Centre opens arms to single brand retail FDI

Centre opens arms to single brand retail FDI

Context

The Union government on Wednesday liberalised and simplified the Foreign Direct Investment (FDI) regime in a host of sectors, including Single Brand Retail Trading (SBRT)

What has happened?

The Union Cabinet, chaired by Prime Minister Narendra Modi, gave its approval to a proposal permitting 100% FDI under the automatic route for SBRT

Other steps

• Easing of sourcing norms: The Centre also eased ‘sourcing norms’ in SBRT by permitting companies to set off their incremental sourcing of goods from India for global operations in the initial five years — beginning April 1 of the year of the opening of the firm’s first store — against the mandatory sourcing requirement of 30% of purchases from India
• After the completion of the five-year period, SBRT entities would be required to meet the 30% sourcing norms directly towards its India’s operation, on an annual basis, the government said in an official statement

Benefits of the move

• Global companies: The relaxation in sourcing norms could help companies like Apple, which had been seeking exemption from the 30% local sourcing norm, according to PankajMohindroo, national president, Indian Cellular Association (ICA)
• Make in India: The move will not only attract additional foreign capital into the country, but will also provide an impetus to the retail industry growth, at a time when organised retail is already seeing strong growth over the last 12 months
• Global brands across different categories, from apparel to electronics to accessories will be aided through this, providing further options to Indian consumers and improving India’s ranking in ease of doing business
• The relaxation in local sourcing norms would allow the SBRT entity adequate time to set up their supply chain for local souring in India, Mr. Wahi said, adding that it would also provide an impetus to the government’s “Make In India” initiative
• The move would open up the Indian retail markets, leading to greater number of brands entering the Indian retail space and thus increasing competition

Why Apple has sought the waiver?

Apple is learnt to have sought the waiver on the ground that it manufactures ‘cutting-edge technology’ products for which it is not possible to source as much from India due to the absence of or low capacity of the requisite supply-chain items