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.
