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Nirmala Sitharaman, the new Union minister of commerce and industry, indicated on taking charge on Tuesday that foreign companies might not be allowed to open mega stores in the multi-brand retail (MBRT) segment.
"It (foreign direct investment in this area) is not best opened up now because medium and small-sized traders or small farmers have not been adequately empowered...immediately, if you open the floodgates of FDI in multi-brand retail, it may affect them," she said.
Her Bharatiya Janata Party's election manifesto had said, "Barring the multi-brand retail sector, FDI will be allowed in sectors wherever needed for job and asset creation, infrastructure and acquisition of niche technology and specialised expertise."
The minister did not specify whether the previous United Progressive Alliance (UPA) government's move of permitting up to 51 per cent FDI in MBRT would be reversed or the decision retained as it had not been attracting much investment anyway.
"I will sit with my officials to find out what has happened this while, (to) further the manifesto-based agenda of BJP," she said.
Experts say it is likely the conditions in this regard might be tightened.
Punit Shah of KPMG said, "If conditions are as stringent as they are now, these themselves could be enough deterrent for foreign investors to come in the MBRT space. So, going forward, even if the BJP makes these conditions more stringent, it would not have much impact, since not many players have come in."
Since MBRT was opened to FDI with a cap of 51 per cent, after much debate, only one investment proposal was cleared by the earlier government, of UK-based Tesco.
