The Government of India ("GoI") on September 14, 2012
has finally decided to permit Foreign Direct Investment
("FDI") in multi brand retail, a decision much awaited by
the industry players and foreign investors. The decision to permit
51% FDI in multi brand retail will clear the way for a number of
multi brand retailers to open stores in India. However, subject to
final release of the notification for amending the FDI Policy of
India, the permission to bring in FDI in multi brand retail is
reportedly expected to come with certain conditions, which would,
inter alia, include:
FDI in multi brand retail shall be under prior FIPB approval
Foreign investor should make a minimum investment of $100
million, 50% of which should be invested in the 'back-end
30% of the products must be procured from small-scale
industries, i.e., units which have a total plant and machinery
investment (at the time of installation) not exceeding $ 250,000;
The final decision of permitting FDI in multi brand retail
vests with the respective State Governments. Thus, retail sales
outlets may be set up only in such States which agree to allow FDI
in multi brand retail and the outlets should comply with the state
legislations of the respective states.
In addition, the GoI is also expected to ease the 30% mandatory
sourcing condition for FDI in single brand retail.
Separately, the GoI has also taken the following decisions:
Permitting FDI up to 49% in scheduled and non-scheduled air
transport services. FDI in air transport services has also been
permitted under prior FIPB approval route and the investor would
also need clearance from the Ministry of Home Affairs;
Permitting FDI up to 49% in power exchanges, a decision which
is expected to inject capital and global practices in the
inter-face between buyers and sellers of electricity and make the
market more competitive; and
Raising the FDI limit from 49% to 74% in direct-to-home, cable
networks and teleports and permit FDI up to 74% in mobile TV.
We will be circulating a detailed analysis on amendments to the
FDI Policy of India, upon release of the official notification
giving effect to the aforesaid decisions of the GoI.
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