Commerce and Industry Ministry's keenness to broaden SME definition welcomed

NEW DELHI: As the Union Commerce and Industry Ministry has displayed its keenness to ease the sourcing norms for foreign players to invest in India's single-brand retail sector with the aim to accommodate Swedish furniture player IKEA’s demands, the SME Rating Agency of India Ltd (SMERA) feels that this noteworthy move will promote foreign direct investment (FDI) in India and also benefit the SME sector.

While speaking to SME News about the Centre's keenness to change SME definition to facilitate investments, Parag Patki, CEO of SMERA, said, “In SMERA’s opinion, a change in the policy to facilitate the growth of SMEs and still keeping them under the SME category is indeed a welcome step. It would also enable SMEs to cater to large MNC's and promote FDI in India. SMERA has seen some of its rated MSMEs act as a supplier to IKEA. Currently IKEA sources from the handloom, handicrafts sector and provides design, marketing and technology to its MSME suppliers. A greater presence of the Swedish giant if accompanied by technology, finances and supply chain expertise would surely benefit the sector.”

According to the present policy, global retailers compulsorily need to source 30% of their requirement from Indian small industries.

Meanwhile, MSME Ministry has openly objected to the change in SME definition to help foreign retail brands establish shop in India. If the change occurs, it will help the potential foreign investors to foray in India who have been eyeing for clarity in this regard.

The Department of Industrial Policy and Promotion (DIPP) has hinted that although it is difficult to dilute the foreign direct investment (FDI) policy for single-brand retail sector, but a special provision could be the key for IKEA which has committed to opt for Rs 10,500-crore investment in India.

SMEs are those units that invested up to $1 million in plant and machinery. The SME sector is an important part of Indian economy, contributing to 45% of the industrial output, 40% of exports, employing 60 million people, creating 1.3 million jobs every year and manufacturing over 8000 products for the local and global markets.