In the Union Budget for 2016-17, the Finance Minister had announced 100% foreign direct investment (FDI) in retail food. This was subject to the retailer selling only food procured from farmers in India and processed locally. However, guidelines in this regard are yet to be notified. Meanwhile, the Government is reportedly considering a proposal to allow 100% FDI in all goods “manufactured domestically”. The policy will be applicable to both offline (brick-and-mortar retailers) and online (e-commerce companies). The idea is flawed.
At the outset, a few words on the existing policy dispensation on the FDI in retail. For this purpose, retail is classified in two broad categories, viz, single-brand retail (SBR) and multi-brand retail (MBR). In the SBR, 100% FDI is permitted (in both offline and online) subject to the company sourcing 30% of its requirements from local vendors. Last year, the guidelines were amended to relax this condition if investment is made in “cutting-edge technology”. However, full exemption will be available for the first three years only and thereafter, it will be partial for five years on a sliding scale.
In the MBR offline and physical format (also known as “mom-and-pop” store in common parlance), 51% FDI is allowed subject to 30% local sourcing, a minimum investment of USD 100 million and prior approval of the State where the store is to be set up.
In the MBR/online segment, 100% FDI is allowed in “market-place”- an IT platform which acts as facilitator for sellers and buyers and provides support services, viz, warehousing, logistics, order fulfilment and payment collection. This is subject to no more than 25% sale by a single vendor and no advertisement or discount by an ecommerce company. In an “inventory”- based model, where the company also owns an inventory of goods and services, FDI is prohibited.
この記事は Bureaucracy Today の April 1 - 30 2017 版に掲載されています。
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