The commerce ministry will soon put up a note to the Cabinet seeking to permit foreign direct investment in at least five speciality retail areas, including electronics, sports goods, building equipment and stationery.
Although pharmaceutical retailing will not be brought under this move, there is a strong likelihood that furniture may also see a similar relaxation.
Highly placed sources in the government said Commerce Minister Kamal Nath had discussed the matter with Prime Minister Manmohan Singh, who is understood to have directed him to bring the matter to the Cabinet for discussion.
The commerce ministry is also initiating a discussion with the Department of Consumer Affairs on this proposed move, which is likely to take shape in a month or so.
When asked, Nath confirmed that the move was being considered. "I am looking at this," he said. The logic behind the move, which comes amid the Left parties' opposition to FDI in the retail sector, is that this relaxation will not impact nay domestic interest groups.
For instance, with the Commonwealth Games scheduled to be held in New Delhi in 2010, Nath feels that there will be a need for good sports goods stores. Interestingly, Nath made it clear that he was personally opposed to diluting FDI norms for retail in a manner that would impact neighbourhood grocery stores.
"Even if the Left were to agree, my line would be that we cannot allow it," he said. At present, the government does not allow FDI in retail trading, except 51 per cent FDI in single branded product retailing.
FDI via the automatic route is permitted in trading wholesale, cash and carry, exports and items sourced from the small scale sector. A similar rule also applies to warehousing facilities.
Officials added that there was no question of tinkering with the existing rules with regard to automatic approvals for cash and carry. "We have replied to the Prime Minister's Office regarding the clarifications sought on this matter. There is no question of any changes," they said.
The commerce ministry feels the proposed reform in retail FDI would induce a number of global chains in these sectors to set up shop in India. In fact, US based Best Buy, a large electronics retail chain, has sounded out the ministry regarding its interest to source goods from India.
Retail consultant Arvind Singhal of KSA Technopak feels that if this proposed liberalisation of FDI norms for the retail sector happens, it will be a positive development.
"It makes sense to have 100 per cent FDI in speciality retail. Why should we go into a debate about 49 per cent or 51 per cent. In fact, the government should look at other areas like clothing and furniture also. Barring two areas, food and grocery stores and chemists, it can look at most other products," he said.