India Eases Rules for Foreign Brands to Own Store Chains

The Government of India announced 100 percent foreign direct investment in single brand retail trade; global single-brand retailers will no longer need its permission to own and operate stores in the country. Earlier, overseas companies needed government approval to own more than 49% of an Indian retail operation, leading many to partner with Indian companies or rely on local distributors and franchises.

“Allowing foreign brands to directly invest in retailing in India will improve customers’ shopping experience and push Indian retailing companies to upgrade their services and offerings,” Ahmed Timoumi, a professor of marketing at the Indian School of Business said.

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The government also relaxed the norm of mandatory 30% sourcing requirement from India for the first five years. This will allow global retailers to come in with international merchandise without concerns of loss of quality and brand equity. Retailers can now start operations and will have 5 years to find Indian partners and vendors that qualify in terms of quality and price. After five years, the single-brand entity will be required to meet the 30% sourcing norm directly towards its India operation on an annual basis.

The relaxation of FDI norms in single-brand retailing in India will benefit companies that source goods from the country for their global operations. Per industry estimates, the Indian retail sector is projected to reach $1 trillion by 2020 at an estimated CAGR of 15 percent. India’s retail market is currently worth around $600 billion, Since organized retail currently accounts for just 8% of the market, India presents global brands with “tremendous scope for growth.”

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Posted on by Gunjan Bagla
Gunjan Bagla
California-based management consultant Gunjan Bagla runs Amritt, a consulting firm helping American companies to succeed in India. Amritt is the trusted advisor for India market research, India business development, India market entry, Global Engineering, Global Technology Scouting, India R&D and Open Innovation. Gunjan is author of "Business in 21st Century India: How to Profit Today from Tomorrow’s Most Exciting Market" (Hachette Book Group, 2008), Amazon's top rated title on the subject. He has appeared as the India Expert on BBC Television, Bloomberg TV, Fox Cable Business and has been quoted in the New York Times, the Los Angeles Times, the Hollywood Reporter and Business Week for his expertise on India.

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