India: FEMA/FDI: Foreign Direct Investment (FDI) In Single-Brand Product Retail Trading

Last Updated: 18 October 2012

Edited by Hitender Mehta

The Government of India has revised the conditions for FDI in single brand product retail trading. The amendments may be listed as under:

  • Only one non-resident entity, whether owner of the brand or otherwise, shall be permitted to undertake single brand product retail trading in the country, for the specific brand, through a legally tenable agreement, with the brand owner for undertaking single brand product retail trading in respect of the specific brand for which approval is being sought. [Earlier, the foreign investor could only be the owner of the brand.]
  • In respect of proposals involving FDI beyond 51%, sourcing of 30%, of the value of goods purchased, will be done from India, preferably from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors, where it is feasible. The quantum of domestic sourcing will be self certified by the company, to be subsequently checked, by the statutory auditors. [Earlier, the 30% sourcing was to be done on value of goods sold and from Indian small industries/ village and cottage industries, artisans and craftsmen.]
  • Retail trading, in any form, by means of e-commerce, would not be permissible, for companies with FDI, engaged in the activity of single brand retail trading.

(Source: DIPP Press Note No. 4 of 2012)

FDI in multi-brand retail trade

The Government of India has permitted FDI, upto 51%, under the Government approval route, in multi-brand retail trading subject to the specified conditions. The key conditions may be listed as under:

  • Minimum FDI of US$ 100 million should be brought in by the foreign investor;
  • At least 50% of the total FDI brought in shall be invested in 'backend infrastructure' within 3 years of the first tranche of FDI.
  • At least 30% of the value of procurement of manufactured/ proceesed products purchased shall be sourced from Indian small industries which have a total investment in plant and machinery not exceeding US$ 1 million.
  • Government will have the first right to procurement of agricultural products.
  • Retail trading, in any form, by means of e-commerce, would not be permissible, for companies with FDI, engaged in the activity of multi-brand retail trading.
  • This is an enabling policy and the State Governments and Union Territories would be free to take their own decision in regard to implementation of this policy.

(Source: DIPP Press Note No. 5 of 2012)

FDI in Civil Aviation Sector

The Government of India has permitted foreign airlines to invest, under Government approval route, in the capital of Indian Companies, operating scheduled and non-scheduled air transport services, up to the limit of 49% of their paid-up capital.

Such investment shall be subject to the following conditions:

  • The 49% limit will subsume FDI and Foreign Institutional Investors investments.
  • The investments so made would comply with the relevant regulations of Securities and Exchange Board of India (SEBI).
  • A Scheduled Operator's Permit can be granted only to a Company
    • That is registered and has its principal place of business within India;
    • The Chairman and at least two-thirds of the Directors of which are citizens of India; and
    • The substantial ownership and effective control of which is vested in Indian nationals.
  • All foreign nationals likely to be associated with Indian scheduled and non-scheduled air transport services, as a result of such investment shall be cleared from security view point before deployment;
  • All technical equipment that might be imported into India as a result of such investment shall require clearance from the Ministry of Civil Aviation.

(Source: DIPP Press Note No. 6 of 2012)

Foreign investment in Companies operating in the Broadcasting Sector

The Government of India has amended the foreign investment limits, in the companies engaged in providing broadcasting carriage services, subject to the terms and conditions, as may be specified by the Ministry of Information and Broadcasting from time to time, in the following manner:

  • Teleports, Direct to Home, Cable Networks: Increase in Foreign investment limit from 49% to 74% subject to:
    • Foreign investment up to 49% being permitted under the automatic route; and
    • Foreign investment beyond 49% and upto 74% being permitted under the Government route;
  • Mobile TV: Permitting foreign investment upto 74% subject to:
    • Foreign investment up to 49% being permitted under the automatic route; and
    • Foreign investment beyond 49% and upto 74% being permitted under the Government route;

The foreign investment limit, in companies engaged in aforesaid activities, shall include, in addition to FDI, investment by Foreign Institutional Investors (FIIs), Non-resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and convertible preference shares held by foreign entities.

(Source: DIPP Press Note No. 7 of 2012)

Foreign investment in Power Exchanges

The Government of India has permitted foreign investment, upto 49% in Power Exchanges, registered under the Central Electricity regulatory Commission (Power Market) Regulations, 2010, as under:

  • Such foreign investment would be subject to an FDI limit of 26% and an FII limit of 23% of the paid-up capital;
  • FII investment would be permitted under the automatic route and FDI would be permitted under the Government approval route;
  • FII purchases shall be restricted to secondary market only;
  • No non-resident investor/ entity, including persons acting in concert, will hold than 5% of the equity shares in these companies; and
  • The foreign investment would be in compliance with SEBI regulations; other applicable laws/ regulations; security and other conditionalities.

(Source: DIPP Press Note No. 8 of 2012)

Overseas Direct Investments by Indian Party – Rationalisation

The guidelines relating to submission of Annual Performance Report (APR) in terms of Foreign Exchange Management (Transfer or Issue of any Foreign Security) (Amendment) Regulations, 2004 has been amended as under:

  • An Indian party, which has set up/ acquired a Joint Venture (JV) or Wholly Owned Subsidiary (WOS) overseas in terms of the said Regulations, shall submit, to the designated Authorised Dealer every year, an APR in Form ODI Part III in respect of each JV or WOS outside India, and other reports or documents as may be specified by the RBI from time to time, on or before the 30th of June each year. The APR, so required to be submitted, has to be based on the latest audited annual accounts of the JV/ WOS, unless specifically exempted by the RBI.

The exemption granted for submission of APR based on the unaudited accounts of the JV/ WOS subject to the terms and conditions as specified in the A.P (DIR Series) Circular no. 96 dated March 28, 2012 shall continue.

(Source: RBI A.P. (DIR Series) Circular no. 29 dated September 12, 2012)

Non-resident guarantee for non-fund based facilities entered between two resident entities

Borrowing and lending of Indian Rupees between two persons resident in India does not attract the provisions of the Foreign Exchange Management Act, 1999 ('FEMA'). In case where a Rupee loan is granted against the guarantee provided by a person resident outside India, there is no transaction involving foreign exchange until the guarantee is invoked and the non-resident guarantor is required to meet the liability under the guarantee. The Reserve Bank of India (RBI) vide Notification no. FEMA 29/2000-RB dated September 26, 2000 has granted general permission to a person resident in India, being a principal debtor, to make payment to a person resident outside India, who has met the liability under a guarantee.

RBI has now decided to extend the facility of non-resident guarantee under the general permission for non-fund based facilities (such as Letters of Credit/ Guarantees/ Letter of Undertaking / Letter of Comfort) entered into between two persons resident in India. The method of discharge of liability by the non-resident guarantor under the guarantee and the subsequent repayment of the liability by the principal debtor would continue, as detailed in A.P. (DIR Series) Circular no. 28 dated March 30, 2001.

(Source: A. P. (DIR Series) Circular No. 20 dated August 29, 2012)

Foreign Direct Investment by citizen/ entity incorporated in Pakistan

RBI has allowed that a person, who is a citizen of Pakistan or an entity incorporated in Pakistan may, may with the prior approval of the Foreign Investment Promotion Board of the Government of India, purchase shares and convertible debentures of an Indian company under Foreign Direct Investment Scheme, subject to the terms and conditions specified in Schedule 1 of FEMA 20.

Editorial Team: Bomi F. Daruwala, Gautam Chopra, Hemant Puthran, Rupesh Jain and Shilpi Shivangi

© 2012, Vaish Associates, Advocates,
All rights reserved with Vaish Associates, Advocates, 10, Hailey Road, Flat No. 5-7, New Delhi-110001, India.

The content of this article is intended to provide a general guide to the subject matter. Specialist professional advice should be sought about your specific circumstances. The views expressed in this article are solely of the authors of this article.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Khaitan & Co
Vaish Associates Advocates
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Khaitan & Co
Vaish Associates Advocates
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions