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Sops expected in FDI Single Brand Retail

Posted: Tuesday, 22 July 2014 17:50

Sops expected in FDI Single Brand Retail

July 22: Even as it has exited from Multi-brand Retail due to restrictive government policy, Wal-Mart is concentrating on the wholesale cash and carry business with an investment of over a $100 million and even as Carrefour has announced its exit from India and Tesco is still pursuing its dream by partnering with Tata, the government seems to be mulling over the idea of scrapping the 30% clause for the single brand FDIs thus encouraging clothes, electronics and luxury goods retailers to set up shop in India

Economic Times reported yesterday an investment of Rs.623 Crore more in its India operations, based on documents submitted by the world’s biggest retailer with the Registrar of Companies in June this year. The investment is proposed to be used for working capital requirements as well as capital expenditure for store expansion and Business-to-Business (B2B) and e-commerce in its cash and carry business, reports Mint.

Wal-Mart operates 20 wholesale stores in the country and plans to add another 50 over the next five years and also expand its e-commerce operations in India. Wal-Mart had reportedly infused over Rs.1,300 Crore in India in January this year, taking its total investments in India to Rs.2,000 Crore, after the break up with the JV partner Bharti Retail in October.

The retailer apparently took the decision to focus on wholesale trading in India since the newly elected Bhartiya Janata Party (BJP) has announced that while it would not reverse the existing policy that governs multi-brand retail trading in the country, no early reversals may be expected. However, the government has not drawn curtains on the scheme as yet. In fact, Tesco is actively pursuing their case in partnership with Tata.

Sops for Single Brand Retail FDI

In the meanwhile, the government is mulling over the possibility of dispensing with the 30% clause to buy the goods locally for the Single brand Retail and further to consider sub-brands under the same brand umbrella. This will help bring in clothes, electronics and various luxury brands. According to Mint, many industry bodies have had discussions with the commerce ministry and the department of industrial policy and promotion (DIPP) regarding possible changes to the existing single brand retail policy.

After allowing the entry of Multi brand Retail with majority holding, the government allowed 100% FDI for single brand retailers in 2012. But the rider was that 30% of the value of goods must be sourced from within India, preferably from micro, small and medium enterprises (MSMEs), village and cottage industries and artisans.

Yesterday The Economic Times reported that DIPP was considering doing away with the 30% domestic sourcing norm. The government is reportedly also reviewing a plan to allow entry of sub-brands under the single master brand. Single-brand retail is still getting an encouraging response from foreign retailers. Obviously, this would be of no consequence for wine marketing in India.

Tags: Wal-Mart, Bharti Retail

       

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