The Indian government on Monday changed its stand on sourcing rules for international retailers who want to set up shop in the South Asian nation, in the face of stiff political opposition to its move to open up the sector to foreign investment.

On Friday, the government said foreign retailers looking to invest in India should procure 30 percent of manufactured or processed products from small-scale industries "anywhere in the world". However, on Monday, it said they must source a minimum of 30 percent from small industries in India, so as to encourage local manufacturing and create employment.

The change in stance comes as the Congress party-led United Progressive Alliance government faces sharp criticism from opposition parties as well as some key government allies for allowing multi-brand retailers like Wal-Mart Stores Inc. and Carrefour SA to directly invest up to 51 percent in India. Such companies weren't previously allowed to invest in local retail operations.