Indian govt amends policy on Foreign Direct Investment (FDI) in single-brand product retail trading - Revised Guidelines

September 14, 2012:

The Cabinet has approved the proposal of the Department of Industrial Policy & Promotion for amendment of the existing policy on Foreign Direct Investment in Single-Brand Product Retail Trading.

In January 2012, Government had permitted FDI, up to 100%, in single brand product retail trading, subject to specified conditions, including, interalia, the conditions that:

(i) The foreign investor should be the owner of the brand.

(ii) In respect of proposals involving FDI beyond 51%, 30% sourcing would mandatorily have to be done from SMEs/ 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, which could be subsequently checked, by statutory auditors, from the duly certified accounts, which the investors will be required to maintain.

The CCEA has approved modification of the above mentioned conditions, for the activity of single brand product retail trading, as under:



(i) Only one non-resident entity, whether owner of the brand or otherwise, shall be permitted to undertake single brand product retail trading in the country, for the specific brand, through a legally tenable agreement, with the brand owner for undertaking single brand product retail trading in respect of the specific brand for which approval is being sought. The onus for ensuring compliance with this condition shall rest with the Indian entity carrying out single-brand product retail trading in India. The investing entity shall provide evidence to this effect at the time of seeking approval, including a copy of the licensing/ franchise/sub-licence agreement, specifically indicating compliance with the above condition.

(ii) In respect of proposals involving FDI beyond 51%, sourcing of 30%, of the value of goods purchased, will be done from India, preferably from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors, where it is feasible. The quantum of domestic sourcing will be self-certified by the company, to be subsequently checked, by statutory auditors, from the duly certified accounts which the company will be required to maintain. For the purpose of ascertaining the sourcing requirement, the relevant entity would be the company, incorporated in India, which is the recipient of FDI for the purpose of carrying out single-brand product retail trading.

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>> Full Guidelines - FDI in multi-brand product retail trading

>> Why Indian Govt decided to allow foreign investment in retail trade

>> Multi-brand retail to get FDI of US$3 billion to India



NOTE- "Complete Guide to Foreign Direct Investment (FDI) in India" (April 2012) is the only updated complete guide on FDI in India. Guide includes :- Complete Government of India and Reserve Bank of India approved FDI policies and guidelines; General conditions on FDI, All the permitted and prohibited sectors for FDI Investment: Guidelines and consequences of violation of FDI policies like penalties, adjudication and appeals, compounding proceedings; All important FDI forms & documents and 18 Charts/Diagrams/Tables ; Important contact details of RBI & Govt. of India & Special Supplement on World Investment Report 2012. Available online at Special Discounted Rates ...Click here

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