FDI in Single Brand Retail Trading

The much awaited move by the Department of Industrial Policy and Promotion (DIPP), Government of India (GOI) has permitted upto 100% Foreign Direct Investment (FDI) in Single Brand Product Retail Trading under approval route vide Press Note 1 of 2012 dated 10.01.2012. The much hyped decision on allowing upto 51% in Single Brand Retail under automatic route and upto 51% in Multi Brand Retail did not get the nod of Ministry. The above increase in foreign participation is aimed at attracting investments in production and marketing, improving the availability of such goods for the consumer, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices. This move will allow players like Marks & Spencer to expand and IKEA to enter into Indian Market.

This permission is subject to the following conditions:

1. Products to be sold should be of a ‘Single Brand’ only;
2. Products should be sold under the same brand internationally;
3. ‘Single Brand’ product-retail trading should be branded during manufacturing;
4. The foreign investor should be the owner of the brand; and
5. Proposals involving FDI beyond 51% requires mandatory sourcing of at least 30% of the value of products sold from Indian ‘small industries/ village and cottage industries, artisans and craftsmen’.

Small industries are defined as industries which have a total investment in plant & machinery not exceeding US $ 1.00 million.

This move will surely encourage further foreign investment in India and even players like Wal-mart, Carrefour and Tesco might see this move as a step towards allowing FDI in multi brand retail in near future.