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2012-09-10

Govt dilutes sourcing norms on FDI

In latest development on FDI in single brand retail, the government has reportedly diluted the norms for foreign investors pertaining to source their products from SMEs. According to government officials, the Commerce and Industry Ministry has liberalised

In latest development on FDI in single brand retail, the government has reportedly diluted the norms for foreign investors pertaining to source their products from SMEs. According to government officials, the Commerce and Industry Ministry has liberalised the rules to accommodate Swedish furniture giant IKEA’s demands.

According to officials, softening the sourcing norms suggests that preference should be given to SMEs by foreign companies in sourcing their demands. However, the current policy has made 30 per cent sourcing of their demands from SMEs mandatory.

The move is critical for foreign investment in India as the dilution would ease off the entry barriers for foreign retailers who want to tap the emerging retail market in India. However, last week, the government had ruled any dilution in sourcing norms.

“We are not talking of any dilution. We are talking of clarity... We are very clear that 30 per cent of the sourcing has to be from India primarily from micro, small and medium enterprises,” Anand Sharma, Commerce and Industry minister had told earlier this month to reporters.

The minister had said that major retailers in the single brand were already sourcing from India. IKEA source products worth 1 billion euros from India and mainly from handloom and carpet clusters.

“Cabinet decision is taken and if there is any clarity required we will do that. If we feel that there is a need of clarity to ensure that their investments are facilitated, we will do that,” Sharma added earlier.

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