MUMBAI, Jan 23 (Reuters) - Local-sourcing requirements could deter foreign retailers from taking advantage of new rules allowing them to take full ownership of their operations in India, and many potential investors are seeking more clarity from the government.
India formally eliminated restrictions on foreign investment in its single-brand retail sector earlier this month, but made it mandatory for foreign firms to source 30 percent of their requirements from small and medium enterprises. The caveat defines small industries as those with a total investment in plant and machinery of up to 50 million rupees (about $1 million).
In December the government suspended plans to open India's $450 billion supermarket sector to foreign firms, backtracking from one of its boldest reforms in years. Removing restrictions in the single-brand sector -- which was announced at the same time as the supermarket policy change -- was relatively uncontroversial.
A number of retail players are pressing ahead with plans to enter and expand in the country in joint venture partnerships with a 51 percent foreign ownership cap (see story). The 51 percent cap, which was permitted even earlier, does not make local sourcing mandatory.
Source: Reuters
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