Government notifies changes to FDI in single-brand retail

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Published: September 19, 2019 2:17:38 AM

The 30% local sourcing norms had been a pain point for many companies, restricting their India expansion plans.  In 2012, the government had allowed 100% FDI in single-brand retail under the government approval route.

Government, FDI, single brand retail, Apple, IKEA, H&M, foreign direct investment, economy newsIn January 2018, the government allowed up to 100% FDI in single-brand retail via automatic route, scrapping the need to seek its approval beyond 49%.

The government on Wednesday formally notified the amendments to the foreign direct investment (FDI) policy  in single-brand retail.  Last month, the Cabinet had relaxed key aspects of the 30% local sourcing rules applicable to single-brand retail entities where FDI is over 51%.

In a boost to foreign behemoths such as Apple, IKEA and H&M, single-brand retail entities can now adjust their entire procurement of goods from India for their global operations against their mandatory 30% local sourcing requirements. Even sourcing for global operations done through group companies (resident or non-resident) or indirectly via third parties such as contract manufacturers will be counted towards domestic sourcing obligation.

Similarly, all procurements made from India, be it for domestic sales or exports, by such an entity will be counted towards local sourcing. Further, single-brand retailers have now been permitted to set up online stores before establishing brick-and-mortar stores, though they have to open offline stores within two years of conducting online business.

The 30% local sourcing norms had been a pain point for many companies, restricting their India expansion plans.  In 2012, the government had allowed 100% FDI in single-brand retail under the government approval route. In January 2018, the government allowed up to 100% FDI in single-brand retail via automatic route, scrapping the need to seek its approval beyond 49%.

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