Govt contemplates changes in single-brand retail FDI norms

Thursday, 12 July 2012

The government is considering making changes in the policy norms for single-brand retail to allow easy access to global brands. With many international applicants making a beeline for India, the government had discussions with them and decided to relax certain clauses stated in the FDI policy.

First and foremost, the government is planning to relax the clause that the foreign investor should also be the owner of the brand because many global labels wish to enter India under a different name suitable for the market here rather than retaining the same brand under which they operate internationally.

Recently, the Foreign Investment Promotion Board under the Ministry of Finance rejected a proposal by Zara Holdings Netherlands for bringing the Massimo Dutti brand in India. The rejection was based on this same clause: Zara Holdings was not the majority shareholder in Massimo Dutti, the main owner of the brand being a Spanish retail chain, Inditex. So the government is planning to relax norms stipulating that the foreign investor should be the owner of the brand, also discussions are on whether to ease the clause that states products should be sold under the same brand internationally.

The motto behind reconsidering the clauses comes after several retailers urged the government to look at the policy again to make the FDI policy on single-brand retail more investor-friendly. The government is also contemplating over 30 per cent mandatory sourcing from SMEs clause because since January, when the policy was notified, the government has received only three applications - IKEA, Pavers and Skechers. IKEA has formally proposed to invest $1.9 billion over 10-15 years to open 25 retail stores, restaurants and cafes, among others.

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