Centre liberalises single-brand retail norms

Believes there was 'anomaly' in the previous policy that had 'confused' retailers who wished to expand

India might see a flurry of single-brand retailers entering , with the government allowing them to operate across multiple platforms. As a result, a number of proposals, including ones by Tommy Hilfiger, Swarovski, H&M, Nike and Adidas, among others, might soon get the government's nod to open stores here. The government believes there was an "anomaly" in the previous policy that had "confused" the retailers who wanted to expand here in a big way. The policy, as was drafted by the previous government, did not explicitly clarify that retailers could operate in multiple formats as long as the investment was done through different entities.
 

TALKING SHOP

• Several single-brand retailers might soon get government approval to operate in multiple formats
• Government has now allowed single-brand retailers to operate their own outlets, franchise stores and wholesale
• Large number of investment proposals by marquee international brands were held up due to lack of clarity in policy
• Government believes since franchise money comes into the current account and FDI proceeds in capital account, there is no violation of rules
• Single-brand retailers have also been demanding government relax mandatory 30 per cent sourcing norms

"We have sorted out all issues by taking policy measures. We have allowed their own outlet and franchising," Amitabh Kant, secretary, Department of Industrial Policy & Promotion (DIPP) told Business Standard. Several investment proposals by Tommy Hilfiger, H&M, Swarovski, Skechers, Nike and Adidas were stuck in the pipeline as they wanted to run company-owned direct retail outlets as well as franchise outlets. Some of them like Tommy Hilfiger wanted to have a wholesale presence as well. In an important clarification, the government tweaked the foreign direct investment (FDI) policy on single-brand retail last month stating that non-resident entity/entities will now be allowed to undertake single-brand retail trading business through "one or more wholly owned subsidiaries or joint ventures (JVs)."

According to an official, proceeds from franchise business will come into the current account, while those through the FDI route will be accounted in the capital account.

Presently, 100 per cent FDI is allowed in single-brand retail trading, out of which proposals beyond 49 per cent require prior approval from the government.

So far only one proposal by Swedish furniture maker IKEA has come on the table. Others have largely shied away from making any big-ticket investment announcements here, owing to the stiff riders in the policy. The most important being that of 30 per cent sourcing norms. According to the policy, proposals involving FDI beyond 51 per cent, sourcing of 30 per cent of the value of goods purchased, need to be from India, preferably from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors.

"The government has to come out with a single policy on retail. The issue of sourcing remains unanswered. There should be no linkage between sourcing and retail," said Arvind Singhal, chairman, Technopak - a retail advisory firm.