREVER

In a far-reaching reform, the government proposes to amend the Essential
Commodities Act to void the list of items, including grains, edible oils
and sugar, wherein it can intervene at will regarding their production,
supply, and distribution. Instead, the government will possess the power
to declare an item "essential" in times of crisis. The cabinet will
review the proposed law shortly, after which it has to be approved by
the parliament. The biggest obstacle to the reform may be the United
Progressive Alliance government\'s Common Minimum Program, which
promised no further dilution of Essential Commodities Act. The
politically left parties, who are supporting the government, are also
likely to oppose the government's proposed move. (Source: The Economic
Times, 4/17/05)

*Post Comments*: The Essential Commodities Act is a major impediment to
investment, including foreign direct investment, in the agriculture and
the food processing sectors---both of which the ruling coalition Singh
Government is trying to develop.

# PARLIAMENT PANEL WANTS FOOD LABS IN ALL STATES

The Parliamentary Standing Committee on Agriculture recommended that
food testing laboratories be set up in each state under the direct
control of the Ministry of Food Processing. The Committee said that
imported processed food items should also be subjected to quality
checks. (Source: Indian Express, 4/29/05)

# RECENT REPORTS SUBMITTED BY FAS/NEW DELHI

  ----------- --------------------------------------- -------------------
  **REPORT    **SUBJECT**                             **DATE SUBMITTED**
  \#**                                                

  IN5041      Weekly Highlights & Hot Bites, #15      04/22/05

  IN5042      India: Grain & Feed Update - May        04/26/05

  IN5043      India: Tobacco and Products Annual      04/27/05

  BG5003      Bangladesh: Oilseeds and Products       04/28/05
              Annual                                  

  IN5044      India: Oilseeds Monthly Lock up - May   04/29/05
  ----------- --------------------------------------- -------------------

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