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<keyword id="163329" type="COMPANY" weightage="100" keywordseo="Levi-Strauss-Co">Levi Strauss &amp; Co</keyword>, the US-headquartered maker of the popular <keyword id="3321200" type="UNKNOWN" weightage="100" keywordseo="levis-denim">Levi's denim</keyword> jeans, wants to convert its existing local wholesale entities into retail, for which it has sought the permission of Indian government. Doing so, it has joined the <a href="http://www.businessinsider.in/10-new-insurance-companies-to-start-operations-in-India-soon/articleshow/51585962.cms">long list of foreign brands</a> that are seeking to gain from the changes in India’s FDI policies. 
 
As per reports, Levi Strauss &amp; Co had filed an application with the Department of Industrial Policy and Promotion under the Industry Ministry on April 11, seeking approval that its existing wholesale entities are allowed to engage in direct retailing and ecommerce. 
 
Also read: <a href="http://www.businessinsider.in/New-FDI-rules-to-upset-online-shoppers-no-more-promotional-offers-and-cash-backs/articleshow/51644272.cms">New FDI rules to upset online shoppers; no more promotional offers and cash-backs</a> 
 
Other apparel and casual wear brands that have sought the approval <a href="http://www.businessinsider.in/Samsung-to-soon-apply-for-single-brand-retail-licence-in-India/articleshow/50848515.cms">for direct retail</a> include Pepe Jeans, Adidas and Puma. 
 
It was in November 2015 that the government had relaxed the rules for <a href="http://www.businessinsider.in/Not-everything-can-be-termed-state-of-the-art-says-Indian-government-to-facilitate-FDI/articleshow/51628211.cms">FDI in retail</a>. The new rules allow manufacturers to sell their products through wholesale, retail and ecommerce channel as well. 
 
<a href="https://upload.wikimedia.org/wikipedia/commons/2/2e/HK_Yuen_Long_Plaza_Levi_s_Store_Ground_Floor.JPG">Image source</a>

Levi
Strauss wants to directly retail online and offline, writes to the government

After failing to get a response from the central government over <a href="http://www.businessinsider.in/searchresult.cms?query=foreign+direct+investment+%28FDI%29+">foreign direct investment (FDI)</a> norms with e-Commerce players in India, brick-and-mortar retailers are going to approach the <a href="http://www.businessinsider.in/searchresult.cms?query=Delhi+High+Court+">Delhi High Court</a> once again. 
 "We did meet the government once and nothing happened after that. We will have to take a call as a group," said Kishore Biyani, founder of <keyword id="44949" type="CITY" weightage="80" keywordseo="Future-group">Future Group</keyword>, India's largest network of retail store chains. He said there should be clarity in the policy. 
 In their quest for parity in <keyword id="44528" type="ORGANIZATION" weightage="100" keywordseo="FDI">FDI</keyword> norms with <a href="http://www.businessinsider.in/searchresult.cms?query=e-Commerce+">e-Commerce</a> firms, which have attracted billions of dollars in overseas funding using the marketplace model, traditional retailers had already approached the court in May. 
 
They contend that while India bars FDI in e-Commerce firms that sell products directly to consumers, foreign companies are allowed to operate online marketplaces that offer a platform for sale of global brands, putting them at a disadvantage. 
 India allows 51% FDI in multi-brand retailing, with a whole host of conditions including 30% mandatory local sourcing and $100 million upfront investment. "We will wait for another few days but if it (the government) still doesn't get a clarified policy, we will have no other option than to go for legal recourse," said <keyword id="113284" type="PERSON" weightage="60" keywordseo="Kumar-Rajagopalan">Kumar Rajagopalan</keyword>, chief executive of the <a href="http://www.businessinsider.in/searchresult.cms?query=Retailers+Association+of+India">Retailers Association of India</a>. 
 
RAI, an industry body representing over 1,000 retailers, including Shoppers Stop, Reliance Retail and the Future Group, filed a petition against the government in mid-May asking for a level playing field in terms of foreign investment. 
 On May 21, the <keyword id="6355014" type="ORGANIZATION" weightage="100" keywordseo="Delhi-High-Court">Delhi High Court</keyword> converted the petition into a representation, directing the association to discuss the matter with the government, failing which they could approach the court again within four months. Since then, associations of mobile and footwear sellers have also filed similar petitions alleging FDI violations. 
 
Biyani had earlier said that India's physical retailers and the marketplace model operated by foreign funded e-Commerce companies in India are largely similar — the only difference is the process of smart accounting by <a href="http://www.businessinsider.in/searchresult.cms?query=online+retailers">online retailers</a>. He also said ecommerce companies are violating FDI laws "in the spirit and letter". 
 
Retailers say they will push the case in the Delhi court, once again highlighting how e-Commerce companies are allegedly circumventing India's FDI regulations. "e-Commerce is only supposed to translate the physical world into the Internet world and therefore deserves to be similarly regulated as commerce in the physical world," said Rajagopalan. 
 
"Though the outcome of ecommerce and retail in the physical world is the same, the treatment meted out by the government of India to the two retail segments in the same market is inequitable," he added. 
 
(Image: Indiatimes)

Flipkart and Snapdeal have one thing in common, but that’s irking the Govt!

Offline retailers want a level playing field. They want 100% FDI in place of the current 51%. They reason that the current rate was fixed to only save small retailers. However, these sellers are anyway facing competition from e-commerce sites. 
 
The Retailers Association of India (RAI), the apex body for offline retailers has recently filed a petition in the Delhi High Court asking for uniform FDI provisions for online retailers. 
 
The current FDI policy for offline retailers comes with strings attached. They need minimum $100 million backend investment and 30% sourcing from small enterprises. State-by-State approvals are required, and FDI is only permitted in cities with a population of over 1 million. Most retail experts feel India needs less regulations, not more. 
 
“There has been the wrong discussion for far too long in India– the ownership of retail. It should be on how to make retail distribution more efficient so that transaction costs are reduced. The government should attract global investment to promote made in India products in the global market”, says Mr. Arvind Singhal, Chairperson of Management Consulting Firm Technopak. 
 
The Indian retail scenario is rapidly changing. E-commerce is biting into revenues of traditional retailers both in urban and rural sectors. This has been fuelled by increased consumer spending due to economic growth and lower inflation. Is it going to be that way? 
 
“Technology allows you to disintermediate. The prospect of having a physical store in rural India is not viable due to the limited number of customers. The only way there is e-commerce”, Singhal observes. 
 
So is this the end of offline retail? Not quite. Most experts feel competition is one of the hallmarks of any healthy market, and with growing competition, both online and offline retailers would have to evolve. It’s true. Most e-commerce companies want physical footprint, either for sales or support. Brick-and-mortar retailers are online as well. 
 
Would large scale foreign investment do away with smaller Indian retailers? Experts beg to differ. 
 
“There is no competitive advantage foreign companies enjoy over Indian sellers. They buy from the same vendors. There shouldn’t be fear in inviting international retailers who would ‘destroy’ manufacturers in India”, Singhal reminds. 
 
So what’s the USP of Brand India now that Modi is desperately pushing the ‘Make in India’ campaign across the globe? Well, India is one of the larger economies in terms of consumer spending. It has a fairly large youth population willing to spend big moolah. If the economy grows at 7-8%, the Indian market will double in the next decade; the country will remain a reasonably attractive country to invest in. 
 
To sum up, it’s party time both for investors and consumers. The former has buyers lined up, the later has a plethora of options on the table to choose from. 
 
(Image credit: SunrisePOS and pfsweb)

Allow entry to WalMart and let Flipkart and Amazon fight it
out with Reliance Retail and Big Bazaar

Ready to take full advantage of the current market situation, both eCommerce companies and brick-and-mortar retailers want to make maximum profit and debating over who can be tagged as a marketplace. Both share different views over Foreign Direct Investment (<keyword id="44528" type="ORGANIZATION" weightage="80" keywordseo="FDI">FDI</keyword>) in online stores. 
 eCommerce companies such as Amazon, Flipkart and <keyword id="541988" type="COMPANY" weightage="80" keywordseo="SnapDeal">Snapdeal</keyword> operate as marketplaces in India thus allowing any retailer or trader to sell goods on their platform. But companies such as <keyword id="64373" type="CITY" weightage="80" keywordseo="Shoppers-Stop">Shoppers Stop</keyword>, <keyword id="6398216" type="COMPANY" weightage="80" keywordseo="Tesco">Tesco</keyword>, <keyword id="6357823" type="COMPANY" weightage="80" keywordseo="Big-Bazaar">Big Bazaar</keyword>, <keyword id="58448" type="COMPANY" weightage="80" keywordseo="Reliance-Retail">Reliance Retail</keyword> and others work only with their chosen vendors, which makes them closed marketplaces. 
 
The two models of retail - online and offline - have different business models and cannot be looked upon with the same lens, said Aamir Jariwala, secretary, E-commerce Coalition of India, which represents firms such as YepMe, Ferns n Petals and IndiaMart, told the Economic Times. 
 Among all eCommerce companies, only <keyword id="6354743" type="COMPANY" weightage="60" keywordseo="Amazon-India">Amazon India</keyword> supports opening up online retail to FDI. 
 <keyword id="113282" type="ORGANIZATION" weightage="80" keywordseo="Retailers-Association-of-India">Retailers Association of India</keyword> (RAI), a lobby organisation for companies such as Reliance Retail and <keyword id="44949" type="CITY" weightage="80" keywordseo="Future-group">Future Group</keyword>, has demanded a clarification from the government about what constitutes a marketplace and sought status equivalent to their online rivals, as several large offline retailers, too, explore opening online fronts. 
 
Many of these online stores that could make use of foreign capital are demanding opening up India's ecommerce sector to 100% FDI. But the move is being opposed by larger online marketplaces such as Flipkart and Snapdeal. The government is hearing various retail industry representatives before framing its policy. 
 
While, traditional retailers such as Shoppers Stop and BigBazaar are putting up a united front with RAI. "A lot of our members are either already running or want to open online channels and get access to foreign capital. This ambiguity on 'retail marketplaces' creates a sense of risk," said Kumar Rajagopalan, chief executive at the lobby group. 
 
Offline retailers are also demanding that the government not differentiate within the retail sector by sales channel for drafting FDI regulations. "Creation of a policy on FDI just for online or offline retail is very myopic. It will create an imbalance in the sector," Rajagopalan said. 
 
Ecommerce firms argue that they will lose a good share of the market due to such policies. 
 
Nasir Jamal, secretary general at ECAI, said financial and strategic investors would flock to offline retail if the government equates online and offline retailers with respect to FDI. "Inventory-led ecommerce companies are facing a capital crunch, and are on the lookout for funds and they also need support," he said. 
 "Offline and online retail is converging and the government should precipitate this by having similar policies," said Nitin Gupta, CEO of <keyword id="1493567" type="UNKNOWN" weightage="80" keywordseo="PayU-India">PayU India</keyword>, owned by South Africa's <keyword id="1634215" type="ORGANIZATION" weightage="80" keywordseo="Naspers-Group">Naspers Group</keyword>. 
 
India's ecommerce trade accounts for 2% of the overall retail sector, which grosses over 31.7 lakh crore ($500 billion) annually. The country's online retail sector grew to $12 billion last year. 
 
(Image: Indiatimes)

Fearing competition, Flipkart, Snapdeal oppose 100% FDI in India’s eCommerce sector

New Delhi, Feb 26 () Goods procured from units in special economic zones (SEZs) by single brand retailers, owned by foreign companies, would qualify for meeting the mandatory 30 per cent local sourcing conditions, according to a government clarification. According to the current foreign direct investment (FDI) policy on single brand retail trading, 100 per cent overseas investments are allowed in the sector. But sourcing of 30 per cent of the value of goods procured is mandatory from India for such companies having FDI beyond 51 per cent. The government has received representations from various business entities seeking clarification whether sourcing of goods from units located in SEZs would qualify as sourcing from India, as per FDI policy. "As regards, sourcing of goods from units located in SEZs in India, it may be clarified that sourcing of goods from such units would qualify as sourcing from India for the purpose of 30 per cent mandatory sourcing from India for proposals involving FDI beyond 51 per cent, subject to SEZ Act, 2005," according to the clarification. However, it said that goods which are proposed to be sourced by a single brand retailer from SEZ units will have to be manufactured in India. It added that compliance with all the conditions enumerated in the FDI policy and as notified under FEMA (Foreign Exchange Management Act) would continue to be the responsibility of manufacturing entity. SEZs, developed as export hubs, are treated as foreign territory in terms of customs laws. Procurement of goods and services from units in these zones are treated as imports. In February 2006, the government for the first time opened the sector for foreign players by allowing 51 per cent FDI. In January 2012, the cap was raised to 100 per cent -- up to 49 per cent through automatic route and beyond that with the government approval. In January 2018, the government allowed 100 per cent FDI in the sector, permitting foreign players in single brand retail trade to set up own shops in India without government approval. FDI into India grew by 15 per cent to USD 26 billion (about Rs 1,85,000 crore) during April-September 2019-20. RR RVK

Goods procured from SEZs by single brand retailers to qualify for meeting local sourcing norms

In the Jeff Bezos vs <keyword id="3820" type="PERSON" weightage="20" keywordseo="Mukesh-Ambani">Mukesh Ambani</keyword> battle royale for the Indian retail market, which is now also evolving into a 'videshi vs swadeshi' battle, questions are being raised by corporate watchers. Eight absolutely unknown facts are emerging in the <keyword id="10174110" type="UNKNOWN" weightage="20" keywordseo="Bezos-vs-Ambani">Bezos vs Ambani</keyword> battle. 1. Has <keyword id="18635" type="CITY" weightage="20" keywordseo="Amazon">Amazon</keyword>'s Jeff Bezos disclosed all of the Amazon-<keyword id="23644" type="COMPANY" weightage="20" keywordseo="future">Future</keyword> agreements to Future Retail Ltd (FRL) shareholders? To this, corporate watchers say no. Bezos has invested 49 per cent in Future Coupons Ltd (FCL), a promoter company of FRL. 51 per cent of FCL is held by Kishore Biyani, an Indian resident. FCL, in turn, has 9.82 per cent holding in FRL. It looks as though that FCL is controlled by Biyani with his holding of 51 per cent. This is a requirement under India's FDI Regulations. Bezos cannot hold directly even one share in FRL. On the face of it, he seems to be in compliance with FDI Regulations. But, the reality is different. In a two-tier structure, Bezos has taken control of FRL, which is prohibited under FDI Regulations: (i) Tier 1 is a shareholders' agreement between FRL, FCL and other promoters of FRL – in terms of this agreement, without FCL's consent, FRL cannot transfer its assets or business to any third party and its board cannot even consider such a proposal. (ii) Tier 2 is a shareholders' agreement between FCL, Amazon and other promoters of FRL – in terms of this agreement, Bezos has taken over the rights of FCL under the FRL shareholders' agreement. (iii) Thus, effectively Bezos controls FRL. The Future Retail shareholders agreement and the Future Coupons shareholders agreement have never been disclosed to any Indian regulator. If they are disclosed: (i) SEBI will find that Bezos has taken control of FRL and will mandate him to make an open offer at a price of Rs 500 per share. (ii) ED will find that Bezos has invested in and taken control of a multi-brand retail company without Government approval and hoodwinked the Government of India. 2. Has FRL amended its Articles? Amazon's rights in FCL were carried as part of the amendment to the Articles of FCL. FRL Articles have not been amended. This is because, had the amendment been proposed to the shareholders disclosing that Amazon will exercise the rights of FCL under FRL shareholders' agreement, the public shareholders would have never approved it. 3. Amazon could not have invested in FRL through FDI route under FDI Policy. Then, how does it have enforceable rights against FRL? For this, Amazon has gone through the above mired (and convoluted) structure; FRL is engaged in Multi Brand Retail Trade (MBRT); Foreign Direct Investment (FDI) - up to 51 per cent - in MBRT is allowed only with prior permission of the government, which will also be subject to veracious conditions, including sourcing of materials within India and management control etc.; Amazon wants to control multi brand retail space, but without any of the legal hassles; therefore, in a convoluted manner, it went ahead with the mired illegal structure; if the veil is pierced and the transaction structure is studied in detail, it will be found illegal, corporate watchers said. The fact that Amazon has obtained an interim order from the Emergency Arbitrator injuncting the public company, FRL not to proceed with the scheme, inspite of not having any direct shareholding in FRL, shows that the contractual rights are nothing but "control", in violation of SEBI and FDI Regulations. Bezos is learnt to have followed a similar investment structure while investing in More Retail; where he invested Rs 4,200 crore; For FDI violations, the consequence is, apart from annulment of transactions, Bezos is exposed to penalty of up to three times the investment – ~Rs 5,630 crore x 3 times = Rs 16,890 crore, sources said. For violation of SEBI Takeover Regulations, apart from penalty, they may also be liable to be prosecuted. 4. How as a foreign company Amazon asserted control over FRL and its Board? And on FRL shareholders? The assertion shows that Amazon has violated FDI and SEBI Regulations. If Amazon asserts control, it needs to make an open offer. 5. Amazon is asserting control over FRL. Does it violate FDI policy? Yes. 6. Have all of the agreements been disclosed to regulators – SEBI, ED, etc.? No – details of transaction selectively provided – in an obfuscated manner Enforcement Directorate, SEBI, Ministry of Company Affairs, and other authorities etc, must direct Amazon to disclose the agreements and details of actual arrangements in and commence inquiry. 7. What is the crux of the SIAC'd Interim Order? It records that Amazon's entire investment was for its direct interests in FRL. 8. Is Mukesh Ambani a competitor of Bezos? Bezos cannot carry on multi brand retail in India. He can carry on only market-place e-commerce in India. Yet, his Amazon is referring to Ambani's <keyword id="10926" type="CITY" weightage="20" keywordseo="Reliance">Reliance</keyword> as its competitor. Reliance can be Amazon's competitor only if the latter is permitted to do MBRT.

Bezos vs Ambani battle: Eight questions regarding Amazon's disclosures of Future deal will be in the spotlight

Top brick and mortar retailers have moved the <keyword id="6355014" type="ORGANIZATION" weightage="80" keywordseo="Delhi-High-Court">Delhi High Court</keyword> against the <keyword id="6357307" type="ORGANIZATION" weightage="80" keywordseo="Central-Government">Central Government</keyword>, demanding change in Foreign Direct Investment (<keyword id="44528" type="ORGANIZATION" weightage="60" keywordseo="FDI">FDI</keyword>) norms vis-a-vis eCommerce players in the wake of rapid growth of online shopping. 
 The case was filed by <keyword id="113282" type="ORGANIZATION" weightage="80" keywordseo="Retailers-Association-of-India">Retailers Association of India</keyword> (RAI), which represents top retailers such as <keyword id="44949" type="CITY" weightage="80" keywordseo="Future-group">Future Group</keyword>, Shoppers Stop and <keyword id="58448" type="COMPANY" weightage="60" keywordseo="Reliance-Retail">Reliance Retail</keyword>. 
 "We are demanding parity," said lawyer <keyword id="106922" type="PERSON" weightage="80" keywordseo="Abhishek-Manu-Singhvi">Abhishek Manu Singhvi</keyword>, who represents the country's largest lobby of organised retailers. 
 
This is the second such method adopted by physical retailers against the government in the past six days. The country's branded stores operators did not attend a meeting convened last week by the ministry of commerce and industry to discuss FDI in eCommerce. 
 Sales of brick-and-mortar retailers have declined after eCommerce companies such as Flipkart, Snapdeal and <keyword id="18635" type="CITY" weightage="80" keywordseo="Amazon">Amazon</keyword>.in have made major inroads into the retailing business in India by offering unprecedented discounts. 
 
While India bars FDI in eCommerce companies selling products directly to consumers, it allows foreign companies to operate the so-called eCommerce marketplace that lends its platforms for other companies to sell their products. 
 
"On paper, eCommerce can't have foreign direct investment. However, a whole lot of marketplaces are effectively retailing," Kumar Rajagopalan, chief executive at RAI, told the Economic Times. 
 
"It is a convenient method of saying they are marketplaces, but they can get as much FDI they want. So there is no level playing field in India," he said. 
 Flipkart and Snapdeal have attracted billions of dollars in funding by operating such marketplaces while US-based <keyword id="6391410" type="CITY" weightage="80" keywordseo="Amazon-com">Amazon.com</keyword> has set up a fully owned subsidiary here and has pledged to invest $2 billion in India. 
 
Physical retailers want a level playing field for both and want equal policies for both the offline and online channels. 
 
Analysts, however, say that even if India allows similar policies for both offline and online retailers, store operators can’t attract the kind of investor response as eCommerce. 
 
Even though India opened the retail business for global supermarkets in 2012 by allowing them to own up to 51% in local ventures, the showpiece liberalisation policy has discouraged a number of companies including clearance from state governments, mandatory 30% sourcing from small vendors and upfront investment of at least $100 million. 
 
Because of such conditions retailers have not been able to get any fund amid so many clauses. 
 
eCommerce companies have been spending millions of dollars in discounting products and large scale advertising to lure consumers, while physical retailers, which pay heavy rentals and have other establishment costs, say it's very difficult to compete with online retailers. 
 
(Image: Reuters)

Indian retailers have declared war against FDI and e-tailers. Know more

Among 30 developing countries, India now ranks at Number 2 position in <a href="http://www.businessinsider.in/searchresult.cms?query=ease+of+doing+business&amp;sortorder=effectivedate">ease of doing business</a> index. 
 As per a study, ‘2016 <keyword id="451693" type="ORGANIZATION" weightage="20" keywordseo="Global-Retail-Development-Index">Global Retail Development Index</keyword> (GRDI)’, which ranks top 30 developing countries for <a href="http://www.businessinsider.in/searchresult.cms?query=retail+investment&amp;sortorder=effectivedate">retail investment</a> worldwide, India jumped 13 places up at number two post. 
 
The study, which is topped by China, also took <a href="http://www.businessinsider.in/searchresult.cms?query=GDP&amp;sortorder=effectivedate">GDP</a> growth and better clarity regarding <a href="http://www.businessinsider.in/searchresult.cms?query=FDI&amp;sortorder=effectivedate">FDI</a> regulations into considerations and these have helped India achieve a second ranking. 
 "India's strong ranking reflects foreigner retailers' increased optimism in its retail market and its vast growth potential. India has relaxed several key Foreign Direct Investment (<keyword id="44528" type="ORGANIZATION" weightage="20" keywordseo="FDI">FDI</keyword>) regulations in single-brand retail and this has paved the way for multinational firms to enter the market," said Debashish Mukherjee, a partner with A T Kearney and co-head of the Consumer Industries &amp; Retail Products Practice for India and Southeast Asia. 
 
According to A T Kearney, a London-based business consultancy, India's retail sector has expanded at a compound annual growth rate of 8.8 per cent between 2013 and 2015, with annual sales crossing the USD 1 trillion mark. 
 
India has also become the world's fastest growing economy. That coupled with a large population base and the easing of FDI regulations in the sector has made it an even more attractive market, it said in the ranking. 
 
"We expect to see e-commerce to propel India's growth and make it a more attractive proposition. However, there are some challenges as well. India remains a challenging and complex market for foreign retailers, where understanding dynamics at the state level is important," Mukherjee said. 
 
(Image: Thinkstock)

India is now Number 2 in ease of doing business index

Debates – both politically motivated and economy-focused – might be raging in India regarding <keyword id="44749" type="ORGANIZATION" weightage="100" keywordseo="Foreign-Direct-Investment">foreign direct investment</keyword> (<keyword id="44528" type="ORGANIZATION" weightage="100" keywordseo="FDI">FDI</keyword>) in the retail segment, but the <keyword id="44734" type="ORGANIZATION" weightage="100" keywordseo="Indian-Government">Indian government</keyword> is constantly paving the path for global majors to enter the <keyword id="47445" type="UNKNOWN" weightage="100" keywordseo="Indian-market">Indian market</keyword>. In its latest bid to attract foreign investment, the Foreign Investment Promotion Board (<keyword id="6360345" type="ORGANIZATION" weightage="100" keywordseo="FIPB">FIPB</keyword>) has given its nod to <keyword id="1130286" type="UNKNOWN" weightage="100" keywordseo="swedish-retailer">Swedish retailer</keyword> <keyword id="771163" type="COMPANY" weightage="100" keywordseo="Hennes-Mauritz">Hennes &amp; Mauritz</keyword> (<keyword id="150626" type="COMPANY" weightage="100" keywordseo="HM">H&amp;M</keyword>) who plans to open 50 stores across the country and <keyword id="47916" type="UNKNOWN" weightage="80" keywordseo="invest">invest</keyword> around Rs 700 crore under the single-brand retail format. 
 The FIPB approval will allow the world’s second biggest fashion retailer to set up a wholly owned subsidiary in the country, according to a government statement. Last year, the Indian government opened up the retail sector to foreign investors, allowing up to 51% <keyword id="405850" type="UNKNOWN" weightage="100" keywordseo="FDI-in-multi-brand-retail">FDI in multi-brand retail</keyword> and 100% for single-brand retail. The government eased the rules further in August this year to woo <keyword id="1965137" type="UNKNOWN" weightage="100" keywordseo="Global-chains">global chains</keyword> such as <keyword id="46675" type="CITY" weightage="80" keywordseo="Wal-Mart">Wal-Mart</keyword> and <keyword id="57606" type="COMPANY" weightage="80" keywordseo="Carrefour">Carrefour</keyword> although the FIPB, nodal body for monitoring <keyword id="396143" type="UNKNOWN" weightage="100" keywordseo="Foreign-investments">foreign investments</keyword>, had kept a stringent watch over some key deals. The FIPB can vet proposals up to Rs 1,200 crore and anything above that amount has to be referred to the <keyword id="120170" type="ORGANIZATION" weightage="80" keywordseo="Cabinet-Committee-on-Economic-Affairs">Cabinet Committee on Economic Affairs</keyword> (CCEA). 
 Interestingly, there is another Swedish retailer that has been quite active in the Indian market. The budget furniture chain <keyword id="6371031" type="COMPANY" weightage="100" keywordseo="Ikea">IKEA</keyword> was one of the first companies to receive an FIPB approval for its investment plans in May this year. IKEA is now planning to enter the country with an investment of around Rs 10,500 crore. But the company is yet to announce the location for its first store. 
 It is not difficult to understand why retail giants from all over the globe are targeting the Indian market. H&amp;M has strong interest in <keyword id="21718" type="ENTERTAINMENT" weightage="100" keywordseo="Asia">Asia</keyword> as the company posted rising profits in the September quarter due to its steady growth in this region. It recorded a third quarter net profit of $690 million, up 22% on the same quarter in 2012. Since India is the third-largest <keyword id="34412" type="ORGANIZATION" weightage="100" keywordseo="economy">economy</keyword> in the continent and home to nearly 1.2 billion people, it is evolving as one of the biggest consumer markets that no <keyword id="62791" type="POSITION" weightage="80" keywordseo="global-player">global player</keyword> can possibly ignore. 
 With the government seemingly doing its best to sweeten things up, global firms in India are looking at expansion as well. In November this year, UK retail giant <keyword id="46182" type="COMPANY" weightage="100" keywordseo="Marks-and-Spencer">Marks and Spencer</keyword> opened its largest Indian store in Mumbai, a joint venture with <keyword id="196796" type="POSITION" weightage="80" keywordseo="local-player">local player</keyword> <keyword id="58448" type="COMPANY" weightage="100" keywordseo="Reliance-Retail">Reliance Retail</keyword>. <keyword id="330888" type="COMPANY" weightage="80" keywordseo="MS">M&amp;S</keyword> also said in a recent announcement that it would be aiming to make India its second largest market by more than doubling its number of stores in the country to 80. That is quite heartening, to say the least. All we require now is a crystal clear, liberal and win-win approach (it should benefit both global and local partners) to pursue the FDI dream even further. 
 
Image: Wikimedia Commons

FDI
In Retail May Flourish More As One Of The Biggest Fashion Retailers Is Hitting Indian Shores

Recently, there seems to be a new wave of hope for a kick in the foreign direct investment (FDI) in single-brand retail space, with the government considering the scrapping of compulsory 30% <keyword id="2459072" type="UNKNOWN" weightage="100" keywordseo="Domestic-Sourcing-Clause">domestic sourcing clause</keyword>. The <keyword id="6423836" type="ORGANIZATION" weightage="100" keywordseo="Department-of-Industrial-Policy-and-Promotion">Department of Industrial Policy and Promotion</keyword> (DIPP), under the Commerce Ministry, is reviewing this restrictive clause, which is a major bottleneck. If implemented, the move promises to open up a plethora of opportunities for global players to boost expansions in areas such as clothing, electronics and luxury goods. 
 
Sourcing clause takes away the authenticity of the brand Till now, this clause has played deterrent to the interests of foreign brands as it makes it imperative for the single-brand retailers to compulsorily source at least 30% of the value of the goods sold in India from Indian <keyword id="2459073" type="UNKNOWN" weightage="100" keywordseo="small-scale-manufacturers">small scale manufacturers</keyword> (SMEs) and/or village and cottage industries, artisans and craftsmen. However, these businesses have created a unique brand promise and imagery based on the quality of their products, and often, they are not able to meet the same quality standards with local sourcing. 
 
In addition, these players comply with strong process orientation and follow uniform business strategies along with having global supply chain. Hence, it becomes difficult to source local vendors, as that means losing out on the authenticity of the brand. Thus, if the government scraps the sourcing clause completely, it can really make it a lot easier for these foreign brands to ensure their quality as well as credibility. 
 
Smoother implementation 
Moreover, this 30% sourcing clause also creates implementation hurdles for foreign brands. At the moment, there is no strict supervision over product and inventory with local manufacturers and vendors on whether this norm is actually complied by companies or not. This poses a bigger threat for these companies as, if after five years, the government wants to verify the compliance, there may not be enough evidence to prove anything and that could lead to a risk of them facing a non-compliance situation, which may or may not be true. With this ceiling of 30% local sourcing gone, it will mean smoother implementation and function for the single-retail companies, which in turn, will encourage them to expand and grow faster in the country. 
 
More beneficial for luxury brands 
The changing consumer demographics and exposure to international brands have attracted the interest of premium and luxury players to open stores in India. For instance, luxury group Richemont, whose stable of brands includes Cartier, Van Cleef and Arpels, is willing to enter the single-brand retail space. If the clause is done away with, it will be a favourable move for such brands as SME sourcing for high end labels will remain a challenge. 
 
Moreover, as these brands make only a few thousands of pieces and also change product lines quite often, it is a herculean task to comply with the local sourcing prerequisite with such small amounts of product. Scrapping this rule will mean easier operation for luxury and premium brands like Gucci, LMVH, Cartier, etc and thus, make them more inclined to expand and invest in the country’s retail space. 
 
Encourage the shy companies 
Due to this local sourcing ceiling, the single-brand retail model becomes too complex, causing many companies like Apple and H&amp;M to shy off from investing in the country. If this hurdle is removed, these and many more companies will be inclined to invest more, which means increased FDI inflow for the retail space. 
 
The sourcing condition was also being seen as impacting investments by technology companies as any overseas company looking to own more than 51% of a single-brand retailing venture would have to comply with the norm. The move will also allow companies such as Apple to open stores. 
 
Analysts believe that a more favourable environment for high-end labels will see a tremendous spurt in the economy. Over Rs 300 crore has been invested in the retail space from foreign investment over the last two year period. This has resulted in more jobs which is a key growth driver, especially in a slowing economy. 
 
Clearly, scrapping this 30% sourcing rule will mean a lot for the Indian retail space and also the overall economy in general. Thus, from pure industry viewpoint, this might prove to be a complete game changer for the Indian retail industry. 
 
The previous government allowed 100% FDI in single-brand retail in 2011 with mandatory 30% sourcing from small and medium enterprises.

FDI
In Retail To Get A Boost As Govt Mulls Scrapping Domestic Sourcing Clause

<ul><li>The <keyword id="6387077" type="UNKNOWN" weightage="20" keywordseo="narendra-modi-government">Narendra Modi government</keyword> has eased the norms for 30% local sourcing rule for FDI in single-brand retail trading.</li><li>The government has now allowed online sales even before a company sets up a brick and mortar presence in India.</li><li>This will invite major single brand retailers who want to enter the Indian market.</li></ul>Indians will now be able to enjoy more stores of Swedish furniture giant <keyword id="6371031" type="UNKNOWN" weightage="20" keywordseo="IKEA">IKEA</keyword>, or Spanish brand <keyword id="6377147" type="PERSON" weightage="20" keywordseo="zara">Zara</keyword>, <keyword id="150626" type="COMPANY" weightage="20" keywordseo="HM">H&amp;M</keyword> and many more, all thanks to government’s move to relax laws. They will also be able to buy more foreign brands online, even those which have no stores in the country yet. Yesterday, the government in its Foreign Direct Investment (FDI) policy changes, eased the norms that had earlier held them back – like 30% local sourcing rule for single-brand retailers. "H&amp;M has been sourcing from India since the last 30 years for its international markets, its great to see global sourcing is now part of the 30% local sourcing norms. We see this supporting the ease of doing business in India and driving in larger investments from global companies," said Janne Einola, Country Manager H&amp;M India. The Narendra Modi-led government has been chasing growth at a time when the country’s corporate sector is saddling debt coupled with slow demand. To supplant this gap, the government is trying to attract foreign investors who are keen on the India growth story. “This will lead to greater flexibility and ease of operations for single brand retail trading (SBRT) entities, besides creating a level playing field for companies with higher exports in a base year,” said the government said. As a part of the eased norms, the government decided that all procurements made from India by the single brand retail entity shall be recognised as local sourcing. This is irrespective of whether the goods procured are either sold in India or exported. Green signal to global corporations The relaxation of the FDI norms will send the green signal to global corporations who want their share of the growing Indian retail market. “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 such players can now make their foray into India to tap into India’s consumption story - and to boost investments here,” said Shobhit Agarwal, MD and CEO, ANAROCK Capital. Online before brick The government also allows online sales even before a company sets up a brick-and-mortar presence. “Online sales will also lead to creation of jobs in logistics, digital payments, customer care, training and product skilling,” said the government said. This will invite major single brand retailers who want to enter the Indian market, without necessarily having to invest in the required physical infrastructure. “Massive capital is required for setting up a physical store vis-à-vis online platforms. Now retailers can start online sales without having to open physical stores. This will significantly ease capital pressure on small retailers who are looking to start afresh,” said Agarwal.

India gives green signal to global majors like IKEA, Zara, H&M and more

New Delhi, Mar 11 () A parliamentary panel on Wednesday expressed concerns over decline in foreign direct investment (FDI) in the manufacturing sector and recommended to address these issues to make India an attractive destination for investments. The Department-Related Parliamentary Standing Committee on Commerce said the FDI equity inflow in manufacturing is declining and the sector's share in the total FDI inflow in 2018-19 was around 23 per cent "which is very low". It said the "low inflow of FDI in the manufacturing sector defeats the very purpose of Make in India scheme". It recommended the commerce department to take concerted efforts to increase the share of manufacturing sector in FDI inflows. It said that in the past five-and-a-half years (April 2014-September 2019), India received FDI inflows worth USD 319 billion, which is 50 per cent of the total FDI inflow (USD 642 billion) in the past over 19 years since April 2000. It also asked for fast disposal of 51 pending cases of FDI proposals. "The committee, while appreciating the liberal and investment-friendly policies adopted by the government, recommends to take necessary precautions/ steps to ensure that the liberal policies are not exploited by some unscrupulous investors and institute a stringent mechanism to check the misuse of FDI for routing black money in the guise of FDI," it said. Besides, the report stated that a large chunk of FDI inflow is captured by a few states while majority of them witness a minimal inflow of FDI. It recommended the government to take necessary steps to increase the inflow of FDI into the lean states to ensure balanced growth so that there is no regional disparity in development. Further, it asked the department to be vigilant about the domestic sourcing norms and ensure that they are strictly adhered to by the multinational corporations so that the intended benefits are accrued to the target groups. "The committee recommends to address the concerns raised by the domestic retailers and indigenous traders in a structured manner through its retail trade policy which is supposedly under preparation," the report added. The report also said necessary steps need to be taken to ensure that the liberalisation of the coal sector provides the required impetus to the sector. It called for concerted efforts for revival of the industrial sector with focus on mining, manufacturing and electricity sectors given their importance in the economy and to address declining capacity utilisation of the manufacturing sector considering its impact on investment and job creation. On the proposed new industrial policy, it suggested for finalising the policy at the earliest in tune with changing global scenario. On intellectual property rights, the committee stressed the need to further reduce the time for examination and disposal of patents to match the international standard, create awareness among various stakeholders and fill the sanctioned posts of patent examiners and controllers at the earliest. Taking note of the World Bank's Doing Business Report, 2020, which ranks India at 63rd among 190 countries, it said sustained measures need to be taken for further improvement. Further, for start-ups, it suggested to increase registration of start-ups in Government e-Marketplace portal, facilitate establishment of start-ups in those states with dismal record, address the issue of insignificant drawing of funds from the Fund of Funds Scheme and operationalisation of Credit Guarantee Scheme to ease the availability of credit. "Expressing concern over the delay in payment by the PSUs (public sector undertakings) and the government departments to the start-ups, the committee recommended to increase procurement and payment of dues within a stipulated time period," it said. RR HRS

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