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India may relax 30 per cent sourcing rule for FDI in single brand retail

India may relax the 30 per cent local sourcing norm in the single-brand retail sector. The aim is to attract big foreign players. Big single-brand retail firms may also be permitted to open online stores before setting up brick-and-mortar shops.

Currently, online sale by a single-brand retail player is allowed only after opening of physical outlets. Single-brand foreign retailers may be allowed to adjust the incremental sourcing of goods from India for global operations during the initial ten years from the current five years against the mandatory sourcing requirement of 30 per cent of purchases from India.

The relaxation, however, would be subject to a condition that a foreign entity would have to bring foreign direct investment in excess of $200 million within the first two or three years. During April to June 2018, FDI in India grew by 23 per cent.

In January 2018, India allowed 100 per cent FDI in the sector, permitting foreign players in single-brand retail trade to set up their own shops in India without approval. The mandatory local sourcing requirement of 30 per cent was relaxed. A foreign retailer was allowed credit from an incremental increase in sourcing for its global operations from India toward the mandatory 30 per cent local sourcing requirement for its business in the country.