FDI in retail: 30 pc from Indian SMEs only, says Govt

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SME Times News Bureau | 28 Nov, 2011
A day after industry and media intervene about specifications of 30 percent quota of Indian SMEs in retail FDI policy, the government Monday clarified that 30 percent mandatory procurement from small and medium enterprises (SMEs) clause applied only to Indian enterprises and not globally.

"Sourcing of a minimum of 30 percent from Indian micro and small industry having capital investment of not more than USD 1 million has been made mandatory," the ministry of commerce and industry said in a statement.

It said up to 51 percent foreign equity investment in multi-brand retail sector would be allowed through the government approval route, subject to adequate safeguards for domestic stakeholders.

However, the official documents, released last week after the cabinet decision to open up the multi-brand retail sector for foreign equity investment, said, "30 percent sourcing is to be done from micro and small enterprises, which can be done from anywhere in the world and is not India specific."

Earlier in the day, the Federation of Indian Chambers of Commerce and Industry (FICCI) urged the government to clarify the issue.

In the clarification note, the government said mandatory sourcing of at least 30 percent goods will help boost the growth of small and medium enterprises in the country.

"This will provide the scales to encourage domestic value addition and manufacturing, thereby creating a multiplier effect for employment, technology upgradation and income generation," it said.

The cabinet headed by Prime Minister Manmohan Singh last week gave green signal to allow up to 51 percent FDI in multi-brand retail, and raised the limit in single-brand retail from 51 percent to 100 percent.

The official document said the foreign retailers would be allowed to operate only in those cities where the population is more than 1 million.

"The policy rollout will cover only cities with a population of more than 1 million." As per 2011 census, of 7,935 towns and cities in the country, only 53 cities have over 1 million population.