June 12, 2016

India may amend single brand retail policy

India’s Department of Industrial Policy and Promotion (DIPP) is likely to adjust the foreign direct investment single brand retail policy to give between two and three years for overseas firms to comply with the domestic rule on local sourcing.

By Umesh Ellichipuram

India’s Department of Industrial Policy and Promotion (DIPP) is likely to adjust the foreign direct investment single brand retail policy to give between two and three years for overseas firms to comply with the domestic rule on local sourcing.

This comes as the Foreign Investment Promotion Board (FIPB) decided last month not to remove the compulsory 30% local sourcing requirement while giving clearance to Apple’s proposal to set up its branded stores in the country, reported Financial Express.

"Xiaomi had initially sought exemption from the clause to open own branded stores but later agreed to meet the clause."

Though the mandatory sourcing requirement may not be relaxed, the FIPB is believed to have urged DIPP to look into providing more time for overseas firms to test the Indian market conditions so that they can establish infrastructure to meet the clause.

DIPP secretary Ramesh Abhishek headed panel had recommended that the clause may be relaxed in case of Apple as it uses modern technology. However, this was rejected by the union finance ministry, which believes that if overseas firms need to have access to India’s market, they have to create jobs in local manufacturing segment.

Apple intends to access India’s market to counter decreasing sales in the global market.

Xiaomi had initially sought exemption from the clause to open own branded stores but later agreed to meet the clause.

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Overseas firm planning to open single brand stores have to secure the approval of the FIPB if the overseas direct investment limit is more than 49%.