No proposal to dilute FDI rules in single brand retail: MSME

The Micro, Small and Medium Enterprises (MSME) ministry has clarified that the government has not received any proposal to dilute guidelines regarding sourcing of goods related to foreign direct investment in the single-brand retail business.

The ministry's clarification follows concerns over diluting the mandatory condition of 30 per cent sourcing by 100 per cent foreign-owned single-brand retailers from small and cottage industries in the country.

"There is no proposal with this ministry at present for diluting FDI guidelines in single brand retail," MSME minister Vayalar Ravi said in a written reply to the Rajya Sabha.
The minister said the guidelines for FDI in retail were approved by the cabinet with inputs from all concerned ministries.

While the government has allowed 100 per cent foreign direct investment for single brand retailers like IKEA, Adidas, Louis Vuitton and Gucci, he said, for FDI beyond 51 per cent, the minimum 30 per cent sourcing of their merchandise from the domestic MSMEs is mandatory.

Swedish furniture retailer IKEA has sought easing of norms for compulsory procurement from the micro and small enterprises for its proposed 100 per cent owned network in India.

IKEA has argued that MSEs will case to remain so once its huge orders are placed on them -  that these domestic entities will have to expand capacity and pump in more investment and thus would not remain eligible MSMEs.