Cabinet approves 100% FDI under automatic route for single brand retail, construction development

Government aims to liberalise and simplify the FDI policy so as to provide ease of doing business in the country.

New Delhi: The Union Cabinet on Wednesday approved 100 percent foreign investment in single brand retail trading (SBRT) and construction development.

At present, FDI up to 49 percent is allowed under automatic route but any investment beyond the limit required government approval.

“These are intended to liberalise and simplify the FDI policy so as to provide ease of doing business in the country. In turn, it will lead to larger FDI inflows contributing to growth of investment, income and employment,” a government statement said.

The decision is likely to benefit big foreign single-brand retailers such as IKEA, Carrefour and Walmart. Meanwhile, the Confederation of All India Traders (CAIT) has strongly opposed the government decision saying that the move will facilitate easy entry of MNCs (multi-national companies) in the retail trade.

The Cabinet also decided to allow 100 percent FDI in construction development relating to building townships, housing, infrastructure and real estate broking services.

Explaining 100 percent FDI under automatic route for construction development the Cabinet clarifed that real-estate broking service does not amount to real estate business and is therefore, eligible for 100 percent FDI under automatic route.

Here are the details of amendments in the FDI in Single brand Retail Policy

• Government approval no longer required for FDI in Single Brand Retail Trading (SBRT).
• Extant FDI policy on SBRT allows 49 percent FDI under automatic route, and FDI beyond 49 percent and up to 100 percent through government approval route. It has now been decided to permit 100 percent FDI under automatic route for SBRT.
• It has been decided to permit single brand retail trading entity to set off its incremental sourcing of goods from India for global operations during initial 5 years, beginning 1st April of the year of the opening of first store against the mandatory sourcing requirement of 30 percent of purchases from India.
• For this purpose, incremental sourcing will mean the increase in terms of value of such global sourcing from India for that single brand (in INR terms) in a particular financial year over the preceding financial year, by the non-resident entities undertaking single brand retail trading entity, either directly or through their group companies.
• After completion of this 5 year period, the SBRT entity shall be required to meet the 30 percent sourcing norms directly towards its India’s operation, on an annual basis.
• A non-resident entity or entities, whether owner of the brand or otherwise, is permitted to undertake ‘single brand’ product retail trading in the country for the specific brand, either directly by the brand owner or through a legally tenable agreement executed between the Indian entity undertaking single brand retail trading and the brand owner.