New Delhi, Jan. 11: The commerce ministry has drawn up a proposal to allow 100 per cent FDI through the automatic route in wholesale trading and sourcing for exports.

Recently, commerce minister Kamal Nath made a presentation on the issue at a meeting of the empowered group of ministers on FDI, sources said.

The proposal seeks to rationalise 13 trading activities into four broad categories. Apart from wholesale trading and sourcing for exports, these will cover trading of items sourced from small-scale industrial units under technical arrangements.

A separate category will include test-marketing for up to two years, if these lead to facilities for manufacturing of goods.

Under the existing system, 100 per cent FDI is allowed for cash-and-carry wholesale trading, but only through the FIPB route. The FDI cap in export trading is at 51 per cent.

The new proposal seeks to throw the gates wider open in these segments.

Nath expects less resistance from the Left parties as the Bengal government has already made a move to allow FDI in wholesale trade.

The Centre expects the move to go through as it is not viewed with the same suspicion as FDI in retail trade, where the opening up could lead to the displacement of small traders. The commerce minister is holding out job hopes through FDI to make the proposal more acceptable.

The plan also covers small-scale enterprises. However, these units lack technical expertise to compete in the world market ? a shortcoming which should be removed.

The group of ministers wanted the FDI procedures to be simplified and rationalised and more core sectors brought under the automatic route to increase foreign investment.

The proposals have been finalised and the recommendations will have to be cleared by the cabinet.

The government is also toying with the idea of allowing FDI in single-brand retail trade for big companies that do not affect smaller stores.

The logic behind this is that foreign companies like Korea’s Samsung, which have manufacturing facilities in the country, should be allowed to set up their own showrooms like their Indian counterparts.

Senior officials said brands like Nike and Reebok, for instance, essentially have an upper middle-class clientele. They like to purchase imported goods in large quantities. The commerce minister also sees FDI in retail food processing as a means to generate huge employment in the country.