The government is looking to review the requirement for mandatory local sourcing of 30% of the goods sold by overseas players, who have entered India through the single-brand retail window.
The issue has come back to the fore after some global players like H&M flagged their concerns to the government. During a recent meeting with government officials, the Swedish company, which is the world’s second largest fashion retailer, pointed out that India is a large sourcing base for the company to meet its global business needs and the mandatory domestic purchase requirement was a hurdle for players setting up shop in the country.
H&M, which is opening several stores, is the latest player to air its concern against the policy. Sources said some of the complaints appeared genuine, especially when there was large volume of international purchases from India for the global supply chain. Several other players such as Zara and Marks & Spencer are already operating in the same space as H&M, which is seen as a late entrant.
“If companies are sourcing voluntarily, why do we need these restrictions which seem to belong to a different era?” said a source, suggesting that the entry of international players was already resulting in opening of stores and creation of jobs in the retail sector.
While allowing 100% FDI in single-brand retail, the UPA government had originally stipulated mandatory 30% sourcing from the small scale sector. But the clause was later amended after companies such as IKEA, the multinational furniture and home accessories giant, said it was not feasible to operate in the country with these restrictions.
Carve-outs have been made for segments such as “high technology” goods, paving the way for the entry of the likes of Apple.
After the change, IKEA alone has committed to invest close to Rs 12,500 crore in opening stores and creating infrastructure across the country.
But a fresh change in the sourcing policy may not be easy given that a section of officers within the government is of the view that such requirements are essential to promote domestic manufacturing and boost the ‘Make in India’ campaign. Logan Shaw JerseyShare This