Foreign investment in retail trading in India — where we stand today

By Biswajit Chatterjee and Daniel Sharma

The regulatory regime on Foreign Direct Investment (FDI) in retail trading in India has seen multiple reforms over the last year. We set out below the regulatory position as of August 2013.

Foreign investment up to 100 per cent is permitted in single brand retail trading (a form of retail trading wherein products should be branded as per a single brand during manufacturing and sold under the same brand internationally) subject to the approval and certain conditions as specified by the Government of India. FDI up to 49 per cent is permitted without the prior approval of the government of India while any investment in excess of 49 per cent may be made with the prior approval of the government of India. A foreign investor is not required to own the ‘brand’ under which retail distribution is contemplated. Brand licensing/sharing arrangements between the entity owning the brand and the investing entity is now permitted.

Previously only one non-resident entity (whether the owner of the brand or an entity which had a legally tenable agreement with the owner of the brand) was permitted to invest in single-brand retail operations. This restriction has been lifted and now more than one non-resident entity can invest in single-brand retail operations, regardless of whether such entity is the owner of the brand or the brand licensee…

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