The changes in FDI policies come as a wave of relief for single-brand retailers.
So before setting up physical stores, these single-brand retailers can now sell online. But there’s a condition! They will have to to open bricks-and-mortar stores within 2 years of commencement of e-commerce operations.
Big retailers in India like IKEA, H&M and Uniqlo are grasping the new opportunity presented by the relaxed policies, as now all procurement made from India by a single-brand retailer for that brand shall be counted towards local sourcing, irrespective of whether the goods procured are sold in India or exported.
The previous requisite mandated that 30 per cent of value of goods for India operations for single-brand retailers with over 51 per cent FDI was to be procured from India as a part of the local sourcing requirement.
Further, the Government has decided that sourcing of goods from India for global operations can be done directly by the entity undertaking single-brand retail or its group companies (resident or non-resident), or indirectly by them through a third party.
“IKEA India welcomes the relaxation of local sourcing norms for single-brand retailers. Government of India’s efforts to enhance ease of doing business for single-brand retailers are encouraging. IKEA has been sourcing from India for more than 30 years. We are committed to increase local sourcing from India,” the company said.
IKEA has been planning expansion in India with the next destination after Hyderabad being Mumbai where the company has launched its e-commerce services ahead of the launch of their physical store. This relaxation in policies will help expand the scope of sourcing operations for retailers.
Janne Einola, Country Manager, H&M India, which operates a 100 per cent FDI single-brand retail business in India, said that the company has been sourcing from India since the last 30 years for its international markets, and it’s great to see global sourcing become now a part of the 30 per cent local sourcing norms.”
