According to industry experts, conditions related to mandatory sourcing and branding issues are impacting FDI inflows in the single-brand retail sector.
India has received lukewarm response in the single-brand retail segment, getting only $135 million (about Rs 700 crore) of foreign direct investment in about nine years.
On the other hand, one proposal in multi-brand retail alone has attracted an investment of $140.3 million (Rs 850 crore).
The lowly FDI from 2006-07 to 2014-15 in single brand retail was received from over 80 proposals, which include Brooks Brother, a UK-based shoe firm, Pavers England and Burberry International Holdings all cleared by the government, an official said.
In February 2006, 51% FDI was permitted in single-brand retail. In January 2012, the government raised the cap to 100%. FDI up to 49% was allowed under the automatic route, but beyond that, government approval was required.
According to industry experts, conditions related to mandatory sourcing and branding issues are impacting FDI inflows in the single-brand retail sector.
"Relaxation is required in sourcing and branding provisions of the sector in order to attract more foreign inflows," said Head of tax and expert on FDI with corporate law firm Shardul Amarchand & Mangaldas Krishan Malhotra.
FDI in single-brand product retail is allowed subject to certain conditions, which require products to be of a 'Single Brand' only and to be sold under the same brand internationally.
Furthermore, in respect of proposals involving FDI beyond 51%, the government has made it mandatory to source 30% of the value of goods purchased from India, preferably MSMEs.
According to sources, the government may come out with some kind of clarification on single brand retail to attract global players.
In April, Commerce and Industry Minister Nirmala Sitharaman said in a written reply to the Lok Sabha that British retail major Tesco has invested Rs 850 crore in multi-brand retail in the country.
Tesco was the first global retailer to have got approval for opening multi-brand retail stores after the government allowed 51% FDI in the segment in September 2012.
The BJP, which got a massive mandate in the general election last year, is opposed to FDI in multi-brand retail.
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