India to remove FDI cap from Single-Brand Stores

Oct 01

India to remove FDI cap from Single-Brand Stores

“India will ‘certainly’ look at removing the cap of 51 per cent in single-brand retail”, Industry and Commerce Minister Kamal Nath said.

India already has 51% FDI allowed in Single-Brand Outlet, whereas 100% FDI is allowed in Cash and Carry business. However there is no FDI in case of Multi-Brand store in India due to wide political opposition. Allowing 51% FDI lead to entry of many luxury retailers into India like Louis Vuitton, Cartier, Armani etc. But now these brand is looking for 100% FDI. President of Louis Vuitton Yves Carcelle, who raised the question of removing the FDI cap, said, “Why will anybody come unless they allow 100 per cent?”

Apart from Single-Brand store, government is also pondering on allowing 51 per cent FDI in multi-brand retail of electronics goods, computers, sports goods as well as watches. But this wont be an easy task for them. However government will protect groceries and consumer goods for Indian Retailers. This move will come with various conditions like mandatory sourcing from Indian Vendors.

This move will lead to entry of brands like IKEA, Curry’s, Sports Direct etc in India. It will also motivate existing players to expand their presence in India. Louis Vuitton entered India in 2003 but still they have only 4 stores compared to 25 in China. “We would like to have the right to own 100 percent of our retail company rather than 51 percent today that is our request and we will continue to talk to the Indian authorities,” Louis Vuitton Chief Executive Yves Carcelle said. A recent survey done by the United Nations Conference on Trade and Development (Unctad) on 300 international retailers found that more than a quarter of them have either opened or are planning to open their stores in India if the country relaxes the norms further. Allowing 100% FDI in Single Brand store will encourage more luxury retailers to enter India as they will have a stronger foothold in one of their biggest untapped markets to date, potentially worth $15 billion.

- Rajeev Damani