Lok Sabha Question No. 2647 (UNSTARRED), answered on 2018-03-12
Subject: FDI in Single-Brand Retail Trading
Ministry: COMMERCE AND INDUSTRY
Asked by: C. N. JAYADEVAN, HARISH CHANDRA MEENA, SHIVKUMAR CHANABASAPPA UDASI

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY DEPARTMENT OF INDUSTRIAL POLICY & PROMOTION

## LOK SABHA

UNSTARRED QUESTION NO. 2647. TO BE ANSWERED ON MONDAY, THE 12 TH  MARCH, 2018.

## FDI IN SINGLE-BRAND RETAIL TRADING

## 2647.  SHRI C.N. JAYADEVAN:

SHRI HARISH MEENA:

SHRI SHIVKUMAR UDASI:

Will the Minister of COMMERCE AND INDUSTRY be pleased to state:

## वाणिज् यवव द्योग म त्री

- (a) whether  the  Government  has  allowed  Foreign  Direct  Investment  (FDI)  in Single Brand Retail Trading under the automatic route, accompanied by the long sought relaxation of mandatory local sourcing norms;
- (b) if  so,  the  details  thereof  along  with  its  likely  impact  on  the  economy  of  the country;
- (c) whether the domestic small traders have expressed their concern against this decision of the Government; and
- (d) if  so,  the  reaction of the Government thereto along with the corrective steps taken by the Government to protect the interest of domestic retailers/ traders?

## ANSWER

## वाणिज् यवव द्योग म त्रालयमेंराज् यम त्री(श्री सी.आर.चौधरी) THE MINISTER OF STATE IN THE MINISTRY OF COMMERCE & INDUSTRY (SHRI C.R. CHAUDHARY)

- (a) & (b): As per the FDI policy, 100% FDI in Single Brand Retail Trading (SBRT) was allowed under the Government approval route with FDI upto 49% being allowed under automatic route. Now, vide Press Note No. 1(2018 Series)  issued  on  23rd  January,  2018,  the  FDI  policy  provisions regarding  SBRT  have  been  amended  to  allow  100%  FDI  under automatic route. The condition prescribed for this sector for mandatory local sourcing norms is still applicable for investee entities undertaking SBRT with a slight modification  to  the  extent  that  for  the  first  5  year period  from  the  date  of  opening  of  the  first  store,  the  year-on-year incremental sourcing from India by group companies for the particular

|         | brand shall also be counted towards the compliance of 30% local sourcing condition. After completion of this 5-year period, the SBRT entity is required to meet the 30% local sourcing norms directly towards its India's operation on an annual basis, as was the case earlier. Revised policy for FDI in SBRT is at Annexure. This modification is expected to encourage additional sourcing and                                                                                                                                                                        |
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| & (d) : | A representation dated 05.03.2018 has been received from Confederation of All India Traders, wherein decision to allow 100% FDI in SBRT has been opposed. FDI policy on SBRT has been in operation since 2006 when 51% FDI was permitted under Government approval route. Thereafter, in 2012, FDI limit for the sector was raised to 100%, under approval route. Thus, 100% FDI in SBRT has been in force since 2012. In 2013, the policy was further revised to permit 49% FDI under automatic route and FDI beyond 49% and up to 100% under Government approval route. |

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## ANNEXURE REFERRED TO IN REPLY TO PARTS (a) TO (d) OF LOK SABHA UNSTARRED QUESTION NO. 2647 FOR ANSWER ON 12th MARCH, 2018.

## Single Brand Product Retail Trading

| Sector/Activity                     | %of Equity/ FDI Cap   | Entry Route   |
|-------------------------------------|-----------------------|---------------|
| Single Brand product retail trading | 100%                  | Automatic     |

(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:
2. (a)  Products to be sold should be of a 'Single Brand' only.
3. (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.
4. (c) 'Single  Brand'  product-retail  trading  would  cover  only  products  which  are branded during manufacturing.
5. (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, either directly by the brand owner or through a legally  tenable  agreement  executed  between  the  Indian  entity  undertaking single brand retail trading and the brand owner.
6. (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  1 st 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.
7. (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.

| (g) Single brand retail trading entity would be permitted to set off sourcing of goods from India for global operations during beginning 1 st April of the year of the opening of first store, mandatory sourcing requirement of 30% of purchases from purpose, incremental sourcing will mean the increase in terms global sourcing from India for that single brand (in INR terms) financial year from India over the preceding financial year, by entities undertaking single brand retail trading, either directly group companies. After completion of this 5 years period, the SBRT be required to meet the 30% sourcing norms directly towards   |                                                                                                                                                                         |
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| operation, on an annual basis. Note: (i) Conditions mentioned at Para 5.2.15.3 (2) (b) & 5.2.15.3 (2) (d) will not be applicable for undertaking SBRT of Indian brands.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | operation, on an annual basis. Note: (i) Conditions mentioned at Para 5.2.15.3 (2) (b) & 5.2.15.3 (2) (d) will not be applicable for undertaking SBRT of Indian brands. |
| (ii) Indian brands should be owned and controlled by resident Indian citizens and/or companies which are owned and controlled by resident Indian citizens.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | (ii) Indian brands should be owned and controlled by resident Indian citizens and/or companies which are owned and controlled by resident Indian citizens.              |

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