SME Times News Bureau | 28 Jan, 2011
A Survey on the impact of Foreign Direct Investment (FDI) in retail on small and medium enterprises (SMEs), undertaken by the Confederation of Indian Industry (CII) confirms that SME industry supports 100 percent FDI in single brand retail.

CII survey, released on Friday in New Delhi, said, "By and large small and medium enterprise (SME) industry supports 100 percent FDI in single brand retail and expects earlier and speedier implementation of 51 percent FDI in multi-brand retail and notification to that effect in consideration of the overall benefits for industry and business."

The government recently allowed 100 percent FDI in single brand retail, notifying the norms that among other things said all wholly owned international brands will need to source at least 30 percent of their requirement from domestic small and cottage industries, which have a maximum investment in plant and machinery of USD 1 million (about Rs 5 crore).

"India's growing retail boom is a success story. 51 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," says Chandrajit Banerjee, Director General, CII.

The CII Survey is based on a large sample size covering different categories of SMEs according to sales turnover including companies with a turnover of Rs.25 lakhs to 1 crore, between Rs.1 crore to Rs.5 crore, Rs 5 crore to 25 crore and SMEs having turnover between Rs 25 crore and 100 crore and above, from different regions of the country.

The CII Survey reveals that almost 96 percent of the respondents from SME sector are aware of the Government’s earlier decision to allow 100 percent FDI in single brand retail and 51 percent FDI in multi-brand retail and also of the latest notification in January this year.

A majority of the SME companies surveyed, have supported the government’s decision and the notification allowing 100 percent FDI in single brand retail and 52 percent of respondents hope for an early implementation of 51 percent FDI in multi-brand retail with required notification.

Majority of the respondents (98.6 percent) are of the opinion that the 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 percent) expect the size of their Industry/ company to grow with the opening of 51 percent FDI in multi-brand retail along with 100 percent FDI in single-brand retail.

Over 56 percent of the respondents are also of the view that the government’s decision of mandatory sourcing of a minimum of 30 percent from Indian micro and small industry will help in achieving qualitative improvements and branding of the products.

This in turn will ensure SMEs in receiving a sure source of market for their products while ensuring value realisation for their products/supplies. 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 up gradation and income generation, demand and further investment

Also 68.7 percent of the respondents are of the opinion that the opening up of retail would lead to improvements in the supply chain efficiencies in their sector which in turn will integrate small and medium size enterprises into the modern trade process, resulting in substantial amount of knowledge and skills transfer in the sector.

Only around 16 percent expect the impact of FDI in retail on the employment in the SME sector to be negative.