In a clear message to foreign retailers eyeing entry into single-brand retail in India through the wholly-owned route, the government has ruled out even "theoretically discussing" any change in the mandatory requirement for prospective foreign direct investors to source from local, small and medium enterprises (SMEs).

The clause is part of the newly notified guidelines for 100 percent FDI in single-brand retail, and had been widely opposed by major foreign retailers, especially in the luxury segment.

The government decided to increase the FDI limit in single-brand retail from 51 to 100 percent. Accordingly, a notification was issued on 10 January. It said that in respect of proposals involving FDI beyond 51 percent, there will be mandatory sourcing of at least 30 percent of the total value of the products sold from Indian "small industries/village and cottage industries, artisans and craftsmen".