Govt allows 100% FDI in single-brand retail via automatic

Foreign players in single brand retail trade will now be able to set up own shops in India without government approval.

This follows a Cabinet decision to allow 100 per cent FDI in single brand retail under automatic route, while also easing local sourcing norms.

Industry players welcomed the development saying it would help attract more foreign investments in the sector and boost the economy and generate employment.

Till date, 49 per cent FDI was allowed under automatic route, while beyond that government approval was required.

"It has now been decided to permit 100 per cent FDI under automatic route for SBRT (single brand retail trading)," the government said in a statement.
 

Moreover, the government has also relaxed mandatory local sourcing requirement of 30 per cent, which has been a long standing demand from players such as IKEA and H&M.

Under the relaxed norms, a foreign retailer will 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.

"What the government has said is that the single brand retailers, who are also sourcing from India for their global markets for the incremental increase in their global sourcing, will be given credit for five years," DIPP Secretary Ramesh Abhishek told reporters here.

As per the new rule, an SBRT entity is allowed to set off its incremental sourcing of goods from India for global operations during the initial 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.

He, however, said, "They will have to comply with the 30 per cent local sourcing requirement."

Reacting to the development, Retailers Association of India CEO Kumar Rajagopalan said: "In the long run, today's reform would help boost employment, bring in wide product choices for consumers and help grow not just the economy, but the nation as a whole."

Expressing similar views, Wildcraft cofounder Siddharth Sood said: "The consumer in the country will be direct beneficiary of this move as they will have access to the brands hitherto unavailable in the country as it will be much easier for the international brands to set up shop in India."

This opens avenues for Indian firms to raise more fund from foreign investors and makes it easier for them to pursue larger domestic and global expansion strategies, Sood added.

CBRE Chairman India and South East Asia Anshuman Magazine said: "By allowing 100 per cent FDI in single-brand retail via the automatic route, the government is further strengthening its commitment to attract foreign investments into India and boost the overall economy."

Deloitte India Partner Rajat Wahi also said global brands across different categories will be aided through this, providing further options to Indian consumers and improving India's ranking in ease of doing business.