FDI norm in multi-brand retail relaxed,sourcing clause diluted

Government today eased norms for FDI in multi-brand retail, diluting contentious 30 per cent sourcing clause and allowing foreign chains to set up stores in cities with less than ten lakh population to accommodate demands of global retailers like Walmart and Tesco.
In a slew of decisions taken by the Cabinet, the investment requirement on back-end infrastructure by a foreign retailer has been kept at 50 per cent of the first tranche of investment only. The mandatory requirement is that foreign retailers have to bring in a minimum of USD 100 million capital for setting up shops in the country.

"Thereafter, this would be need-based business decisions by investors and their domestic partner," Commerce and Industry Minister Anand Sharma told reporters here.
He further said global multi-brand retailers will now have to source 30 per cent of their products from small and medium enterprises only at the time of start of business.
Sharma said relaxing the condition was keeping in mind not to hurt interest of entrepreneurs, who have done well to grow from being owner of a micro unit to a bigger one.
So for foreign retailers, "one condition remains that when they start the first engagement (for sourcing), they have to be MSME."

Clarifying further on the sourcing clause, the minister said procurement from farmers and other agricultural co-operatives will be included in the mandatory sourcing conditions.
"There was demand to include agri-cooperative and farmers' co-operatives in the category of MSMEs. This has been accepted and approved," he said.
Sharma said the earlier condition for foreign retailers to set up stores in only cities with population more than 10 lakh has been relaxed, leaving it to states to let them enter towns with lesser population.