In 2012, the previous government allowed 51 per cent foreign direct investment (FDI) in multibrand retail, with a minimum investment of $100 million (about Dh367 million). Fifty per cent of that amount was to be spent in building back-end infrastructure such as warehouses and cold storage facilities. In terms of single-brand retail, 100 per cent investment was allowed with a caveat that the retailer would source 30 per cent of its goods from India.
The retail sector in India, estimated by The Associated Chambers of Commerce and Industry to reach a size of Rs47 trillion by 2017, continues to be lucrative to those with long-term plans.
Tata’s Trent Hypermarkets brand, which has a joint venture with the UK’s Tesco, has created a separate company to run its stores in states that don’t allow FDI in multibrand retailing, such as Gujarat and Tamil Nadu. The company has revealed plans to conduct multibrand retail businesses in Maharashtra and Karnataka, which permit FDI in retail.
In single-brand retail the Department of Industrial Policy and Promotion currently has at least 13 applications from foreign retailers under review, including Forever 21, Furla and Swarovski, to open company-owned stores in the country.According to the Indian newspaper The Economic Times, it may do away with the clause mandating 30 per cent sourcing from India, making way for products sourced from China by everyone from Apple to Prada and Armani.
International interest in single-brand FDI in India is slow but persistent. Indian newspapers have cited a statement from the Telangana chief minister’s office that Swedish furniture company Ikea may open its first Indian outlet in Hyderabad with an investment of $100 million. Its proposal for FDI was approved in November 2012 citing plans for 25 stores within a decade with an investment of Rs105 billion (about Dh6.3 billion). Ikea regularly sources products from India and according to reports, women entrepreneur groups, bamboo and wood artisans and carpetmakers have been identified as potential suppliers.
Swiss luxury watch brand, Jaeger-LeCoultre owned by Geneva-based Richemont SA filed for single-brand retail in January. Dinesh Aswani, Country Manager, Jaeger-LeCoultre India, tells GN Focus, “It is an important market on many levels, not just in terms of revenue, but historically as well. Our strategy has not changed and in the long-term it won’t change with the government. We also want to be present in Tier II cities.
“We are working towards our own retail presence for people to be able to be a part of our experience.” n
