Delhi's Industry Secretary Amit Yadav said that the city government in a letter has communicated its decision in the matter to the Department of Industrial Policy and Promotion (DIPP) of the Union Commerce and Industry Ministry.
"I am directed to inform you that government of NCT of Delhi has reviewed its earlier decision and it has been decided not to support FDI policy in multi-brand retail trade in Delhi," the letter written by Yadav to DIPP Secretary said.
Chief Minister Arvind Kejriwal, however, said though his government reversed the decision on allowing FDI in Delhi, the Aam Aadmi Party is not "opposed to FDI per se".
"It was part of our commitment in the manifesto (for Delhi polls). We are not against FDI per se. This is something that ought to be decided on sector-to-sector basis," he told reporters when asked about his government's first major reversal of policy.
The Chief Minister said though allowing FDI in multi-brand retail will improve consumer's choice to a great extent but experience world over showed that it "leads to loss of jobs to a very large extent".
"There is huge unemployment in Delhi and AAP government does not wish to increase this unemployment. Delhi is not prepared for FDI," he said, justifying the decision.
The previous Congress government had taken a number of steps to remove bottlenecks in attracting FDI in multi-brand retail. It had even announced plan to make amendments to the Agricultural Produce Marketing Committee (APMC) Act to allow direct connectivity between retailers and farmers.
As per the existing provision, farmers cannot sell their produce directly to retailers as it has to be routed through the mandis operated by APMC.
Endorsing the FDI policy, then Chief Minister Dikshit last year had announced that Delhi will become the first city in the country to have global retail chains like Wal-Mart and Tesco.
As per the FDI policy approved by the Cabinet, the final authority for granting trade licence rests with the states under their respective Shops and Establishment Acts.
States which had supported the Centre's decision on FDI in retail includes Maharashtra, Delhi, Jammu and Kashmir, Haryana, Rajasthan, Uttarakhand, Andhra Pradesh and Assam - all ruled by the UPA then.
As per Centre's decision, foreign retailers will only be allowed to set up shop in cities with over one million population.
Arvind Kejriwal said his government had to take a decision between better choices for the consumers and unemployment.
The Chief Minister felt the entire retail sector has not been given a "conducive and honest environment" and his administration would do everything possible to help the traders.
"Today, if you want to start the business or if you want to do business, you have to face many bottlenecks because of huge corruption. In the next few days, I am going to have meetings with the traders and industrialists to ask them about steps required to help them," he said.
Arvind Kejriwal said trade and business have been generating wealth and creating employment opportunities and his government's priorities would be to help the entrepreneurs and trading community.
"We are committed to creating an honest environment to do business. Ever since the launch of anti-corruption helpline, I have been getting the feedback that officials are on back foot and afraid of asking for bribe," said Arvind Kejriwal.