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Indian policy on 51% FDI in multi-brand retail simplified

22
Sep '12
The government of India recently permitted 51% foreign direct investment (FDI) in multi-brand retail. However, when fibre2fashion spoke to a few leaders in the apparel and garment retail sector earlier, they admitted that the policy was not clear to them. 

Fibre2fashion attempts to make the policy on 51% FDI in multi-brand retail simplified for our global readers from around 190 countries. Excerpts have been taken from a paper released by PricewaterhouseCoopers (PWC) India. 
 
The contours of the new policy are set out below:
 
Multi brand retail trading:
Minimum US $100 million investment by foreign investor. 
At least 50% of total FDI to be invested in ‘back-end infrastructure’ within three years of first tranche.
At least 30% of the value of procurement of manufactured and processed products to be sourced from Indian ‘small industries’ (those that have a total investment in plant and machinery not exceeding USD 1 million). 
For convenience of initial roll-outs, the sourcing compliance requirement for first 5-years has been averaged. After this period, it will be annual compliance.
Stores will be set up only in cities with a population of more than one million as per the last census. 
Stores can be set up only in those states that are notified by the government as having agreed or agreeing in future to allow FDI in multi-brand retail trading. 
States that have been currently notified include Andhra Pradesh, Assam, Delhi, Haryana, Jammu and Kashmir, Maharashtra, Manipur, Rajasthan, Uttarakhand, Daman and Diu and Dadra and Nagar Haveli (union territories). 
Given this, Mumbai, Pune, Delhi, Nagpur, Hyderabad and Jaipur are some of the cities where retail stores will currently be permissible.
Companies with FDI cannot undertake multi-brand retail trading through e-commerce. 
 
A high-level group, under the Minister of Consumer Affairs, may be constituted to examine the issues concerning internal trade. This group is expected to make recommendations for reforms accordingly.
 
 


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