Relaxation in FDI norms will support growth of retail sector
The Indian government has relaxed local sourcing norms for single-brand retailers entering the country through foreign direct investment (FDI) route. Fibre2Fashion takes reactions from a cross-section of the industry.
The automatic 100 per cent FDI in retail, with 30 per cent domestic sourcing above equity ownership of 51 per cent has been a long-standing demand of the industry and is welcome, though a little delayed. It will help FDI influx from many iconic brands, who stayed away as they did not want to risk their brand or operations with equity sharing arrangements. This is also likely to help in domestic job creation. However, the actual benefits will only be seen in the first quarter of the next financial, even if this rule gets applicable immediately. Further, many brands, like Tiffany and others, which have come under the franchise model in India, may rethink their strategy of India considering this new announcement.
The Indian retail sector traverses many industries such as clothing / lifestyle/ electronics and much more. The Cabinet's decision has definitely given impetus to many single-brand retailers to set up owned / non-franchise stores and direct e-commerce options. With the opening up of this segment, a lot of MNCs are likely to invest in India and push forward the Digital India movement. Additionally, the eased norms have added fuel to world-known brands to benefit local sourcing too.
We are delighted! H&M has been sourcing from India since the last 30 years for its international markets, it's great to see global sourcing is now part of the 30 per cent local sourcing norms. We see this supporting the ease of doing business in India and driving in larger investments from global companies.
It is a progressive decision by the government. It will be easier to meet the 30 per cent minimum local sourcing criteria for global brands wanting to run single brand retail, if they are also sourcing from India for other markets. I see this as a big opportunity for apparel companies, where indian factories have strong capabilities. This decision not only improves ease of doing business, but also promotes Make in India initiative by incentivising global sourcing from India.
Published on: 29/08/2019
DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.