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Indian govt eases norm for FDI in single-brand retail
02
Aug '13
The Government of India has decided to amend the provision related to foreign direct investment (FDI) route in single-brand retail, including apparel retail trading.
 
At a meeting, the Union Cabinet approved the proposal to allow up to 49 percent FDI in single-brand product retail trading through the automatic route.
 
Earlier, all the FDI proposals by single-brand retail companies were subject to the Government approval.
 
The existing paragraphs 6.2.16.4 (2) (d) and 6.2.16.4 (3) of ‘Circular 1 of 2013-Consolidated FDI Policy’ have now been changed.
 
The revised para 6.2.16.4 (2) (d) now reads: “A non-resident entity or entities, whether owner of the brand or otherwise shall be permitted to undertake ‘Single Brand’ product retail trading in the country for the specific brand, directly or through a legally tenable agreement with the brand owner for undertaking single brand product retail trading.”
 
However, the onus for ensuring compliance with this condition will rest with the Indian entity carrying out single brand product retail trading in India.
 
The investing entity shall provide evidence to this effect at the time of seeking approval, including a copy of the licensing/ franchise/sub-license agreement, specifically indicating compliance with the above condition.
 
The requisite evidence should be filed with the Reserve Bank of India (RBI) for the automatic route and Secretariat for Industrial Assistance (SIA)/Foreign Investment Promotion Board (FIPB) for cases involving approval of the Government i.e. where the investment in single-brand retail is between 49 percent and 100 percent.
 
The amended para 6.2.16.4 (3) now states, “Application seeking permission of the Government for FDI exceeding 49% in a company which proposes to undertake single brand retail trading in India would be made to the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy and Promotion (DIPP).”
 
“The applications would specifically indicate the product/ product categories which are proposed to be sold under a ‘Single Brand’. Any addition to the product/ product categories to be sold under ‘Single Brand’ would require a fresh approval of the Government. In case of FDI up to 49% the product/ product categories proposed to be sold except food products would be provided to the RBI.” 
 
The FDI entry route in single-brand retail has been liberalized by the Government with a view to stimulating FDI inflows in to the country, and thereby contributing to growth of investment, incomes and employment.
 
The latest decision of the Government has been taken in the backdrop of fairly modest FDI inflows over the last year and lack of growth in gross domestic capital formation.
 

Fibre2fashion News Desk - India

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