New Strategies


FDI in SME Sector


Foreign direct investment in SME sector

New strategies

Though it seems the government does not maintain a separate list of FDI in the SME sector, the government has provided certain provisions for FDI in retail trading sector to look after the interest of Indian SME sector.

 The Central government has put in place new investor-friendly policy with the intention to promote foreign direct investment(FDI). According to this policy, except a small negative list, most sectors are open for 100% FDI under the automatic route. Further, the policy on FDI is reviewed on an ongoing basis, to ensure that India remains attractive and investor friendly destination. Changes are made in the policy after having intensive consultations with stakeholders including apex industry chambers, associations, representatives of industries and groups and other organizations taking into consideration their views and comments. The FDI policy is applicable across the sectors and equally applies to small and medium enterprise (SME) sector.

Foreign Investment in various sectors bring international best practices and latest technologies leading to economic growth in the country and providing much needed impetus to manufacturing sector and job creation in India. In line with the policy to provide boost to the manufacturing sector and give impetus to the Make in India initiative, the Government has permitted a manufacturer to sell its product through wholesale and retail, including through e-commerce under automatic route. To look after the interest of Indian SME sector, certain provisions have been provided for FDI in retail trading sector. For retail trading of single brand products, in respect of proposals involving foreign investment beyond 51%, sourcing of 30% of the value of goods purchased, has been mandated to be done from India, preferably from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors.

For the benefit of farmers, giving impetus to food processing industry and create vast employment opportunities, 100% FDI under government route for trading, including through e-commerce, has been permitted in respect of food products manufactured and produced in India.