Retail sector may see 100% FDI

Proposal is a part of a revised offer in the services sector prepared by the WTO.

The department of commerce has proposed that 100 per cent foreign direct investment be allowed in retailing. This could lead to opening up of the retail sector.

The proposal is a part of a comprehensive revised offer in the services sector prepared by the department for the World Trade Organisation.

Officials pointed out that offers being submitted by different countries to the WTO did not have any legal status but indicated the direction a country was moving to vis-a-vis liberalisation. The offers can be withdrawn or amended at any time.

Not just the department of commerce, the department of industrial policy and promotion (DIPP), the nodal department for the FDI policy, too, is considering 100 per cent foreign direct investment in select areas like food processing.

The DIPP proposal is, however, expected to contain some riders, restricting the operation of global companies to certain metros. According to sources, another rider being considered is to seek a commitment on sourcing from India by foreign companies.

Officials said one of the arguments being presented in favour of allowing FDI in select sectors like food processing was that farmers in countries that had opened up their economies had benefited in terms of better prices for their produce and increased investment in infrastructure.

"We are moving extremely cautiously on the issue. The DIPP will seek the views of other ministries before the matter is taken up by the Cabinet," a senior government functionary told Business Standard.

Several global retail giants, including Wal-Mart, Carrefour and Tesco, have been asking the government to open up the retail sector to FDI. Wal-Mart Chief Executive John Menzer, who was in India last week, made a strong pitch in this regard.

In a recent note on the retail sector, the DIPP had pointed out that international brands were already available in the country through franchisees and the wholesale cash-and-carry route as well.

"With few restrictions on trading, most goods of foreign origin are nevertheless available, and opening retail to FDI would, per se, not lead to any further influx of imported goods," the note said.

The government is also of the view that FDI in retailing will not lead to a large-scale exit of small family-owned businesses. It has been pointed out that the level of threat, if any, to small retailers from an international retailer, will be the same as the one from a domestic retailer.

The note has also assured that the government will take all the required steps to ensure that domestic companies are not adversely impacted by the entry of foreign companies in the retail sector.