DIPP Secretary Clarifies Local Sourcing Norms For Foreign Investors in Retail
Foreign firms unable to meet the “state of art technology” criterion also stand to benefit from the changes in India’s local sourcing norms in retail.
Explaining the recent changes in local sourcing norms for foreign investors seeking to set up single brand retail stores in India, the secretary of the Department of Industrial Policy and Promotion, Ramesh Abhishek, said the three-year exemption period would apply only for those companies which have “state of art technology.” The changes were brought about in June this year.
After this exemption for three years, foreign companies will have to stick to the defined norm of 30 percent local sourcing, Abhisekh clarified in an exclusive interview with BloombergQuint.
He further clarified that companies which are unable to meet the “state of art technology” criterion, also stand to benefit as they will have to maintain 30 percent local sourcing criterion, on an average, for the first five years. After this relaxation, companies will have to follow the set norms.
Apple chief executive Tim Cook, during his visit to India in May this year, had announced plans to set up branded retail stores in India but wanted the government to drop the 30 percent local sourcing clause. The government had refused any exemptions. Chinese internet company LeEco and smartphone maker Xiaomi had also applied for similar exemptions, but were turned down.
When asked if Apple and other companies have approached the DIPP after the policy was tweaked, the secretary said that he wasn’t aware of the names and exact details. He expressed confidence however, about heightened interest from foreign companies going forward.
What will also renew enthusiasm among foreign investors, Abhishek said, was the Goods and Services Tax (GST) Bill, the amendments to which were cleared by the Rajya Sabha last week. The Bill will especially benefit India’s manufacturing sector and propel the growth story forward, he added.
He hinted at consultations between the Centre and different government departments on further reforms in foreign direct investments.
After the World Bank meeting last month, the DIPP secretary is hopeful that India’s ease of doing business ranking will improve this year. The government is looking at an August-end deadline to give the final test results for states with respect to ease of doing business.
