Union Cabinet announced major changes to the foreign direct investment (FDI) norms across sectors. In addition, the government has also announced that global single-brand retailers can operate in the country without the necessary permissions beyond 49 percent foreign direct investment (FDI), which was mandatory till now.
For tech giant Apple, this move could greenlight the opening of Apple-branded retail outlets. This wasn't possible earlier due to the regulatory hurdles that mandated government permission for FDI beyond 49 percent.
As a result of this, many global brands had to partner with Indian companies or local retailers. According to this CNN Money report Prime Minister Modi's relaxation of certain regulations and the tax system, has made it easier for foreign companies to operate on Indian soil. This move brought in foreign investment amounting to $60 billion in the March 2017 fiscal year, which is a record in itself.
But one thing that is still a matter of concern for Apple is the '30 percent local sourcing norms'. According to this Business Standard report, Apple has a different set of problems and till the local sourcing clause is removed, the government permission waiver will not be enough to bring Apple stores and other global brands from coming to India.
"During the year 2014-15, total FDI inflows received were $45.15 billion as against $36.05 billion in 2013-14. During 2015-16, the country received total FDI of $55.46 billion. In the financial year 2016-17, total FDI of $60.08 billion has been received, which is an all-time high," said a Press Information Bureau report.
The report claims that according to consulting firm PwC, the retail market in India is about $600 billion and could be as big as a $1 trillion by 2020.
"Organised retailers currently account for just 8 percent of the market, meaning India presents established global brands with "tremendous scope for growth," PwC said in the report.
However, the new government policy is currently restricted to only single-brand retailers and there are no details for those who have many brands under the same roof. The CNNMoney report claimed that Walmart had been actively trying to open up its stores in India, but has so far been restricted to only 24 across the country.
Ahmed Timoumi, a professor of marketing at the Indian School of Business, told CNNMoney, "Allowing foreign brands to directly invest in retailing in India will improve customers' shopping experience and push Indian retailing companies to upgrade their services and offerings."
Updated Date: Jan 11, 2018 10:40 AM