Budget 2019: Government To Make Local Sourcing Easier For Foreign Single-Brand Retailers
Commerce and Industry Minister Piyush Goyal said the government will make it easy for foreign single-brand retailers operating in India to comply with the mandatory 30 percent local-sourcing norms.
He, however, said there will be no relaxation in the requirement of 30 percent local sourcing.
This means, the government is “making it easier to comply with it”, but the “30 percent (local sourcing) will not be compromised”, the minister said.
"When I took the charge of this ministry, I realised that just insisting that 30 percent has to be domestically sourced and sold on the stores is actually limiting the process. Instead of that, our purpose is that they bring modern technologies, set up ancillaries, and set up domestic sourcing," he said.
Goyal said as these things will take some time, “what we are planning is a two-fold measure. First, we will look at five year bloc so that all the domestic sourcing done in five years will go towards meeting the 30 percent norm”.
Besides, the government would also allow them to export from India because that would give double benefit in terms of earning foreign exchange.
In this way, "my own guess is that the 30 percent will increase to much more because by allowing them to export and covering that in the 30 percent, they will be encouraged to set up larger capacities," he added.
Including exports of foreign single-brand retailers in meeting the mandatory 30 percent local-sourcing norms would help them in complying with the provisions at faster pace, the minister said.
"So today, they may set up capacity for domestic sourcing for their store, it will be smaller capacities, but by allowing them to export to meet the 30 percent need, they will be encouraged to do larger capacities," he added.
In 2006, the government had allowed 51 percent foreign direct investment in single-brand retail. In January 2018, 100 percent FDI was permitted for foreign players in single-brand retail trade to set up own shops in India without government approval.
That time, the government had relaxed mandatory local-sourcing requirement of 30 percent by stating that a foreign retailer would be able to get credit from incremental rise in sourcing for its global operations from India towards the mandatory 30 percent local-sourcing requirement for its business in the country.
The retail trading sector attracted $1.65 billion FDI between April 2000 and March 2019.
Finance Minister Nirmala Sitharaman, in her Budget speech, said that the government will ease local-sourcing norms for FDI in single-brand retail sector.