Home » Foreign Direct Investment » Indian Government Approves Relaxation of FDI Norms in Multi Brand Retail Sector

Indian Government Approves Relaxation of FDI Norms in Multi Brand Retail Sector

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With a view to make India an attractive destination for foreign multi brand retail firms, the Government on Thursday, 1 August 2013, approved relaxing the existing FDI norms in this sector that were brought into force in September 2012. The prominent changes approved by the Government are as follows:

S. No. Existing Norms Revised Norms
1. “Retail sales outlets may be set up only in cities with a population of more than 10 lakh

 

“Retail sales outlets may be set up only in cities with a population of less than 10 lakh

 

2. “At least 30% of the value of procurement of manufactured/ processed products purchased shall be sourced from Indian ‘small industries’ which have a total investment in plant & machinery not exceeding USD 1 million.”

 

“At least 30% of the value of procurement of manufactured/processed products purchased shall be sourced from Indian ‘small industries’ which have a total investment in plant & machinery not exceeding USD 2 million.”

 

“Even if such firms cross the USD 2 million threshold at a later stage, this will be ignored as long as the retailer keeps sourcing from that particular firm. “The ‘small industry’ status would be reckoned only at the time of first engagement with the retailer”

 

3. “At least 50% of total FDI brought in shall be invested in ‘backend infrastructure’ within three years of the first tranche of FDI,..”

 

“At least 50% of the total FDI brought in the first tranche of USD 100 million will be invested in creating ‘backend infrastructure’ within three years of the first tranche of FDI..”

 

“Subsequent investment in the ‘backend infrastructure’ would be made by the retailer as needed, depending upon his business requirements”

 Anuj Sahay

anuj.sahay@pxvlaw.com

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