Indian Government adds negative twist to the newly approved FDI (Foreign Direct Investment)

In an unexpected move (at least not for this year) the Indian Government last week approved FDI legislation, allowing foreign companies to own 51% of a local retail business. It is the same Indian Government who has come today with a suprise U turn in the newly approved legislation.


The government on Monday said foreign retailers wanting to set up shop in India must source 30% of their inputs from domestic micro and small enterprises, backtracking from “anywhere in the world” announced last week under political pressure. “No, that was misconstrued,” trade minister Anand Sharma told reporters in New Delhi, referring to the press note issued on Friday that said 30% micro and small enterprises (MSE) sourcing could be done from anywhere in the world. Sourcing of 30% inputs has been made mandatory from Indian MSEs, he added. 


The Indian cabinet on Thursday allowed foreign retailers to own a 51% stake in multi-brand retail and raised foreign direct investment (FDI) in single brand to 100% to boost foreign inflows into the retail sector and improve its infrastructure. Sharma had told reporters on Friday that sourcing from MSEs anywhere in the world had been permitted as restricting it to India could invite trouble at the World Trade Organization.