Retail India: FDI in Retail Trading Rules

Rules for Retail Trading Sector under the Foreign Direct Investment (FDI) - Policy and Procedures,Ministry of Commerce and Industry, India (dated:March 2005).

Trading is permitted under automatic route with FDI up

to 51% provided it is primarily export activities, and the

undertaking is an export house/trading house/super

trading house/star trading house. However, under the

FIPB route:-

i. 100% FDI is permitted in case of trading companies

for the following activities:

a) exports

b) bulk imports with ex-port/ex-bonded warehouse

sales

c) cash and carry wholesale trading

d) other import of goods or services provided at

least 75% is for procurement and sale of goods

and services among the companies of the same

group and for third party use or onward transfer/

distribution/sales

ii. The following kinds of trading are also permitted,

subject to provisions of Foreign Trade Policy:

a) Companies for providing after sales services

(that is not trading per se)

b) Domestic trading of products of JVs is permitted

at the wholesale level for such trading

companies who wish to market manufactured

products on behalf of their joint ventures in which

they have equity participation in India

c) Trading of hi-tech items/items requiring

specialised after sales service .

d) Trading of items for social sector

e) Trading of hi-tech, medical and diagnostic items

f) Trading of items sourced from the small scale

sector under which, based on technology

provided and laid down quality specifications, a

company can market that item under its brand

nameg.

g) Domestic sourcing of products for exportsh.

h) Test marketing of such items for which a

company has approval for manufacture

provided such test marketing facility will be for

a period of two years, and investment in setting

up manufacturing facilities commences

simultaneously with test marketing

i) FDI up to 100% permitted for e-commerce

activities subject to the condition that such

companies would divest 26% of their equity in

favour of the Indian public in five years, if these

companies are listed in other parts of the world.

Such companies would engage only in business

to business (B2B) e-commerce and not in retail

trading FDI is not permitted in retail trading

activity.