The government is finally planning to open retail trading to foreign direct investment, though partially.

At present, FDI in retail trade is not allowed.

According to government officials, while the industry is divided on opening up retail trading, there is a strong case for allowing it in office and medical equipment.

These are essential low-volume, high-value products like photocopiers, laser printers and magnetic resonance imaging scanners.

The officials said some global majors had approached the government for allowing them to retail in India for such equipment. A core group of secretaries, headed by the finance secretary, will discuss the issue this month.

Other liberal foreign investment measures to be taken up by the group of secretaries include relaxation of the restrictions due to Press Note 18 and allowing test marketing of products by multinational companies without attaching any covenants.

Officials said the commerce ministry was in favour of scrapping the test marketing route as companies preferred wholesale trading to the existing model.

They added that the commerce ministry had, however, asked for strict enforcement of the wholesale marketing conditions.

The officials said after the core group of secretaries firmed up its views on the issues, they would be submitted to the group of minister on foreign investment headed by Finance Minister Jaswant Singh.

"Since they are sensitive in nature, a political endorsement is necessary," said an official.

A survey undertaken by an Indian industry chamber in March 2002 on FDI in retail trade showed that small retailers strongly opposed it.

While 88 per cent of the big retailers favoured entry of FDI, the balance were against it though they welcomed FDI in retail trade with a 26 per cent sectoral cap.

The officials said that the commerce and the industry departments were at loggerheads on the issue with the former keen on allowing retail trade in high-value low-volume items.

Such items did not require any retail showrooms since they were not essentially consumer goods. The end-user was not the consumer, they said.

A blanket ban on retail trade would mean that foreign investment in trading magnetic resonance imaging scanners or photocopiers and intermediate goods for ship building work or aircraft would not be allowed, they said.

"FDI in retail trading of final goods, which are of the nature of consumer goods, may continue to be disallowed," the official added.

In the past, commerce department has repeatedly foiled any attempts to permit foreign investment in retail trading.

Under negotiations on services at the World Trade Organisation, the commerce department is of the opinion that India should not offer to undertake any commitments on retail trade.