FDI Amendments Open Up India as a Global Retail Market

In a recent development, a slew of amendments has been made in Foreign Direct Investment (FDI) for the major sectors such as aviation, construction, power exchanges, and single-brand retail trading. After allowing 100 percent FDI in the single-brand retail category, the government has eased the rule on 30 percent compulsory local sourcing of products for five fiscal years after the opening of the first Indian store.

Earlier, only 49 percent was allowed through the automatic route, and anything above that required government approval. In 2016, the government has eased the FDI norms for several sectors including defense, civil aviation, construction and development, private security agencies, real estate, and news broadcasting.

Now, by allowing 100 percent FDI in single-brand retail through an automatic route, the government has taken a progressive step towards attracting foreign investment and easing the business management in India. This will not only facilitate easy entry of MNCs in the retail trade but also makes it easier to set up operations and liaison office in the country.

The large foreign entrants are expected to bring in the latest technologies and retail formats to India. Moreover, the relaxation of policy is aimed at providing a more investor-friendly environment for international players, which in turn will attract more FDI to boost economic growth and create jobs in the country- the need of the hour.

For consumers, the step will bring international brands to their doorsteps at a lower price. Also, Favourable macro indicators such as improving consumer sentiment, rising disposable income, urbanization, and lower penetration of organized retail will boost the Indian retail sector.

The Indian market is expected to remain attractive for retail companies across the globe because of its vast anticipated consumption growth. Furthermore, this step is likely to improve India’s ranking in ease of doing business by allowing a proliferation in the overall commerce of the country.