Experts cheer easing of FDI norms for single-brand retail

To boost the ailing economy, the Narendra Modi-led government on Wednesday relaxed foreign direct investment (FDI) norms for foreign single-brand retailers and also permitted foreign investment in contract manufacturing and coal mining.

The cabinet has allowed online retailing under single-brand retail and relaxed rules for complying with the mandatory 30 percent local sourcing norms by foreign single-brand retailers.

Henceforth, single-brand retail firms would be permitted to open online stores before setting up brick-and-mortar shops. So far, online sale by a single-brand retail player is allowed only after the opening of physical outlet.

Easing of FDI norms for single brand retail should be an attractive proposition for global retailers to scale up their operations in India, both in

brick-and-mortar stores as also in fast expanding online channels of business, said Niranjan Hiranandani, senior vice president, ASSOCHAM.

The norms relating to 30 percent local sourcing have now been made flexible to enable major single brand retailers to integrate their Indian operations with their global supply chain. With the US-China trade war remaining unabated, India could be the best possible alternative for the global firms, offering them operational efficiency and scale.

"There would also be a multiplier effect on the related sectors like the commercial real estate and the organised retail," he added.

"It is a positive consumer-centric move that will bring the Indian market at par with other open market economies. This move by the government has brought about the much-needed clarity and solution to the dilemma of international brands who have high quality, specialised inputs. The earlier FDI norms were not letting better products enter the market or letting retailers look at the country. The earlier restrictive policy environment didn't support local outsourcing," said Shubhranshu Pani, MD - Retail Services and Stressed Asset Management Group (SAMG).

The success of brands such as Zara, Starbucks and other international names that are already operational has made India's retail sector shine at the world level. This new ease in FDI norms will give a big boost to global brands and make the Indian market attractive for them for further trade and investments, he observed.