Retail FDI norms to increase exports
All procurements counted as local sourcing.
Chennai: The government's decision to relax FDI norms for single brand retail can increase exports of local products. Some of the reluctant retailers can now enter the market by testing the waters through the online channel.
Earlier single-brand retailers with over 51 per cent FDI were required to source 30 per cent of the goods locally. As per the new decision, all procurements made from India by single-brand retailers for that brand shall be counted towards local sourcing, irrespective of whether the goods are sold in India or exported. This sourcing for global operations can be directly by the retailer or its group companies.
"The export capability from this country will dramatically increase when these retailers start buying for their global requirements," said Kumar Rajagopalan, CEO, Retailers Association of India. According to Edelweiss Securities, this will also increase the compliance levels of retailers.
Further, the government has allowed single brand retailers to sell online before they set up physical stores against the earlier norm of mandatory offline store before going online. This will encourage retailers to enter the market by first going online.
"Massive capital is required for setting up a physical store vis-a-vis online platforms. The new norm will significantly ease capital pressure on small retailers who are looking to start afresh," said Shobhit Agarwal, MD and CEO, Anarock Capital.
US tech giant Apple welcomed the government decision. "We love our customers in India and we are eager to serve them online and in-store with the same experience and care that Apple customers around the world enjoy... It will take us some time to get our plans underway and we'll have more to announce at a future date," the company said.
"These positive changes in the policy will position India as an attractive investment destination for global retailers, opening more job opportunities in the sector while simultaneously augmenting indigenous manufacturing and exports... This is a welcome move considering the fact that foreign investment is immensely crucial for the country which is looking to double its economy to 5 trillion dollars over the next five years," Anshuman Magazine, Chairman and CEO, India, South East Asia, Middle East and Africa, CBRE.