The Union Cabinet on Wednesday announced a number of decisions designed to attract increased foreign direct investment into the country, including easing local sourcing norms for single-brand retail companies.
Currently, the FDI policy says that a single-brand retail company with more than 51% FDI needs to source 30% of its goods from within India. The new decision says that this 30% can be calculated over the first five years of operation.
Further, sourcing for exports will also count towards the local sourcing requirement, the government said.
“With a view to provide greater flexibility and ease of operations to SBRT (single brand retail trade) entities, it has been decided that all procurements made from India by the SBRT entity for that single brand shall be counted towards local sourcing, irrespective of whether the goods procured are sold in India or exported,” the government said in a release.
The current FDI policy provides for 100% FDI under the automatic route in the manufacturing sector. There was no specific provision for contract manufacturing in the policy. It has now decided to allow 100% FDI under the automatic route in contract manufacturing in India as well.
The government has also updated the FDI policy in keeping with prevalent business practices in India, it said.
The existing policy says that incremental sourcing for global operations by non-resident single brand retail trading, either directly or through group companies, will also be counted towards the local sourcing requirement for the first five years.
“However, prevalent business models involve not only sourcing from India for global operations by the entity or its group companies, but also through an unrelated third party, done at the behest of the entity undertaking single brand retail trading or its group companies,” the release said.
“In order to cover such business practices, it has been decided that ‘sourcing of goods from India for global operations’ can be done directly by the entity undertaking SBRT or its group companies (resident or non-resident), or indirectly by them through a third party under a legally tenable agreement,” it added.
Another change the Cabinet has approved is that single-brand retail companies can now start selling online before setting up a brick and mortar store as long as they set one up within two years of starting online sales. Earlier, they had to set up a brick and mortar store before selling online.
“Online sales will lead to creation of jobs in logistics, digital payments, customer care, training and product skilling,” the government said.
Apart from single brand retail, the Cabinet also approved some changes to the FDI rules for digital media and coal mining.
It has decided to permit 26% FDI, with government approval, for uploading and streaming news and current affairs using digital media, on the lines of print media.
“It has been decided to permit 100% FDI under automatic route for sale of coal, for coal mining activities including associated processing infrastructure subject to provisions of Coal Mines (special provisions) Act, 2015 and the Mines and Minerals (development and regulation) Act, 1957 as amended from time to time, and other relevant acts on the subject,” the government said.
