NEW DELHI — In a sign that the new government in India, led by prime minister Narendra Modi, is not as closed to global retail as his party has appeared to have been over the past few years, a revised checklist of documents for global retailers putting in applications for entry into India was unveiled earlier this week.
The checklist, which has new requirements for both single and multibrand retail, was issued by the Department of Industrial Policy and Promotion.
This comes on the heels of French retailer Carrefour announcing its decision to pull out from India after years of intense lobbying and a widely publicized search for an Indian partner. Carrefour said last week that its five stores in India would be shut down by September.
Industry insiders believe that these are likely to be bought by Reliance Retail, which is strengthening its position in the retail space.
The documents that will be required to file a proposal include a declaration stating that the Indian venture partner company is controlled and owned by residents of India, the existing activity and capital structure of the Indian venture partner, as well as evidence showing that the brand proposed to be sold is an international brand and a list of countries where it sells internationally. Also required are details of the licence agreement, between the foreign investor and brand owner, as well as a list of products proposed to be sold under a single brand.
It needs to be clearly stated whether the amount invested by nonresident Indians would be foreign exchange or Indian rupees, and for indirect foreign investment to list the name of the foreign companies and their shareholding.
The proposals would need to show compliance with earlier parameters also that have allowed 100 percent foreign-direct investment in a single-brand retailer or wholesale-trading format and 51 percent for FDI in a multibrand retailer.
For multibrand retail, these also include a minimum investment of $100 million, half of the total FDI brought in the first tranche of $100 million being invested in “back-end infrastructure” within three years, and that at least 30 percent of the value of procurement of manufactured-processed products shall be sourced from local companies.
Although there appears to be no clear effort to revoke multibrand retail, there has also been no announcement of change on one of the other parameters that global retailers have had issue with, which is the option for state governments to decide if they wanted to allow FDI in multibrand retail. Only a dozen states and union territories including Delhi and Karnataka (where Bangalore is located) have allowed it.