Nath opens Left door on FDI in retail sector

Left divided: CPM open to proposal, Forward Bloc and RSP opposes.

The government has started discussions with the Left on allowing Foreign Direct Investment (FDI) in retail trading.

Commerce and Industry Minister Kamal Nath met Communist Party of India (Marxist) General Secretary Prakash Karat on Tuesday afternoon to discuss the proposed model for FDI in retail, sources in the ministry said. Discussions on the current state of negotiations at the World Trade Organisation were also held.

The Left has so far opposed the government's plans to allow foreign investment in retail trading. Sections within the Communist parties, which are supporting the United Progressive Alliance at the Centre, are, however, open to allowing foreign investment in a limited manner.

Prime Minister Manmohan Singh has favoured the opening up of the sector in view of the large employment potential and backward linkages. Sources in the Prime Minister's Office said that the government was keen on allowing FDI in retail by the end of the year.

While the commerce and industry ministry has prepared an outline of the liberalisation scheme, Nath wants to approach the Union Cabinet after consulting the Left and is willing to modify the plan to evolve a consensus, the sources said.

The model proposed by the ministry evinced phased opening of the retail sector to FDI with an initial investment limit of 49 per cent. The model also suggests restrictions like limiting the presence of foreign investors to select cities and prescribes a minimum floor area.

Officials said that the decision on whether to open up all the sectors to FDI in retail or limit the same to sectors like food would be taken only after consultations were completed.

While CPI(M) is willing to consider allowing FDI in retail with sufficient safeguards such as locating the retail outlets outside city limits to protect the local neighbourhood grocers, other allies like the Forward Bloc and the Revolutionary Socialist Party are opposed to FDI in retail per se.

At the last meeting of the Left Coordination Committee the issue of FDI in retail was discussed and the CPI (M) was to circulate a note on the matter, which is still under preparation.

Nath is slated to meet the Left parties later this month to discuss the negotiations at the World Trade Organisation.

ROADMAP

Govt keen on allowing retail FDI by year-end

Nath willing to modify the plan to suit Left

Govt for phased opening up of sector to FDI with initial investment cap of 49 per cent

For limiting presence of foreign investors to select cities