India Opens Up its Retail Sector to Foreign Investment

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India Brand Equity Foundation - IBEF ( issued a report stating that the Union Government made a major policy announcement permitting Foreign Direct Investment (FDI) in its retail sector. The lucrative Indian retail market, currently dominated by domestic players will now be open to investment from foreign players, who have been eyeing the burgeoning Indian retail sector for some time now.

Indian Government announces FDI in Multi-Brand Retail

As per the report issued by India Brand Equity Foundation (IBEF), under the new policy, the government has announced FDI of 51 per cent for the multi-brand retailers that are interested in setting up operations in India. At the same time, the government also allowed 100 per cent FDI in single-brand retail.

It is expected that the radical FDI policy will drive the growth of the retail sector in the times to come. Under the policy structure announced by the government, the state governments are open to decide whether to allow FDI in multi-brand retail or not in their respective states.

States like Delhi, Maharashtra, Rajasthan, and Uttarakhand have already expressed their willingness to implement FDI policies in multi-brand retail to the Union Government. It is expected that the decision of the government would pave way for global retail chains like Walmart, Carrefour, and Tesco to bring the foreign investment in areas like cold chains and packaging.

It should be noted here that multinational retailers like Walmart, Carrefour and Metro already have presence in India but in alliance with a local partner.

With this policy change, the multinational retailers would now be able to sell directly in India and benefit from the growing middle class Indian population. As per the policy structure, the minimum FDI limit in single-brand retail has been set at US$ 100 million and half of the investment has to be made in areas like cold storage chains and warehouses.

It is expected that allowing FDI in single brand and multi-brand retail would create jobs in the locations where they will open up stores also in the procurement chain. An important condition in the single-brand FDI policy is that the companies will need to fulfil the requirement of 30 per cent local procurement while doing business in India. Any company that is looking for a waiver of the mandatory 30 per cent local sourcing norms would have to set up a manufacturing facility in the country.

Clearly, the FDI announcements made by the government both in multi-brand and single-brand retail are expected to change the landscape of the retail industry and the positive impact of this policy will be felt by the domestic and international retailers in the long run.

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About IBEF
India Brand Equity Foundation is a Trust established by the Ministry of Commerce with the Confederation of Indian Industry (CII) as its associate. IBEF’s primary objective is to promote and create international awareness of the Made in India label in markets overseas and to facilitate the dissemination of knowledge of Indian products and services. IBEF is engaged in building Brand India. Towards this objective IBEF works closely with stakeholders across government and industry.

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Aditi Thakur

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