The government is mulling some significant relaxation in the foreign direct investment (FDI) policy for single-brand retail trading, even as it gets a series of applications from international retailers that are forcing it to give a serious relook at the policy.
First, the government is planning to relax the clause that the foreign investor should also be the owner of the brand. Officials have told Business Standard that during several discussions with foreign retailers, the government finds there are brands planning to foray into India in a big away, not with the same brand under which they operate internationally but some other which it finds a fit for the market here.
Recently, the Foreign Investment Promotion Board under the ministry of finance rejected a proposal by Zara Holdings Netherlands for bringing the Massimo Dutti brand chain in India. The rejection was based on this same clause: Zara Holdings was not the majority shareholder in Massimo Dutti, the main owner of the brand being a Spanish retail chain, Inditex.
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“We are weighing various options as to how the policy can be made more investor-friendly. The policy can always be reviewed, keeping in mind the needs of the investors. The ultimate goal is to bring in more FDI into the country. Several discussions with the retailers have made us re-think on how to streamline the policy,” an official told Business Standard.
The official said it might relax the clause based on the fact that the company that filed the application might not be a majority shareholder but would have some stake in the brand which it intended to bring.
The official also said the government had got several suggestions from international retail chains on relaxing another clause, stating only those products would be allowed to be sold in India that operate under the same brand internationally.
The official said the government was planning to ease this norm, too, as it had got suggestions from some of the global majors that they’d enter India only if they were allowed to sell products under a different name within a separate format.
For example, if American clothing giant GUESS, which also owns another expensive fashion brand called Marciano, wants to enter India with the intention of bringing its collection of jewellery and watches and not clothing, then the policy should not act as a hurdle. While there are standalone GUESS stores across the world, the Marciano brand follows a mall-based store format.
This is also one of the demands made by Swedish conglomerate IKEA, that has formally proposed to pour in $1.9 billion over 10-15 years to open 25 retail stores, restaurants and cafes, among others. Since the policy of allowing 100 per cent FDI in single-brand retail trade was notified in January, the government has received only three formal applications — from IKEA, the UK-based Pavers Ltd and American shoemaker SKECHERS.
