The Indian government has approved further reforms to foreign investment in single brand retail, and has eased a rule requiring at least 30% of the products sold to be sourced locally.
Announced this week, the moves are aimed at attracting more foreign direct investment (FDI) into the country as well as making it easier do business. Large international retail chains are now more likely to invest in the country, as well as bring latest technologies and retail formats into India.
The changes allow 100% foreign direct investment in single-brand retail “via automatic route,” which essentially means investment will be allowed without prior government approval.
The existing policy on Single Brand Retail Trading (SBRT) allows 49% FDI under automatic route, and up to 100% FDI with government approval. However, seeking prior government approval is a long and laborious process.
“It has been felt that the country has potential to attract far more foreign investment which can be achieved by further liberalising and simplifying the FDI regime,” a statement says. It adds that increased investment inflows are a major driver of economic growth and a source of non-debt finance for the country’s economic development.
Another change eases the requirement for a single brand retail trading entity to source 30% of goods locally for five financial years after opening the first Indian store. After the end of this five-year period, the SBRT entity shall be required to meet the 30% sourcing requirement for its India’s operation on an annual basis.
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By GlobalDataFDI inflows into India reached an all-time high of US$60.08bn in 2016-17, up from US$55.46bn the year before.
