With the opening up of foreign direct investment (FDI) in single-brand and multi-brand retail, the Department of Industrial Policy and Promotion (DIPP) has dropped test marketing from its FDI policy. Test marketing is no longer relevant as foreign retailers, who invest here, will do their own test marketing, said officials.
Till now, the provision was allowed to the companies on permission from the government. The decision to drop it was taken as recently as last week when FDI caps and routes were changed for more than 10 sectors.
?Test marketing is no longer relevant with the advent of foreign retailers. Hence, it has been dropped from the FDI policy,? said a DIPP official.
In 2010, the department had changed the norms for FDI in test marketing and said that companies seeking test-marketing permission would also have to simultaneously set up manufacturing facilities or seek proper retail licence, as the case may be. Moreover, companies were given only two years to test-market their products.
Earlier, foreign companies first sought permission to test-market their products in the country and later applied for licences for retailing and/or setting up of manufacturing facilities.
However, these norms were flouted, mostly by retailers. The government also found violations by many firms that entered the retailing space using test-marketing licence.
The FDI policy says: ?Test marketing of such items, for which a company has approval to manufacture, provided the facility will be for a period of two years and investment in setting up manufacturing facility commences simultaneously with test marketing.?
Experts said that another prevalent form of violation of the FDI rules was that companies were importing products and selling them in the retail market using their test-marketing licences.