Tuesday, 17 January 2012

100% Foreign Direct Investment (FDI) in Single Brand Product Retail Trading

Foreign Direct Investment (FDI) means investment by non-resident entity/person resident outside India in the capital of the Indian company. It is the policy of the Government of India (GOI) to attract and promote productive FDI in activities which significantly contribute to industrialization and socio-economic development. FDI supplements domestic capital and technology.  Presently, 51% FDI was permitted in Single Brand Retail which was opened to Foreign Players almost 6 years ago. GOI has allowed 100% FDI in this segment of retailing paving the way for International Players vide notification dated 10-01-2012. The highlights of the notification of GOI is as under :

(1) Foreign Investment in Single Brand product retail trading is aimed at attracting investments in production and marketing, improving the availability of such goods for the consumer, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices.

(2) FDI in Single Brand product retail trading would be subject to the following conditions:
(a) Products to be sold should be of a 'Single Brand' only.
(b) Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India.
(c) 'Single Brand' product-retail trading would cover only products which are branded during manufacturing.
(d) The foreign investor should be the owner of the brand.
(e) In respect of proposals involving FDI beyond 51%, mandatory sourcing of at least 30% of the value of products sold would have to be done from Indian 'small industries/ village and cottage industries, artisans and craftsmen'. 'Small industries' would be defined as industries which have a total investment in plant & machinery not exceeding US $ 1.00 million. This valuation refers to the value at the time of installation, without providing for depreciation. Further, if at any point in time, this valuation is exceeded, the industry shall not qualify as a 'small industry' for this purpose. The compliance of this condition will be ensured through self-certification by the company, to be subsequently checked, by statutory auditors, from the duly certified accounts, which the company will be required to maintain.
(3) Application seeking permission of the Government for FDI in retail trade of 'Single Brand' products would be made to the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy & Promotion. The application 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.
(4) Applications would be processed in the Department of Industrial Policy & Promotion, to determine whether the products proposed to be sold satisfy the notified guidelines, before being considered by the FIPB for Government approval. 

Source : Press Note No.1 (2012 Series) of GoI , Ministry of Commerce & Industry,
Department of Industrial Policy & Promotion, (FC-I Section)

Shailendra Kumar Singh
Udyog Bandhu


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