30% Sourcing under FDI in Multi-brand Retail made Mandatory from Indian MSEs Only

The Union government on 28 November 2011 asserted that 30 per cent sourcing under FDI in multi-brand retail has been made mandatory from Indian MSEs only. The government highlighted that the 30 per cent obligation before the global players is limited to India. The government’s explanation came amidst protests from the opposition and the micro and small enterprises (MSEs).

The government’s assertion however was found to be in total contrast to the note issued earlier which stated that the 30 per cent sourcing by global retailers can be done from anywhere in the world and is not India-specific. The provision for procurement from small units would not violate the WTO obligations.

According to government’s previous stand, the overseas players have to do 30 per cent of their sourcing from MSEs which, however, can be done from anywhere in the world and is not India-specific. The only condition placed was that these MSEs must not have more than $1 million [Rs.5 crore] investment in plant and machinery.

Small enterprises had raised concerns over the clause of 30 per cent sourcing from MSEs anywhere in the world, complaining that it would help the cheap Chinese goods rather than Indians in view of cheaper labour available in China.

Union cabinet on 24 November 2011 approved 51 per cent foreign direct investment (FDI) in multi-brand retail. The Cabinet also decided to raise the cap on foreign investment in single-brand retailing to 100 per cent from 51 per cent.