NEW DELHI: The government is readying to address the concerns of foreign brands owning stores in India over the requirement of mandatory procurement of 30% inputs from local small and medium enterprises.
A senior official told ET that the industry ministry is open to review, revise and even waive the requirement after investors gave the thumbs down to the policy change by its Department of Policy and Promotion involving more than 51% foreign direct investment in single-brand retail.
“We are soon going to invite for consultations representatives of global retailers who are interested in investing in India but are keeping away due to some issues with the sourcing clause,” the official said. “Only after the discussions we can take a call on the limit. It may be revised down or waived off or some additional conditions may be put in.”
Prospective foreign investors, such as LVMH and Ikea, are expected to be invited for discussions which are expected to be wrapped up before the Parliament resumes the budget session on April 24.
“The sourcing requirement puts us in a dire position,” said Franck Dardenne, general manager, LVMH Watches and Jewellery India, “We haven’t received any intimation from the government but if and when we do we will definitely go and share our concerns and views. This will be a very positive step.”
The nod to more than 51% FDI in single-brand retail was expected to speed up investment inflows, especially since several retailers such as Ikea and Gap have been reluctant to form partnerships with domestic players to set up stores in the country.
However, the need for 30% local buying proved to be a dampener. Big retailers were not confident that the local SMEs – firms which have a maximum investment in plant and machinery of $1 million – could meet the quality norms of the global brands.