The Indian government has loosened up its rule on single-brand retailing by ratifying its November 24 decision to approve 100 per cent foreign direct investment for single brand retailers. 

The new rule will benefit global brands like Gucci, Louis Vuitton, Adidas and many more which depend on local partners in India for their expansion. Swedish furniture retailer Ikea, which expressed interest in opening wholly-owned stores in India, is also a major beneficiary of the new FDI rule.

But corporate retailers with many brands will not benefit from the change. 

“We have now allowed foreign investment up to 100 per cent with the stipulation that in respect of proposals involving FDI beyond 51 per cent there will be mandatory sourcing of at least 30 per cent of the total value of the products sold from Indian small industries/village and cottage industries, artisans and craftsmen. This step will provide stimulus to domestic manufacturing, add value and help in technical upgrade of our local small industry,” said Anand Sharma, minister of commerce and industry.

The new FDI rule also stipulates that single-brand retailers should sell a single brand only, which must be sold under the same brand globally. Products should be branded during manufacturing and the foreign single-brand retailer should be the owner of the brand.

The relaxed foreign investment in India is viewed by many as beneficial to many sectors. It will not only make India a major new retail destination for retailers worldwide, it will also enhance product quality and services as it encourages competition among retailers as well, industry leaders believe.

“The move will not only mean more FDI but lead to employment and also lead to more choices for consumers. Global retailers are bound to bring in global best practices and technology that will lead to a more competitive marketplace benefiting the consumers,” said Rajiv Kumar, secretary general, Federation of Indian Chambers of Commerce and Industry.

FDI for multi-brand retail remains capped at 51 per cent as some political parties such as UPA ally Trinamool Congress forced the government to put reform plans on hold.

GB