Govt. allows FDI in retail sector

21 November 2011: The Union Government is likely to raise the bar on foreign direct investment (FDI) in single-brand retail by proposing a hike from 51percent to 100 percent, but it may not make much sense for players except a few like furniture maker IKEA to set up shop in India. Strict riders like a minimum of 30percent sourcing from SMEs, cottage industries and villages according to experts will be another roadblock for foreign retailers to enter the Indian market.

According to the Cabinet note floated by the department of industrial policy and promotion (DIPP) proposing the increase in the FDI limit, in respect of proposals involving FDI beyond 51percent, 30 percent sourcing will mandatory have to be done from SMEs/ village and cottage industries artisans and craftsmen. The note also goes on to define the ‘small industries’ saying, industries which have a total investment in plant and machinery not exceeding $0.25 million (approx Rs 1.20 crore) DIPP has also proposed a caveat that the valuation refers to the value at the time of installation without providing for depreciation.

Source: Financial Express