Eyeing retail push, govt seeks to tweak SME definition: Sharma

The government is considering tweaking the definition of small and medium enterprises (SMEs) for giving a boost to single-brand retail in the country.

With an aim to bringing in more foreign investments in the country, struggling with high inflation and low growth, the government wants to remove hurdles in way of such investments from across the sectors, including single-brand retail.

Although 100 per cent FDI in single brand retail was notified in January, only two proposals — IKEA and Pavers —have been received by the government so far.

As per the present definition, all entities having investment of $1 million in plant and machinery would fall under the ambit of SMEs for the purpose of single brand retail. However, as the sector thrives, SMEs would grow and the $1 million definition will need tweaking.

"Policy evolution is a continuous process. Once the Indian SMEs are engaged (with foreign players), the definition will require a change because you have a SME performing well and you cannot punish it for that. Global majors are already sourcing from them… When you are selling this kind (30 per cent) to a global major, you may not remain a SME under the present definition. In one year, revenue and profit may be doubled, so therefore the definition has to keep on evolving," said commerce and industry minister Anand Sharma, who is leading a delegation of business leaders to Sri Lanka.

Sharma added that the guidelines will have absolute clarity. The Swedish firm IKEA had earlier written to the Department of Industrial Policy and Promotion (DIPP) asking for certain concessions in the existing FDI policy regarding definition of SMEs and brand and had asked for 10 years time to meet the 30 per cent sourcing clause.

Sharma, further said that the government has received four more proposals for setting up National Manufacturing Investment Zones (NMIZ) of which "three are being seriously considered".

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