Diwali Gift From Modi Govt: FDI Norms In 15 Sectors Eased; Single Brand Retail & Ecommerce Industry Rejoice

By Mohul Ghosh Last updated Jun 9, 2017

After the Bihar Elections debacle, Modi Govt. was quick to take some concrete action for improving Indian economy and to attract more foreign investors. In a move which can be described as historic, to say the least, Govt. has eased FDI (Foreign Direct Investment) across 15 key sectors, which include single brand retail and eCommerce.

Finance Minister Arun Jaitley announced these major changes yesterday, as Government said in a statement, “This exercise of Prime Minister, Shri Narendra Modi, is intended on the one hand to further open up the sectors for more foreign investments in the country and also to make it easy to invest in India,”

Some experts are saying that these massive FDI changes are the biggest economic push India has seen ever since the liberalization policies of 1991 under Congress Govt.

The 15 key sectors where FDI has now been eased are:

Limited Liability Partnerships, downstream investment and approval conditions.
Investment by companies owned and controlled by Non-Resident Indians (NRIs)
Establishment and transfer of ownership and control of Indian companies
Agriculture and Animal Husbandry
Plantation
Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities
Defence
Broadcasting Sector
Civil Aviation
Increase of sectoral cap
Construction development sector
Cash and Carry Wholesale Trading / Wholesale Trading (including sourcing from MSEs)
Single Brand Retail Trading and Duty free shops
Banking-Private Sector; and
Manufacturing Sector

Single Brand Retail & Ecommerce Industry Rejoice

After the new regulations, single brand retails from International market can now directly sell their products to Indian customers. Thus, brands like Marks & Spencer, Adidas, Reebok, IKEA, Apple, Hennes & Mauritz, Tommy Hilfiger, Furla etc can now look forward to sell via ecommerce, without having to comply with strict rules.

The only requirement is that such single brand retail companies should have a brick-and-mortar outlet in India.

As per the official regulations released by Finance Ministry, “FDI policy on the SBRT (single brand retail trading) provides that retail trading, in any form, by means of e-commerce, would not be permissible. It has been decided that an entity which has been granted permission to undertake SBRT will be permitted to undertake ecommerce activities,”

Thus, big International single retail brands will now arrive in India, with a bigger, bolder plans to lure Indian customers, via online channels. We can witness a new genre of online retailing with such MNCs lining up the Indian web.

Earlier, such single brand retailers from abroad had to rely on Indian ecommerce marketplaces such as Flipkart and Snapdeal to sell their products. They had to compromise on pricing and promotional activities, which are now under their direct control.

Dave Thomas, MD, Adidas Group India, said, “It is a positive step to boost the growth of e-commerce in India. We will study the fine print of this before we can comment on the next steps for Adidas and Reebok,”

An IKEA spokesperson said, “Today’s decision will allow the Indian IKEA customers to interact with the brand IKEA in the same way as all IKEA’s global customers.”

Additionally, Indian manufacturers whose companies have been invested by foreign investors can now sell easily via online medium, which was not permitted earlier. The only condition is that 30% of the output should be sourced from locals, which should not be a difficult rule to comply, considering that majority of their products are manufactured in India.

William Bissell, managing director of Fabindia said, “This is a great Diwali gift from the government to the retailers. What they have done is provided a major boost to ‘Make in India’ and also the ministry has recognised the fact that retail will operate across multiple channels. This will be a huge fillip to ‘Make in India’ as companies like ourselves manufacture 70 per cent of the products ourselves,”

In other major changes, 100% FDI is now allowed in Cable and DTH sector, which means TV viewing experience can change forever. Now, even smaller towns can have DTH as more investment will come in. FDI in uplinking of news and current affairs, FM has been increased to 49% from 26%.

Overall, it’s a great, progressive step towards Make In India and Digital India vision propagated by the Modi Govt; A big Diwali bonanza from the Govt. for the Indian corporate sector.

You can view the full draft of the new FDI policy here.