Foreign Direct Investment (FDI) policy on retail trading in India

asokaemblemA few of our readers have suggested us to include Government of India’s policy guidelines as are presently applicable to Retail trade in India. Although dated, we are glad to provide relevant excerpts of this policy for your reference. We would endeavor to keep our readers posted with amendments, if any, in the policy from time to time.

It is obvious from the present policy guidelines that FDI in retail is permissible only for single brand product retailing subject to a cap of 51% on investment. Investment in multi brand retailing, as such, is presently prohibited.

 

Extract of FDI Policy relevant to Retail Trade.

Section A

FDI POLICY


POLICY ON FOREIGN DIRECT INVESTMENT (FDI)

Sectors prohibited for FDI

i. Retail trading (except Single Brand Product retailing)

ii. Atomic energy

iii. Lottery business

iv. Gambling and Betting


II. All Activities/ Sectors would require prior Government approval for FDI in the following circumstances
:

i. where provisions of Press Note 1(2005 Series) are attracted;

ii. where more than 24% foreign equity is proposed to be inducted for manufacture of items reserved for the Small Scale sector.

III. In Sectors/Activities not listed below, FDI is permitted up to 100% on the automatic route subject to sectoral rules / regulations applicable*.


IV. Sector-specific policy for FDI: In the following sectors/activities, FDI upto the limit indicated below is allowed subject to other conditions as indicated:


Foreign Direct Investment Policy April 2006

*Department of Industrial Policy & Promotion

Ministry of Commerce & Industry, Government of India

26. Trading

.

S.No.

Sector/ Activity

FDI Cap/ Equity

Entry Route

Other Conditions

Relevant Press Note issued by Deptt. Of IPP

www.dipp.gov.in

a.

Wholesale/cash

100%

Automatic

Subject to guidelines for & carry trading FDI in trading issued by Department of Industrial Policy & Promotion vide

Press Note 3 (2006 Series).#

 

PN 4 / 2006

d

Test marketing of such items for which a company has approval for

manufacture

 

100%

FIPB

 

 

e.

Single Brand product retailing

 

51%

FIPB

 

 

 

 

Section B

Press Notes on FDI Policy

#Press Note No. 3 (2006 Series)

Subject: Guidelines for FDI in Retail Trade of ‘Single Brand’ Products

The Government has decided to allow FDI up to 51%, with prior Government approval, in retail trade of ‘Single Brand’ products. This is, inter alia, 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 up to 51% in retail trade of ‘Single Brand’ products would be subject to the following conditions:

i. Products to be sold should be of a ‘Single Brand’ only.

ii. Products should be sold under the same brand internationally.

iii. ‘Single Brand’ product-retailing would cover only products which are branded during manufacturing.

3. FDI would be allowed only with prior approval of the Government. 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.

5. These guidelines would come into force with immediate effect.

(Umesh Kumar)

Joint Secretary to the Government of India

F. No. 5(3)/2005-FC

Dated 10th February, 2006.

Government of India

Ministry of Commerce & Industry

Department of Industrial Policy & Promotion

SIA (FC Division)

***

 

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4 responses to “Foreign Direct Investment (FDI) policy on retail trading in India

  1. Interesting, useful and informative. Could you please post some info on procedural aspects of the policy.

  2. ‘Thanks. We will try to locate some authentic information on the subject. Thanks for your interest.

  3. Shishir Agarwal

    Yes, I agree that the the details provided above are quite useful and interesting. It does appear to be comprehensive in nature and will be further beneficial if information on the subject is made regularly available. While news papers report salient points of the policy, exact notifications are not easily available. Will look forward to details on the same.

  4. I am extremely happy to notice a website providing details about happenings in Retail Industry (Globally and India both). It is highly informative and educative.

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