Local Sourcing in India: Protectionism and Global Procurement Goes Both Ways

Kudos to Procurement Leaders blog for surfacing the continued protectionism that India has over local sourcing within its own markets. In the post, the PL team captures a situation where India is contemplating changing its current protectionist legislation that "stipulate[s] that foreign retailers would only have been allowed to own 51% of the stores selling their products, while they would also have to source 30% of what they buy for the goods from small and medium sized Indian suppliers ... The government introduced the rules due to internal pressure from those worried about the impact of foreign direct investment on the domestic economy."

PL points out that IKEA pioneered the successful request for exceptions by "negotiating for a seven-year period in which to comply with the local sourcing rules while the government also announced it would allow companies to own 100% of the shops and use larger suppliers." Yet across the board, India still maintains tight controls over the amount of local content required for foreign companies sell certain goods within its borders. In other developing markets, such blatant restrictions are often specific to specific sectors (e.g., offset requirements with A&D).

Given India's success based on the free market embrace of leveraging cheaper, regional talent in the IT and related industries, we certainly hope that more and more companies that are smaller than Apple, who PL points out is also pushing for an exception to India's rules, press the world's largest democracy to ease these protectionist policies. After all, one of course wonders what the Indian reaction would be if Western countries insisted that Indian-led BPO engagements required 30% of the resources they involve come from the host country in which the contract was sold?

- Jason Busch

First Voice

  1. James Wilson:

    Hi,
    Thanks for the share.The main aim of India sourcing is to find reliable and trusted vendors.

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