FDI norms in mono brand retail may be amended

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pertaining to FDI norms, sources reported that the Department of Industrial Policy and Promotion (DIPP) is probably mulling to tweak its norms in single-brand retail. Government’s decision to allow up to 100% FDI in single-brand retail last year, attracted firms like Marks & Spencers and Ikea to unswervingly open stores in India. However, this policy came with a condition that those companies holding more than 51% FDI must have 30% domestic sourcing. As a result, it prompted many foreign companies to back out or reconsider their plans of investing in India. Expressing concerns, Swedish furniture retail giant Ikea has written to the authorities in India and will also be sending its delegates to ensure effective communication takes place. In the meantime, National Manufacturing Competitiveness Council is also considering rethinking on domestic sourcing policy. However, London-based Pavers is the only company to have forwarded a proposal for 51% FDI since permission of 100% FDI was granted last year.

As the domestic sourcing clause was anticipated by Ministry of Micro, Small and Medium Enterprises, it will now discuss the matter with DIPP which independently cannot alter the clauses. Earlier, the decision to permit FDI in multi-brand retail had magnetized huge opposition by political parties like Mamata Banerjee’s Trinamool Congress.

Nevertheless, all attempts are being made by the Union Finance Minister Pranab Mukherjee to bring out an agreement on issues like Goods and Services Tax and FDI in retail."The fact that India has not gone through any financial turbulence as a result of the earlier phase of financial deregulation is a testimony to our consistent view that reforms in global standards have to be adapted to local conditions," said Mukherjee.