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Cheat Sheet for FDI in Single Brand Retail Trading

Written By

Priya Kapasi Shah, Dhairya Chaniyara

Published on

April 1,
2025

Last updated on

July 21, 2025
15:53

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https://treelife.in/startups/cheat-sheet-for-fdi-in-single-brand-retail-trading/

FDI e-commerce vs retail?

Get clarity now.

AI Summary

India permits 100% FDI in Single Brand Retail Trading (SBRT) under the automatic route since January 2018, removing the earlier government approval requirement for FDI beyond 49%.
Where FDI exceeds 51%, at least 30% of the value of goods sold must be sourced from India, with a portion mandatorily procured from MSMEs, village and cottage industries, artisans, and craftsmen.
For the first five years of operations, global sourcing from India (covering both Indian and international operations) can be counted toward the 30% local sourcing requirement.
After the initial five-year period, the 30% sourcing mandate must be met exclusively through the brand's Indian operations.
Retailers conducting e-commerce sales in India must set up a physical store within two years from the date they commence online retail.
The brand must be owned by the applicant entity or globally licensed under the same brand name, as in cases such as Apple and IKEA.
Products must be sold under a single brand that is registered globally, and franchise models are permitted subject to filing of the relevant agreements.
The liberalized FDI policy is intended to expand consumer access to global brands, strengthen local manufacturing and supply chains, and create jobs in retail, logistics, and infrastructure.
Global entrants must navigate periodic policy updates and competitive pressure from domestic retailers and e-commerce players while balancing local sourcing compliance with global quality standards.

Content Overview

FDI e-commerce vs retail?

Get clarity now.

India’s Foreign Direct Investment (FDI) policy in Single Brand Retail Trading (SBRT) has undergone significant changes, making it easier for global brands to enter the market while ensuring local economic benefits. Here’s everything you need to know:

FDI Limits & Approval Process

100% FDI is permitted in SBRT under the automatic route (since Jan 2018), eliminating the need for government approval. Earlier, government approval was required for FDI beyond 49%.

Local Sourcing Requirement (30% Mandate)

If FDI exceeds 51%, at least 30% of the goods’ value must be sourced from India, with a portion mandatorily procured from MSMEs, village and cottage industries, artisans, and craftsmen.

To ease compliance, for the first 5 years, global sourcing from India (for both Indian and international operations) can be counted toward this requirement. After this period, the 30% sourcing rule must be fulfilled solely for the brand’s Indian operations.

E-Commerce Allowed but physical store needed in 2 Years

Retailers can sell online but need to set up physical store within two years from date of start of online retail. The brand must be owned or globally licensed under the same name (e.g., Apple & IKEA).

Branding & Product Categories

Products must be sold under a single brand, registered globally. Franchise models are allowed subject to filing of agreements.

Impact of FDI Liberalization in SBRT

Boosts consumer choices with better access to global brands.
Encourages local manufacturing & supply chains through mandatory sourcing.
Creates jobs across retail, logistics, and infrastructure sectors.
Enhances warehousing & distribution networks, strengthening retail expansion.

Challenges & Key Considerations

Balancing local sourcing compliance with maintaining global quality standards.
Navigating India’s regulatory framework & periodic policy updates.
Competing with domestic retailers & e-commerce giants.

Final Thoughts

India’s liberalized SBRT FDI policy presents significant opportunities for global brands. However, careful planning around sourcing, compliance, and local market strategy is crucial for long-term success.

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About the Author

Priya Kapasi Shah

Associate Partner | Tax & Regulatory | priya.k@treelife.in

Heads Treelife’s Financial Advisory practice, specializing in investment structuring, cross-border transactions, and tax and regulatory advisory. Also leads on AIF setups and advisory services for GIFT IFSC.

Dhairya Chaniyara

Senior Associate | Tax & Regulatory | dhairya.c@treelife.in

Focuses on direct tax and regulatory services with a specialization in GIFT IFSC. Brings experience from various industries, including manufacturing, FMCG, IT-ITES, and healthcare, to deliver impactful tax solutions.

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Jitesh Agarwal

Founder

Leads VCFO, finance, tax, and regulatory functions at Treelife. Advises on GIFT City structuring and strategic financial decisions for startups and scale-ups.

Dhaval Sheth

Chief Growth Officer

Drives business development and strategic partnerships for Treelife, owning the growth mandate across client acquisition, market expansion, and revenue pipeline.