The government is reviewing the issue of foreign direct investment in retail trading and may partially open the sector to foreign investors.
Senior government officials said some ministries were in favour of allowing up to 26 per cent FDI in certain retailing activities. They, however, stipulated that management control should lie with the Indian partner on the lines of the FDI policy for the print media.
The move follows requests by some countries, including the US, to India for liberalising its retail trade regime in the current round of negotiations under the General Agreement on Trade in Services.
Unlike other services, India has been unwilling to accept the WTO definition of retail trade, citing administrative difficulties. India has also not accepted the request for opening up the sector in its offers for negotiations on services, submitted to the WTO in December.
Commerce ministry officials, however, said the process of review began before the offers were submitted to the WTO. They said the rethinking was partly prompted by the entry of several multinationals -- notably McDonald's, Marks & Spencer and Subway -- through the franchisee route.
The review includes a proposal to allow retail trading in high-value technical equipment such as medical equipment, where volumes are too low to justify wholesale trading.
Recently, the International Council for Research in International Economic Relations, which had been appointed for the purpose, made a presentation to officials in the ministries of commerce and food and consumer affairs on the impact of FDI in retail and to understand the WTO rules and legal provisions.
The review of FDI for retail marks a reversal from earlier thinking, which feared job losses for Indian workers.
But as a commerce department official pointed out, "If you go by evidence that is available with us, there is nothing to suggest that McDonald's has got foreigners to serve at its outlets in India or Nokia is getting foreigners to sell its phones," adding that the opening up would nevertheless be gradual.
The ruling Bharatiya Janata Party leadership is against opening up the sector because it fears that it could lose votes from the powerful trading community ahead of the elections. A decision on liberalisation is, therefore, expected to be taken only after a new government is in place.
© 2025