New Delhi: CII on Friday supported the government decision of mandatory 30 percent sourcing from Indian micro and small (SME) units by the foreign single-brand retailers, who wish to hold more than 51 percent stake in their units in this country.
In its survey on impact of foreign direct investment (FDI) in retail on SME, CII said 100 percent FDI in single- brand will help units achieve higher growth in sales, increased orders, quality improvement and branding of items.
Besides, CII Director General Chandrajit Banerjee said, "...51 percent FDI in multi-brand retail and its early implementation would give a major boost to the all round growth of organised retail in the country, having substantial positive impact on the growth of SMEs."
India allows 100 percent FDI in wholesale or cash-and- carry segment but has restricted it to 51 percent in single- brand retail. It does not allow any foreign investment in the multi-brand, or supermarket retail.
Recently, the government moved to open the multi-brand retail but has put it on hold amid strong opposition from various quarters. It has also proposed 100 FDI in single-brand stores.
The survey conducted across the sector, said that 66.7 percent of respondents see FDI as an "opportunity" for the sector while around 21 percent perceive it as a threat.
Majority of them (98.6 percent) opined that opening of the FDI in retail will augment growth of sales of their products.
On the aspect of the possible impact on the size of the industry, business and capacity addition, majority of the respondents (98 per cent) expect the size of the industry to grow.
A negligible two per cent of the SMEs feel that the decision would have a negative impact on the growth of size of the business, it said.
The mandatory sourcing will ensure SMEs receiving a sure source of market for their products while ensuring value realisation for their products/supplies, it said.
"This will also 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".