The Government’s decision to relax FDI norms for single-brand retail has been garnering positive results from across the industry. As per the new decision, all procurements made from India by single-brand retailers for their brand shall be counted towards local sourcing, irrespective of whether the goods are sold in India or exported. This sourcing for global operations can be directly done by the retailer or its group companies. The Government has also allowed retailers with FDI to sell online even before setting up physical stores.
Here is a glimpse of what the industry bigwigs think about the relaxed FDI policy helping Indian retail industry going forward.
Kumar Rajagopalan, CEO, Retailers Association of India (RAI)
The announcement by the Government on Foreign Direct Investment (FDI) in India, specifically about single brand retail is a very welcome move. It has significant capability to create ease of doing business for single brand retailers in the country. The fact that the entire purchase is done by the single brand retailers from India, including the purchase done for the sake of exports, is a good move by the Government, which clearly indicates that they want FDI for single brand retail in the country. At the same time, it ensures that manufacturing in the country is being given a boost. In our opinion, the export capability from this country will dramatically increase when these retailers start buying for their global requirements.
The FDI in contract manufacturing also is a good move as it can encourage new types of manufacturers to look at India seriously. The easing of the channel play for single brand retailers by allowing them to start off with online and then subsequently go offline is also a laudable change as it increases ease of doing business and it will encourage them to come in the country.
The Retailers Association of India (RAI) had written to the Government asking to ease FDI norms for single brand retail by considering the exports that is done from this country also as part of the 30 per cent sourcing norm.
This is a good move by the Government, which will, on one hand, encourage global single brands to source from India for global operations, and on the other, encourage the retailers to showcase global product range to consumers in India.
Rahul Mehta, President Clothing Manufacturers Association of India (CMAI)
The Clothing Manufacturers Association of India (CMAI) welcomes the changes made in the FDI rules under single brand retail. The ease in FDI Rules will provide greater flexibility to global fashion brands. This will help to improve the retail landscape of India, increase investments and eventually employment in the country.
However, CMAI is concerned that this could possibly affect the garment manufacturing in the country. The eased rules will provide greater liberty to brands to source globally depending mainly on the cost competitiveness. This might result in brands limiting their sourcing requirement to only 30 per cent for a period of 5 years from India, including sourcing for exports. In such a scenario, it is important that these sourcing clauses are very closely monitored to ensure that sourcing from India is continuously increasing, so as to be in sync with the ‘Make in India’ drive of the Government.
Shobhit Agarwal, MD & CEO, ANAROCK Capital
The Government is on a roll and is making concerted efforts to bring India’s economic growth back on track. In line with the overall demand, the Government relaxed the FDI norms in single brand retail and expanded the definition of mandatory 30 per cent domestic sourcing norms.
This is excellent news for foreign retailer giants like IKEA and Apple who will now find Indian market more lucrative to invest and conduct business in. Many foreign brands have been in a wait-and-watch mode on account of the difficulties so far perceived in meeting the mandated sourcing norms. With more clarity, many of such players can now make their foray into India to tap into India’s consumption story – and to boost investments here.
Also, the announcement to allow single brand retailers to start online sales, effectively doing away with the previous condition of first setting up a mandatory bricks-and-mortar store, is also commendable. Massive capital is required for setting up a physical store vis-à-vis online platforms. Now retailers can breathe a sigh of relief as they can start online sales without having to open physical stores. This will significantly ease capital pressure on small retailers.
Pravesh Kaushik, Category Head – Apparel, Tata CLiQ
At the onset of the FDI opening, it generally seems to be of great value generation for the economy. In the current scenario when cross-border e-commerce is booming which is due to a huge demand at home, the move would allow a closer involvement. The investments which were restricted and hence resulted in limited ‘stack’ ingestion, would now be more welcome. In terms of benefits to various stakeholders in the system, there is one clear cut winner – ‘the customer’. With more accessibility to the international lines, it is certainly going to pump up the wallet size from the customer’s end and in-turn allow the economy to bloat. The international retailers along with the ones willing to explore and expand in India would welcome such a change. The flip side to it can be the impact on the domestic retailers and brands. The competition would result in increased pressure on efficiencies in the P&L for domestic/home-grown brands/labels.
Considering the exporters, it should prove prudent for their growth. Consideration of all sourcing and not just subset of sales, would provide the comfort to retailers and brands to keep sourcing from India with additional power to sell what the customer is asking and not only what is being sourced. We should await the final print though before making conclusions.
Pinakiranjan Mishra, Partner and Leader – Consumer Products and Retail, EY India
As per the proposal, single brand retail companies would now be permitted to open online stores before setting offline stores. This will help new entrants to initiate their business through the online channel especially since the infrastructure to support online is quite well developed now. Allowing the entire value of exports for meeting the mandatory 30% local sourcing norms would be a great relief for both existing and new players.