FDI in retail subject to 30 per cent sourcing from small units in India: government

The government has made a climb-down from its earlier stance on the opening up of the retail sector to foreign investors, saying foreign retailers setting up operations in India would have to source 30 per cent of their requirements from small-scale units here.

Sourcing of a minimum of 30 per cent from Indian micro and small industry having capital investment of not more than $1 million has been made mandatory. This will provide the scales to encourage domestic value addition and manufacturing, thereby creating a multiplier effect for employment, technology upgradation and income generation, the government said in a clarification issued today.

The center's change of mind comes after political parties and some state governments mounted opposition to the far-reaching economic reform and the opposition stalled Parliament proceedings over the FDI issue.

The government is likely to call a meeting of the main political parties tomorrow to discuss ways to end the parliamentary standoff.

The government also clarified on the policy stipulation that 51 per cent FDI in multi brand retail will be allowed through the government approval route, subject to adequate safeguards for domestic stakeholders.

The policy rollout will cover only cities with a population of more than 1 million (as per 2011 census, there are only 53 such cities whereas there are 7935 towns and cities in India), the official release said.

Moreover, India has a federal structure of government. The FDI policy is an enabling framework and it remains the prerogative of the states to adopt it. On ground implementation of policy will clearly be within the parameters of state laws and regulations.

A strong legal framework in the form of Competition Commission is available to deal with any anti competitive practices, including predatory pricing.