In order to attract a larger number of global players in the single-brand retail sector, the government is mulling measures to relax the mandatory 30 percent local sourcing norms by allowing them more time to comply with the regulations. Big single-brand retail firms may also be allowed to open online stores before setting up brick-and-mortar shops. Presently, online sale by a single-brand retail player is allowed only after opening of physical outlet.
According to a proposal under active consideration of the government, single-brand foreign retailers may be allowed to adjust the incremental sourcing of goods from India for global operations during the initial 10 years from the current five years (beginning April 1 of the year of the opening of first store) against the mandatory sourcing requirement of 30 per cent of purchases from India. However, the relation would be subject to a condition that a foreign entity would have to bring foreign direct investment (FDI) in excess of $200 million within the first 2-3 years. The proposal requires union cabinet’s approval for implementation.
In January 2018, the government allowed 100 per cent FDI in single brand retail under the automatic route, permitting foreign players in the sector to set up their own shops in India, without government approval. That time, the government has also relaxed the mandatory local sourcing requirement of 30 per cent. Under the relaxed norms, a foreign retailer will be able to get credit from incremental increase in sourcing for its global operations from India, towards the mandatory 30 per cent local sourcing requirement, for its business in the country. During the April-June quarter of 2018-19, FDI in India grew by 23 percent to $12.75 billion.