FDI In Single Brand Product Retail Trading in India

• By: 'Arjun Anand'
• Date: 26-Apr-2019
• Post in: Foreign Direct Investment

FDI Policy allows FDI up to 100 percent in entities involved in Single Brand Retail Trading (SBRT) business without any government approval subject to certain conditions. Some of the key conditions are (a) the FDI Investee entities should ensure that products to be sold should be of a ‘Single Brand’ only and should be sold under the same brand internationally (i.e. products should be sold under the same brand in one or more countries other than India); (b) ‘Single Brand’ product-retailing would cover only products which are branded during  manufacturing;  (c) local sourcing of products that require the investee entities, receiving FDI beyond 51 percent, to mandatorily source at least 30 percent of the value of goods purchased from India, preferably from MSMEs village and cottage industries, artisans and craftsmen, in all sectors. These local procurement requirements would have to be met as an average of ‘five years’ total value of the goods purchased, beginning April 1 of the year during which the first tranche of FDI is received. Thereafter, this requirement is to be complied on an annual basis. However, the FDI Policy provides certain relaxation, for the initial 5 years commencing from the date of opening the 1^st store, by providing an option to the investee entities to set off their incremental sourcing of goods from India for its global operations, against the mandatory 30 percent domestic sourcing of goods requirement. Goods sourced globally from India by the group companies of these investee entities would also be considered for the purpose of availing this set off. Incremental sourcing means the increase in terms of value of goods sourced from India for that single brand (in rupee terms) in a particular financial year over the preceding one. Moreover, the government also may relax sourcing norms for these investee entities undertaking SBRT of products having ‘state-of-art’ and ‘cutting-edge’ technology and where local sourcing is not possible.