New Delhi : India Tuesday allowed 100 percent foreign equity in single brand retail, notifying the norms that among other things said all wholly-owned international brands will need to source 30 percent of their requirements locally.
The government justified the move, saying that foreign direct investment (FDI) in single brand will attract investments in production and marketing, improve the availability of such goods for the consumer and encourage sourcing of goods from India, according to a notification by the commerce and industry ministry.
“The cabinet took the conscious decision to liberalise policy for FDI in single brand retail. FDI in single brand has led to emergence of some global majors in Indian market,” said Commerce and Industry Minister Anand Sharma.
Until now, global retailers owning a single brand had to look for an Indian partner as the cap on foreign equity was 51 percent.
The ministry had earlier mooted relaxation in multi-brand retail investment norms up to 51 percent, which led to a nation-wide furore and unrest, even within the ruling United Progressive Alliance government, resulting in the withdrawal of the decision last month.
“This is a welcome move with a clear potential to lift the general mood in the economy. Increased investments by foreign single brand retailers will not only help improve consumer choice but also enhance competitiveness of Indian enterprises,” said Rajan Bharti Mittal, vice chairman and managing director, Bharti Enterprises.
“We hope the initiative is a precursor to further liberalisation in the sector in the days to come,” he added.
As per the notifications, products to be sold should be of a single brand only as they are sold internationally.
Companies which propose to set up wholly owned subsidiaries under the single brand format would have to source at least 30 percent of the value of products sold from Indian small industries, artisans and craftspersons.
The notification defined small industries as entities which have a total investment in plant and machinery not exceeding $1 million.
“Further, if at any point in time, this valuation is exceeded, the industry shall not qualify as a ‘small industry’ for this purpose. The compliance of this condition will be ensured through self-certification by the company, to be subsequently checked, by statutory auditors,” according to the notification.
“This step will provide stimulus to domestic manufacturing value addition and help in technical upgradation of our local small industry,” said Sharma.
Also, only products which are branded during manufacturing will be considered for entry under the single-brand format.
“The move will not only mean more FDI but lead to employment and also lead to more choices for consumers. Global retailers are bound to bring in global best practices and technology that will lead to a more competitive marketplace benefiting the consumers,” said Rajiv Kumar, secretary general, Federation of Indian Chambers of Commerce and Industry (FICCI).