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New Rules for FDI in Multi-Brand Retail
In Aug 2013, the Indian government relaxed the rules for Foreign Direct Investment (FDI) in multi-brand retail, as part of a simplification to FDI regulations
for nearly a dozen sectors, The Times of India reported on Aug 2, 2013. The step is the government’s latest attempt to woo investors, as no foreign multibrand retailer has set up shop in India since 51% FDI in multi-brand retail was first permitted in the country in Sep 2012.

More Cities

In Sep 2012, the government allowed 51% FDI in multi-brand retail. Before 2012, FDI in multi-brand retail was prohibited in India. As of
Aug 2013, foreign multi-brand retailers are allowed to open stores in cities with a population of less than 1.0 million. A year ago,
foreign investors were allowed to set up stores only in cities with a population of more than 1.0 million, which actually amounted to 53
cities.

Better
Sourcing
Options

Multi-brand retailers can now source at least 30% of their manufactured and processed goods from local micro, small and medium
enterprises with a total plant and machinery investment of USD 2.0 million, instead of USD 1.0 million, as allowed in Sep 2012.
Sourcing can continue even after the companies’ USD 2.0 million investment cap has been reached. Retailers have also been allowed
to buy from farmers’ and agriculture co-operatives, which will be counted in the sourcing requirement. Sourcing norms will have to be
met over a five-year period.

Back-End
Infrastructure

Unchanged from the Sep 2012 regulations, foreign retailers have to invest at least USD100mn and put at least half of that in back-end
infrastructure, such as cold storage and warehouse facilities within three years. Retailers will make subsequent investment in back-end
infrastructure as needed. The policy does not specify whether the initial investment in back-end infrastructure needs to be a fresh one
or can be a stake purchase in an already existing establishment, Deloitte India commented.

Source: The Times of India; AT Kearney; Deloitte India;
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