New Delhi: Welcoming the government’s decision to allow 100 percent foreign direct investment in single-brand retail, India’s small and medium enterprises (SMEs) say the mandatory 30 percent sourcing from micro and small industries will help them achieve higher growth.
A Confederation of Indian Industry (CII) survey found that the SME industry, by and large, supported 100 percent FDI in single-brand retail.
“The government’s decision of mandatory sourcing of a minimum of 30 percent from Indian micro and small industry will help SMEs to achieve higher growth in sales, size of the industry, capacity addition, increased orders, qualitative improvements and branding of the products, technology upgradation, employment etc,” said the survey on the impact of FDI in retail on SMEs.
According to the survey, mandatory sourcing will provide for expansion of the scales of production facilitating domestic value addition in manufacturing, thereby creating a multiplier effect on employment, technology upgradation and income generation, demand and further investment.
The SMEs are also bullish about 51 percent FDI in multi-brand retail and expect its earlier and speedier implementation would lead to the growth of organised retail.
“India’s growing retail boom is a success story. Fifty-one percent FDI in multi-brand retail and its early implementation would give a major boost to the all round growth of organized retail in the country having substantial positive impact on the growth of SMEs,” said Chandrajit Banerjee, director general, CII.
The CII survey was based on a large sample size covering different categories of SMEs according to sales turnover. This included companies with a turnover of Rs.25 lakh to Rs.1 crore, between Rs.1 crore to Rs.5 crore, Rs.5 crore to 25 crore and those having turnover between Rs.25 crore and 100 crore and above, from different regions of the country.
Asked how the SME industry considered the entry of MNC (multinational corporation) retailers, over 66 percent of the respondents said it was an opportunity. Around 21 percent of them perceived it as a threat. About 12.5 percent of respondents said the decision would have little or no impact on their businesses.
Over 98 percent of the respondents said opening of the FDI in retail will augment growth of sales of their products. Of them, around 21 percent foresaw the growth of sales to escalate more than 20 percent while 31 percent expected the impact in the range of 10-20 percent.
Around 48 percent of the respondents said the decision would have a positive impact whereas 35 percent expected no change in the employment scenario.