Retail FDI has sourcing rider

The government's decision to allow up to 51 per cent foreign direct investment in "single brand" retail will be accompanied by stringent guidelines clearly defining the term.

To begin with, the guidelines to be issued by the department of industrial policy and promotion will clarify that foreign companies will not be permitted to source goods locally and then retail them in India by using their brand names.

Also, permission would be granted to brands that were regular product lines of foreign companies and sold internationally, government officials told Business Standard.

In addition, overseas retailers will have to seek the permission of the Foreign Investment Promotion Board separately for selling different brands in India.

For example, if Adidas gets the FIPB's nod to retail its flagship brand in India, it will not automatically get the right to sell Reebok, the other brand in its stable. Instead, it will have to seek the FIPB's permission separately to sell Reebok in India.

Officials said the guidelines would also clarify that companies would be allowed to sell more than one product using a single brand name.

Therefore, a company like Nike will be permitted to sell apparel or sports goods under the Nike brand. But the company will have to mention the kinds of goods that will be sold under the brand while applying to the FIPB.

A limit on the turnover of companies seeking to enter the Indian market is unlikely. Officials said since only a single brand would be allowed in each case, only companies with substantial presence would want to enter the market.