The BJP-led government is slowly bringing retail business out of its protectionist mould and is considering opening up the multi-brand retail sector to foreign direct investment (FDI), shifting its earlier stand.
The Department of Industrial Policy and Promotion (DIPP) in the ministry of commerce and industry has now proposed exclusion of sensitive sectors, such as grocery, from foreign investments in order to protect small neighbourhood stores.
The Narendra Modi-led government, which has been keeping the FDI policy allowing 51-per cent FDI in the multi-brand sector under wraps, however, did not roll back the policy decision taken by the previous UPA government. It is now trying to get all states on board with the selective approach.
"BJP-ruled States as well as Tamil Nadu and Karnataka have expressed interest in allowing foreign investment in multi-brand retail. We are trying to get the consent of States,'' reports quoted a government official as saying.
Meanwhile, the government had, in July last year, decided to allow foreign portfolio investment of up to 49 per cent or up to the sectoral cap (whichever is lower) through the automatic route in multi-brand retail trade. There were, however, no takers for the proposal as it denied majority control for the foreign investor.
The ruling party has all the time been discouraging FDI proposals in multi-brand retail trade by declaring its opposition through speeches and statements arguing that it would hurt small retailers.
But, with changing ''economic realities'', the government's stance is also going through a change.
''In the fast-growing retail sector, there is space for both large retail stores and the smaller mom-and-pop shops. The government plans to proceed with care to ensure that small businesses are not uprooted. If it comes to that, we will not allow FDI in some sensitive sectors,'' the official said.
While the DIPP is looking at excluding sensitive sectors such as grocery and food, the food processing ministry is batting for allowing FDI in the sector. The ministry has also recently written to the prime minister on this issue.
''We are still holding consultations on the matter. Nothing has been decided yet,'' the official said.
Meanwhile, commerce and industry minister Nirmala Sitharaman has held a round of meeting with state industry ministers to get their views on this as FDI cannot flow in to individual states without a licence from the respective state government.
It is also being seen as part of the `Make in India' programme of attracting foreign investments in manufacturing as products follow the market.