In a move that could lead to marked segmentation in policy governing foreign direct investment (FDI) in single-brand retail, the government is considering a new set of guidelines for retail service providers vis-?-vis other retailers.
At present, 51% FDI is allowed in single-brand retail. However, given the fresh proposals before the Foreign Investment Promotion Board from retail service providers, the government is considering fresh guidelines for FDI in this segment. The move is also necessitated by the fact that, except for financial services like banking, insurance, non-banking finance companies, courier companies and air transport services, no other service is mentioned in the FDI policy.
A policy decision on these lines could have a favourable impact on the entry of big box foreign retailers like Tesco, Carrefour and others who could then club their services under a single brand. These companies could combine their merchandising services under this brand to seek entry into the country.
The move comes at a time when the government is reviewing FDI norms to prevent retailers from coming in via the franchise route. At present, several firms have nominated master franchisees to bypass the 51% cap on single-brand retail.
Recently, Singapore-based EYLM Pvt Ltd sought to enter into a JV with an Indian company, which would in turn enter into a master franchise pact with Spanish laundry and dry-cleaning chain Pressto. However, in the absence of a concrete policy on retail service providers, the government decided to first lay down specific guidelines for foreign companies.
The department of industrial policy and promotion recently rejected a proposal by the world?s largest coffee chain Starbucks on the grounds that it was planning to set up retail outlets under the franchise route, making New Horizon its master franchisee in India.
