Govt to relax mandatory 30% local sourcing norms for single-brand retailers

In order to attract big foreign players in the single-brand retail sector, the government is considering measures to relax the mandatory 30 per cent local sourcing norms by allowing them more time to comply with the regulations, sources said.

Big single-brand retail firms may also be permitted to open online stores before setting up brick-and-mortar shops.

Currently, online sale by a single-brand retail player is allowed only after opening of physical outlet.

As per a proposal under active consideration of the government, single-brand foreign retailers may be allowed to adjust the incremental sourcing of goods from India for global operations during the initial 10 years from the current five years (beginning April 1 of the year of the opening of first store) against the mandatory sourcing requirement of 30 per cent of purchases from India, they added.

The relaxation, however, would be subject to a condition that a foreign entity would have to bring foreign direct investment (FDI) in excess of USD 200 million within the first 2-3 years.

The move is aimed at attracting big players in the sector. The proposal requires approval of the union cabinet for implementation.

In January 2018, the government allowed 100 per cent FDI in the sector, permitting foreign players in single-brand retail trade to set up own shops in India without government approval.

That time, the government also relaxed mandatory local sourcing requirement of 30 per cent by stating that a foreign retailer would be able to get credit from incremental increase in sourcing for its global operations from India towards the mandatory 30 per cent local sourcing requirement for its business in the country.

During April-June 2018-19, FDI in India grew by 23 per cent to $12.75 billion. The Commerce and Industry Ministry has not released the foreign investment data after June 2018.