Retail FDI may now come in three phases

NEW DELHI: The government may allow FDI in the retail sector in three phases. The commerce and industry ministry has reopened discussions on allowing FDI in consumer electronics and sports goods retail, and if everything goes as planned, it may happen before the Commonwealth Games in 2010. In the second phase, FDI in single-brand retail may be hiked from 51% to 100%.

Depending on the impact of the first two phases, the government would consider allowing FDI in the sensitive area of multi-brand retailing. Hectic discussions are on among policymakers in Udyog Bhawan for letting foreign investors into the retail sector.

“The government would always take local vendors, kirana stores and traders into confidence before moving ahead on the retail policy. We would try and overcome resistance from factions opposing the move. But we would do it gradually,” a commerce and industry ministry official told ET.

Last month, commerce and industry minister Kamal Nath had also indicated that the government is keen to allow foreign companies in specific sectors ahead of the Commonwealth Games. The government’s view is that retail in electronics will not upset the neighbourhood kirana stores. “It’s a misconception that FDI in retail will upset all kirana stores,” the official said.

Policymakers are toying with different models for allowing foreign investors in the retail industry. Recently, food processing minister Subodh Kant Sahai had said India would open up its $330-billion retail market, but only after being convinced that big retailers would not affect neighbourhood stores.

Late last year, the government had announced plans to allow 51% FDI in multi-brand retail of consumer electronics, sports goods, building equipment and stationery. But it did not go ahead with them, largely because of Congress President Sonia Gandhi’s letter to the PM, asking for a study on the impact of transnational retail on mom & pop stores.

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