Retail India Business - News, Views and Much More

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.

Bye Bye FDI - Retail India

I guess its going to be a long time before the government would ever come out with some concreate measures to open up the Retail Sector to FDI. I've enclosed a brief comment from a recent interview with FT.com

"The SEZs would benefit from new guidelines that open up FDI in the construction industry, which Mr Nath announced last month. However, the minister says he has no immediate plans to open up India's under- developed retail sector, which remains closed to foreign investment.

"I need to figure out a way first of protecting the 'mom and pop' stores," the minister says."

Source: FT.com

FDI in Retail India - Press Note 1 - 2005

Guidelines for FDI in Retail India

FDI Manual - Ministry of Commerce and Industry

With the influx of requests for the various possibilities and rules governing FDI in Retail with the government speculating over the last few months, I've decided to upload an important document titled "Investing in India - Foreign Direct Investment - Policy and Procedures" - From the Ministry of Commerce and Industry - Government of India.

This document although not a specific focus relating to FDI in Retail, it still covers the overall view and clearly outlines the restrictions under which FDI in Retail exists.

Download fdi_manual_ministry_of_commerce.pdf

With the influx of requests for the various possibilities and rules governing FDI in Retail with the government speculating over the last few months, I've decided to upload an important document titled "Investing in India - Foreign Direct Investment - Policy and Procedures" - From the Ministry of Commerce and Industry - Government of India.

This document although not a specific focus relating to FDI in Retail, it still covers the overall view and clearly outlines the restrictions under which FDI in Retail exists.

Download fdi_manual_ministry_of_commerce.pdf

FDI in Retail Shops in India

Well the news was out last evening that the Government is likely to open up FDI in Retail Shops in India. There was a marked clarification in the same by restricting FDI in Grocery Retailing and Retailers. To what has been gathered so far, Global Retailers like Wal-Mart and Tesco etc, are yet not eligible through the latest initiative. The Government proposes to allow companies such as Tommy Hillfiger, Gucci, etc who are already in India through the Franchise route. Since they come through the Franchise option, why not let them in directly through FDI in Retailing. There are still lot of clarifications to be made and its yet another proposal. The Goverment needs to gets its act clear as over the last 12 years they have allowed many big retailers and brands into retailing like Diary Farm, Marks & Spencers, Metro being the latest and all the other luxury brands etc through Franchisee, Joint Ventures, Distribution clause alone. As it can be seen the Governments is trying its level best to open up Retailing in India but is still pressurised and is trying different options for entry. End of the day the Goverment has slowly allowed the big guns to enter. India is already one of the key locations for global sourcing for large retailers like Wal-Mart, Ikea, M&S, Metro and many more. Tesco has already shifted its back-office through a recent BPO venture and has setup a large facility. How long will it take for any of these companies to learn and understand the market? And how long will it take for these companies to start scouting for prospective people and companies to work along with as soon as the Government opens up FDI in Retailing. Not too long.

Either ways before I end this short note, if you are wondering if I'm for or against FDI in Retailing, let me state again, I'm all in for FDI in Retailing. Yes it will change the fabric of the entire nation. There are much larger issues than wondering if the small mom and pop stores would continue to exist. How many of them realize and think about how every small town that Wal-Mart enters in USA has changed forever and life is never the same. The whole life gets commercialised. Anyways the story never ends.

Well the news was out last evening that the Government is likely to open up FDI in Retail Shops in India. There was a marked clarification in the same by restricting FDI in Grocery Retailing and Retailers. To what has been gathered so far, Global Retailers like Wal-Mart and Tesco etc, are yet not eligible through the latest initiative. The Government proposes to allow companies such as Tommy Hillfiger, Gucci, etc who are already in India through the Franchise route. Since they come through the Franchise option, why not let them in directly through FDI in Retailing. There are still lot of clarifications to be made and its yet another proposal. The Goverment needs to gets its act clear as over the last 12 years they have allowed many big retailers and brands into retailing like Diary Farm, Marks & Spencers, Metro being the latest and all the other luxury brands etc through Franchisee, Joint Ventures, Distribution clause alone. As it can be seen the Governments is trying its level best to open up Retailing in India but is still pressurised and is trying different options for entry. End of the day the Goverment has slowly allowed the big guns to enter. India is already one of the key locations for global sourcing for large retailers like Wal-Mart, Ikea, M&S, Metro and many more. Tesco has already shifted its back-office through a recent BPO venture and has setup a large facility. How long will it take for any of these companies to learn and understand the market? And how long will it take for these companies to start scouting for prospective people and companies to work along with as soon as the Government opens up FDI in Retailing. Not too long.

Either ways before I end this short note, if you are wondering if I'm for or against FDI in Retailing, let me state again, I'm all in for FDI in Retailing. Yes it will change the fabric of the entire nation. There are much larger issues than wondering if the small mom and pop stores would continue to exist. How many of them realize and think about how every small town that Wal-Mart enters in USA has changed forever and life is never the same. The whole life gets commercialised. Anyways the story never ends.

CAIT Opposes Governments Decision on FDI

Not surprisingly, Confederation of All India Traders (CAIT), today opposed the governments decision on allowing 26% FDI in the retail sector in India. The apprehension is expected and will follow soon more seriously with the industry grouping together shortly on this issue. Although the government has to open the sector in line with WTO agreements, it can only be delayed for a short while further beyond this point of time. And the governments decision to open the retail sector in a phased manner is the first step.

Suggestions of protecting the local traders is vague at the moment. What kind of protection can be given if we really want to open the doors in par with the other Asian economies?

Not surprisingly, Confederation of All India Traders (CAIT), today opposed the governments decision on allowing 26% FDI in the retail sector in India. The apprehension is expected and will follow soon more seriously with the industry grouping together shortly on this issue. Although the government has to open the sector in line with WTO agreements, it can only be delayed for a short while further beyond this point of time. And the governments decision to open the retail sector in a phased manner is the first step.

Suggestions of protecting the local traders is vague at the moment. What kind of protection can be given if we really want to open the doors in par with the other Asian economies?

Governement Firms Stance on FDI in Retail

Guess the discussions have been very sidelined so far following the story on the governments decision on Foriegn Direct Investment (FDI) in Retailing. In all parity, the present National Democaratic Alliance is all set to come back in power according to many polls apart from my own view. The government has firmed its decision to open FDI in Retailing to the extent of 26%.

Taking an extract from the Business Standard newspaper reporting the article its rather funny to use such an quote for justification of opening up FDI.

"The 26 per cent FDI limit in insurance also would be revisited, he said. Dismissing notions that foreign retail brands would dislodge Indian brands from the market, Singh said the NDA was considering only 26 per cent FDI and not handing over the entire retail trade. “The Indian sherbeth is still there despite Coca-Cola and Pepsi. Our experience is that the Indian brand has great strength,” he said. "

Well I can run around the corner to about ten stores from my home in a typical neighbourhood and ask for a coke or a can of pepsi, and I'm sure to be able to buy the same, all chilled and fresh. While I doubt if any of ten stores stocking "The Great Indian Shebeth". I'm sure most of you would agree in my view and much is said in that little statement.

Well no arguements from me regarding opening up FDI in Retailing or any other sector. I don't see much protection for the local trade in competing with global giants. The only possibility is if the government really restricts the amount in % of investment through direct and indirect holdings. That has it owns loopholes. Which grocery chain in India can compete against the US$260 Billion Wal-Mart. It has the capability and strength to estabilish itself even in a country like India.

While the arguement goes on, just though I should share the news on the governments stand. Guess we can all from any angle see the difference soon in the markets. Only issue to ponder on at the moment is to think about when the government is going to pass this and really see the investment flowing in.

FDI in Retail

To have an update to the previous post on the Governments decision on FDI in Retailing, heres some information to make things clearer, atleast for the moment. "The NDA also plans to allow 26 per cent foreign investment in the growing retail sector" as quoted by The Economic Times.

Well its quite a start for the government to act so quick. Only 4 days ago, the government acknowledged the retail sector needs to be monitored and controlled and opening up FDI in Retailing will take some more time so that the Indian players can establish themself.

With this new decision are we going to see global players coming in for joint ventures with the exisiting players? This happened in China and many other countries but like most retail companies, thats only the short term route for market entry and to understand the market. In most cases, the investing party gradually buys out the local player or establishes a new entity with total equity as the laws get more flexible.

To have an update to the previous post on the Governments decision on FDI in Retailing, heres some information to make things clearer, atleast for the moment. "The NDA also plans to allow 26 per cent foreign investment in the growing retail sector" as quoted by The Economic Times.

Well its quite a start for the government to act so quick. Only 4 days ago, the government acknowledged the retail sector needs to be monitored and controlled and opening up FDI in Retailing will take some more time so that the Indian players can establish themself.

With this new decision are we going to see global players coming in for joint ventures with the exisiting players? This happened in China and many other countries but like most retail companies, thats only the short term route for market entry and to understand the market. In most cases, the investing party gradually buys out the local player or establishes a new entity with total equity as the laws get more flexible.

Deja Vu! Goverment Favours FDI in Retail

Its nothing new that the government has decided to change its stand in couple of days over FDI in Retailing. Although the specifics can be interpretted in different ways. Unconfirmed reports are out on the governments decision to open up FDI in Retailing in India if the government is reelected back in power this elections.

Well definitely not good news for everyone. But the consumers sure stand to benefit with more increased competion and players leading to impeccable service standards unheard of in the Indian Retailing landscape and more price competition.

Its nothing new that the government has decided to change its stand in couple of days over FDI in Retailing. Although the specifics can be interpretted in different ways. Unconfirmed reports are out on the governments decision to open up FDI in Retailing in India if the government is reelected back in power this elections.

Well definitely not good news for everyone. But the consumers sure stand to benefit with more increased competion and players leading to impeccable service standards unheard of in the Indian Retailing landscape and more price competition.