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Retail boost as nod for 100% FDI in single brand under automatic route
Thursday, 11 January, 2018, 08 : 00 AM [IST]
Our Bureau, New Delhi
Retail sector in India gets a major boost as Union cabinet chaired by prime minister Narendra Modi decides to permit the long-awaited 100% FDI under automatic route for Single Brand Retail Trading (SBRT).

SBRT is among several decisions with regard to the FDI (Foreign Direct Investment) policy announced on Wednesday. According to an official release, the decisions are intended to liberalise and simplify the FDI policy so as to provide ease of doing business in the country. In turn, it will lead to larger FDI inflows contributing to growth of investment, income and employment.

FDI is a major driver of economic growth and a source of non-debt finance for the economic development of the country. Government has put in place an investor-friendly policy on FDI, under which FDI up to 100%, is permitted on the automatic route in most sectors/ activities. However, earlier in SBRT, the policy allowed 49% FDI under automatic route, and that beyond 49% and up to 100% through government approval route.

The measures taken earlier by the government have resulted in increased FDI inflows into the country. During the year 2014-15, total FDI inflows received were US$45.15 billion as against US$36.05 billion in 2013-14. During 2015-16, the country received total FDI of US$55.46 billion. In the financial year 2016-17, total FDI of US$60.08 billion has been received, which is an all-time high.

It has been felt that the country has potential to attract far more foreign investment which can be achieved by further liberalising and simplifying the FDI regime. Hence, the new amendments.

i. It has been decided to permit SBRT entity to set off its incremental sourcing of goods from India for global operations during initial five years, beginning April 1 of the year of the opening of first store against the mandatory sourcing requirement of 30% of purchases from India. For this purpose, incremental sourcing will mean the increase in terms of value of such global sourcing from India for that single brand (in INR terms) in a particular financial year over the preceding financial year, by the non-resident entities undertaking SBRT entity, either directly or through their group companies. After completion of this five-year period, the SBRT entity shall be required to meet the 30% sourcing norms directly towards its India operation, on an annual basis.

ii. A non-resident entity or entities, whether owner of the brand or otherwise, is permitted to undertake ‘single brand’ product retail trading in the country for the specific brand, either directly by the brand owner or through a legally tenable agreement executed between the Indian entity undertaking SBRT and the brand owner.
 
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