Indian Government has opened up single brand retail business in India by allowing 100% FDI.
This announcement comes days after GoI's proposal to allow 51% FDI in multi brand retail triggered protests. The Government than ssuspended plans to allow FDI in multi branded retail.
However, it comes with a major caveat: Foreign retailers that want to invest beyond the previous cap of 51% ownership will need to source 30% of their goods from small and village industries. Small Industries will be defined as industries with a total investment in plant & machinery not exceeding $1Mn.
According to Commerce and Industry Minister, Anand Sharma, the clause of mandatory sourcing of at least 30% of the total value of the products from Indian small scale manufacturers will provide stimulus to domestic manufacturing value addition and help in technical upgradation of the small industry, however this clause may deter may deter global luxury brand retailers to setup fully owned units in India.
As per the current regime, FDI in retail is prohibited except in single brand product retail trading in which up to 51 per cent FDI is permitted, subject to certain conditions.
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