FDI in Single Brand Product Retail Trading in India

Sectoral Caps - FDI in Single Brand Retail Sector in India

Sector/Activity

% of Equity/ FDI Cap

Entry Route

Single Brand product retail trading

100%

Automatic up to 49%

Government route beyond 49%


(1) Foreign Investment in Single Brand product retail trading is 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 in Single Brand product retail trading would be subject to the following conditions:
(a) Products to be sold should be of a ‘Single Brand’ only.
(b) Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India.
(c) ‘Single Brand’ product-retail trading would cover only products which are branded during manufacturing.
(d) A non-resident entity or entities, whether owner of the brand or otherwise, shall be permitted to undertake ‘single brand’ product retail trading in the country for the specific brand, directly or through a legally tenable agreement with the brand owner for undertaking single brand product retail trading. The onus for ensuring compliance with this condition will 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. The requisite evidence should be filed with the RBI for the automatic route and SIA/FIPB for cases involving approval.
(e) In respect of proposals involving foreign investment 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. 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. This procurement requirement would have to be met, in the first instance, as an average of five years’ total value of the goods purchased, beginning 1st April of the year of the commencement of the business i.e. opening of the first store. Thereafter, it would have to be met on an annual basis. For the purpose of ascertaining the sourcing requirement, the relevant entity would be the company, incorporated in India, which is the recipient of foreign investment for the purpose of carrying out single-brand product retail trading.
(f) Subject to the conditions mentioned in this Para, a single brand retail trading entity operating through brick and mortar stores, is permitted to undertake retail trading through e-commerce.
(3) Application seeking permission of the Government for FDI exceeding 49% in a company which proposes to undertake single brand retail trading in India would be made to the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy & Promotion. The applications 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. In case of FDI up to 49%, the list of products/product categories proposed to be sold except food products would be provided to the RBI.

(4) Applications would be processed in the Department of Industrial Policy & Promotion, to determine whether the proposed investment satisfies the notified guidelines, before being considered by the FIPB for Government approval.

Note:
(i) Conditions mentioned at Para (2) (b) & (d) above will not be applicable for undertaking SBRT of Indian brands.
(ii) An Indian manufacturer is permitted to sell its own branded products in any manner i.e. wholesale, retail, including through e-commerce platforms.
(iii) Indian manufacturer would be the investee company, which is the owner of the Indian brand and which manufactures in India, in terms of value, at least 70% of its products in house, and sources, at most 30% from Indian manufacturers.
(iv) Indian brands should be owned and controlled by resident Indian citizens and/or companies which are owned and controlled by resident Indian citizens.
(v) Sourcing norms will not be applicable up to three years from the commencement of the business i.e. opening of first store for entities undertaking single brand retail trading of products having ‘state-of-art’ and ‘cutting-edge’ technology and where local sourcing is not possible. Therefore, provisions of para 2(e) will be applicable.


Notes:
(1) FDI policy for Single Brand Product Retail Trading in India is prescribed in the Clause 5.2.15.3 of the Consolidated FDI Policy Circular of 2016 (D/o IPP F. No. 5(1)/2016-FC-1 Dated the June 07, 2016) issued by Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, Government of India.
(2) Clause 5.2.15.3 was modified by Press Note No. 5 of 2016 Series(File No. 5/4/2016-FC-I dated 24th June 2016) issued by DIPP - link
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