A white paper of cabinet’s decision on FDI suggested that 30 percent procurement from SME sector is not India specific. In a response to proposals regarding FDI beyond 51 percent, cabinet suggested that 30 percent sourcing has been made mandatory from artisans and craftsmen/SME village and cottage industries.

The 30 percent sourcing should be done from micro and small scale industries. This can be sourced from anywhere in the world and is not specifically confined to Indian SMEs. However, there is the anticipation and fear that cheap Chinese products will take over the market and severely damage SME owners in India. The paper on cabinet decision also says that 30 percent sourcing will be done from SME enterprises whose plant and machinery are worth less than USD 1 million.

Small industries are categorized as the ones whose plant and machinery valuation is within USD 1.00 million. However, when the valuation exceeds this level then the industry is no longer small scale. This classification ensures that the SME sector that includes artisans, craftsman, handicraft, and cottage industry shall be benefited. It is going to benefit textiles, gems & jewelry, leather & jute manufacturers. This remains applicable for multi-brand as well as single brand retail especially in cases where foreign equity exceeds 51 percent.