A rider in the multi-brand FDI policy which mandates 30 per cent sourcing by retail chains like Walmart from the micro and small enterprises (MSEs) may be more helpful to the Chinese rather than Indians, industry fears.
Small industries have raised serious concerns over the fine prints of the controversial policy, which gives liberty to the foreign players to source 30 per cent of their requirements from MSEs anywhere in the world. The fear is more with regard to China with which India is already running a huge trade deficit of $20 billion (about Rs 1.05 lakh crore) as Chinese goods are pre-dominant in the Indian markets.
"China has done nuisance for us. And after this (the FDI policy) it will become more difficult for us," President of Federation of Indian Small and Medium Enterprises (FISME) V K Aggarwal said.
He said that the issue had come up in the meetings of Planning Commission with the industry, where it was stressed that India should seek FDI in multi-brand retail on its own terms and model like the Chinese have done to foreign investors.
"This (the policy) has come as a shock to us. It makes no sense at all. Indian government is not supposed to take care of the MSEs of entire world," Aggarwal said. In the Cabinet decision of November 24, the overseas players have to do 30 per cent of their sourcing from MSEs which however "can be done from anywhere in the world and is not India specific".
The only condition is that these MSEs must not have more than $1 million (Rs 5 crore) investment in plant and machinery - in line with the Indian MSME Act. However, the government has said that the language of the policy has been framed in such a way that it should not violate India's WTO obligations.
Experts, requesting anonymity, agreed saying if the MSEs sourcing was restricted to India, it would be violative of the Trade Related Investment Measures (TRIMs) agreement and Most Favoured Nation (MFN) obligations of the World Trade
R P Singh, who recently retired as Secretary in the Department of Industrial Policy and Promotion (DIPP) said: "technically they (foreign retail chains) can source from China and sell here".
But measures like anti-dumping duties are available to check flooding of the imported goods, Singh said. Secretary in Micro, Small and Medium Enterprises (MSMEs) Radha Krishna Mathur said, "It would be premature to comment".