FDI in Single Brand Product Retail Trading

FDI in Single Brand Product Retail Trading

2 August 2018 • bsamrishindia.com

India being amongst largest markets of the world, is eyed by all major international companies in the sphere of retail, e-comerce and wholesale trade. India is assessed as having huge population falling in Middle Income Group band with high purchasing power and with majority population being young and with mobile connections in excess of one billion, this sector would remain the hottest destination. There are more concerns on FDI in multi brand retail trade led by brands like Walmart, Tesco etc. due to concerns with respect to protection of local kiryana stores, agriculture sector and village and cottage industry (the sectors which have employed largest number of people in India), and the sector continues to be regulated and restricted for FDI. However, there are comparatively less concerns for single brand retail trading.

FDI in Single Brand product retail trading (SBRT):

Foreign Investment in Single Brand product retail trading 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 excess to global designs, technologies and management practices.

FDI in SBRT would be subject to the following conditions:

• products to be sold should be of a ‘Single Brand’
• products should be sold under the same brand internationally.
• products which are branded during manufacturing.
• a legally tenable agreement with the brand owner for licensing/franchise/sub-licence agreement
• for foreign investment beyond 51%, sourcing of 30% of the value of goods purchased by the investee company, will be done from India, preferably from MSMEs, cottage industries etc with sourcing as an average of five years’ total value of the goods purchased, beginning 1st April of the year of opening of the first retail store and subsequently to be met on annual basis.
• SBRT through brick and mortar stores are permitted for retail through e-commerce also
• SBRT entity would be permitted to set off incremental sourcing of goods from India for global operations during initial 5 years against mandatory sourcing of 30%. Incremental sourcing means increase in the value of the global sourcing in a FY from India over the preceding FY either directly or through its group company. After 5 years, SBRT entity shall be required to meet 30% sourcing norms directly.

So, FDI with a controlling stake for single brand retail trade is permitted with sourcing conditions from MSMEs and cottage industries for developments and benefits to MSMEs and cottage industries and thus promoting Make in India.

 For knowing more about FDI in multi brand retail trade, please read

FDI in Multi Brand Retail Trade