Page 90 - DMGT551_RETAIL_BUSINESS_ENVIRONMENT

Unit 4: Retailing Structure

(c) FDI is not permitted in Multi Brand Retailing in India. Notes
Prospected Changes in FDI Policy for Retail Sector in India

The government (led by Dr. Manmohan Singh, announced following prospective reforms in
Indian Retail Sector:
1. India will allow FDI of up to 51% in multi-brand sector.

2. Single brand retailers such as Apple and Ikea, can own 100% of their Indian stores, up from
previous cap of 51%.
3. The retailers (both single and multi-brand) will have to source at least 30% of their goods
from small and medium sized Indian suppliers.
4. All retail stores can open up their operations in population having over 1 million. Out of
approximately 7935 towns and cities in India, 55 suffice such Criteria.
5. Multi-brand retailers must bring minimum investment of US$ 100 million. Half of this
must be invested in back-end infrastructure facilities such as cold chains, refrigeration,
transportation, packaging etc. to reduce post-harvest losses and provide remunerative
prices to farmers.

6. The opening of retail competition (policy) will be within parameters of state laws and
regulations.

Single and Multi-Brand Retailing

FDI in Single-Brand Retail

The Government has not categorically defined the meaning of Single Brand anywhere neither
in any of its circulars nor any notifications.
In single-brand retail, FDI up to 51 per cent is allowed, subject to Foreign Investment Promotion
Board (FIPB) approval and subject to the conditions mentioned in Press Note 3 that –

(a) only single brand products would be sold (i.e., retail of goods of multi-brand even if
produced by the same manufacturer would not be allowed),
(b) products should be sold under the same brand internationally,

(c) single-brand product retail would only cover products which are branded during
manufacturing, and
(d) any addition to product categories to be sold under ¯single-brand would require fresh
approval from the government.
While the phrase ‘single brand‘ has not been defined, it implies that foreign companies would
be allowed to sell goods sold internationally under a ‘single brand‘, viz., Reebok, Nokia, and
Adidas. Retailing of goods of multiple brands, even if such products were produced by the same
manufacturer, would not be allowed. Going a step further, we examine the concept of single
brand‘ and the associated conditions:
FDI in ‘Single brand‘ retail implies that a retail store with foreign investment can only sell one
brand. For example, if Adidas were to obtain permission to retail its flagship brand in India,
those retail outlets could only sell products under the Adidas brand and not the Reebok brand,
for which separate permission is required. If granted permission, Adidas could sell products
under the Reebok brand in separate outlets.

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