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India's FDI Retailing Challenges

India allows 100% foreign ownership of single-brand retail stores but requires 30% local sourcing if ownership is over 51%. Foreign companies can own up to 51% of multi-brand stores since 2012, also requiring 30% local sourcing. 100% foreign ownership is permitted for wholesale businesses but they can only sell to retailers. Foreign direct investment of $100 million over 3 years is required, with half for infrastructure and half for operations. However, India faces difficulties balancing foreign investment and stakeholder interests due to its economic needs and political realities.

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28 views1 page

India's FDI Retailing Challenges

India allows 100% foreign ownership of single-brand retail stores but requires 30% local sourcing if ownership is over 51%. Foreign companies can own up to 51% of multi-brand stores since 2012, also requiring 30% local sourcing. 100% foreign ownership is permitted for wholesale businesses but they can only sell to retailers. Foreign direct investment of $100 million over 3 years is required, with half for infrastructure and half for operations. However, India faces difficulties balancing foreign investment and stakeholder interests due to its economic needs and political realities.

Uploaded by

gs randhawa
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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India's FDI Retailing Laws

The above facts show that, on the one hand, India is one of the poorest countries in the world and it can
clearly use billions of dollars in FDI in its retail industry year after year for its economic growth. On the other
hand, however, it is also difficult for India to place a blind trust in its foreign partners. As such, India wants
to receive those investments in a way that is generally satisfactory to its various stakeholders who often
have divergent or opposing views. It is a very difficult task to accomplish to say the least. Its laws related to
the FDI in retail industry such as those narrated below are a result of these multidimensional backgrounds
and views.

India has separate laws for FDI in single-brand stores and multi-brand stores. It allows 100% foreign
ownership in single brand retail stores such as Nike and IKEA. However, with 51% or more ownership in
such stores, the foreign investor has to source 30% or more of their goods locally from small and medium
size firms. (Government of India, "FDI Policy in Multi Brand Retail,” 28 November 2011.)

Beginning September 2012, Indian laws also allow foreign companies to own up to 51% of multi-brand
retail stores, such as Walmart. These foreign investments are also subject to sourcing 30% of their
requirements from local small and medium size firms (Government of India, "FDI Policy in Multi Brand
Retail,” 28 November 2011.)

Indian laws permit 100% foreign ownership in wholesale businesses. Such whole sellers, however, can only
sell to retailers, not to the general public. (Government of India, "FDI Policy in Multi Brand Retail,” 28
November 2011.)

FDI should be of $100 million or more spread over a three year period. Half of this should be invested in the
back-end infrastructure, and the other half in the front-end operations. (Government of India, "FDI Policy in
Multi Brand Retail,” 28 November 2011.)

India’s FDI Retailing Laws: Central vs State Governments

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