Indian brands may get to wear retail FDI
Home-grown brands will get a leg up as the govt plans to encourage flow of foreign direct investment (FDI) into retailing of Indian brands. Myth and reality of retail stores
By G Ganapathy Subramaniam, TNN |
NEW DELHI: Home-grown brands like Park Avenue, Wills Lifestyle, Parx, Tanishq and ColorPlus will get a leg up as the government plans to encourage flow of foreign direct investment (FDI) into retailing of Indian brands. Top government officials said creation of new brands for the domestic market would also be allowed through the single-brand retail FDI window which is the only avenue available for foreign investment into retail.
Today, FDI through the single-brand route is flowing into retailing of foreign brands such as Louis Vuitton, Fendi, Lladro, Hermes and Nike. There will be no hitch in allowing FDI in Indian brands if the merchandise is branded during manufacturing and the same brand is used if sold abroad, the officials added. “Indian brands should not be denied the benefit of foreign investment. Over a period of time, they can grow into global brands. As of now, not many Indian brands have made it to the global stage,” they said.
In view of the growing political opposition to FDI in retail, officials want to be cautious in promoting foreign investment, and the feeling is that encouragement to domestic brands and companies would be welcome. While FDI in retail is not allowed, the government has been facing criticism over foreign investment in wholesale trading and single-brand retail.
While FDI is allowed in manufacturing of most premium consumer goods such as automobiles, watches, jewellery, perfumes and garments, foreign investment cannot flow into retailing of the products unless they stick to single-brand retailing. A car manufacturer like Maruti, for example, can attract FDI in its capacity as a manufacturing company but retail is out of bounds in such cases.
However, the automaker can form a separate company to launch retail showrooms and attract 51% FDI to boost sales on its own rather than depending on distributors. Mitsui Automotive of Japan, for example, has obtained approval for retailing Toyota cars. The approval for Mitsui retailing Toyota cars was provided under the single-brand retail window, the officials said.
The government is also thinking of widening the single-brand retail window to include FDI in segments like electronics and sport goods. This would enable multinational companies to invest in retailing of more than one brand in India. As of now, most brands enter the country through franchisees as in the case of McDonald’s and Pizza Hut.
While FDI review proposed at the beginning of the year is yet to materialise, the government is fine-tuning its policy on franchisees investing in retail.
Today, FDI through the single-brand route is flowing into retailing of foreign brands such as Louis Vuitton, Fendi, Lladro, Hermes and Nike. There will be no hitch in allowing FDI in Indian brands if the merchandise is branded during manufacturing and the same brand is used if sold abroad, the officials added. “Indian brands should not be denied the benefit of foreign investment. Over a period of time, they can grow into global brands. As of now, not many Indian brands have made it to the global stage,” they said.
In view of the growing political opposition to FDI in retail, officials want to be cautious in promoting foreign investment, and the feeling is that encouragement to domestic brands and companies would be welcome. While FDI in retail is not allowed, the government has been facing criticism over foreign investment in wholesale trading and single-brand retail.
While FDI is allowed in manufacturing of most premium consumer goods such as automobiles, watches, jewellery, perfumes and garments, foreign investment cannot flow into retailing of the products unless they stick to single-brand retailing. A car manufacturer like Maruti, for example, can attract FDI in its capacity as a manufacturing company but retail is out of bounds in such cases.
However, the automaker can form a separate company to launch retail showrooms and attract 51% FDI to boost sales on its own rather than depending on distributors. Mitsui Automotive of Japan, for example, has obtained approval for retailing Toyota cars. The approval for Mitsui retailing Toyota cars was provided under the single-brand retail window, the officials said.
The government is also thinking of widening the single-brand retail window to include FDI in segments like electronics and sport goods. This would enable multinational companies to invest in retailing of more than one brand in India. As of now, most brands enter the country through franchisees as in the case of McDonald’s and Pizza Hut.
ADVERTISEMENT
While FDI review proposed at the beginning of the year is yet to materialise, the government is fine-tuning its policy on franchisees investing in retail.
Start a SIP with as low as ₹500 with ET Money App!
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
