The government’s move to allow 100 per cent FDI in single brand retail through the automatic route is expected to encourage more international brands to set up base in India and help Indian consumers get better access to international products, say analysts.
At the same time, analysts believe the tweaks in sourcing norms will give international retailers the much-needed flexibility and more time to develop vendors in the country and establish a supply chain for their Indian operations.
Dhanraj Bhagat, Partner, Grant Thornton India, says this positive change will foster ease of doing business in India. It will encourage international brands to look at India seriously as they will now find it easier to set up operations in the country. In addition, the tweaks in the sourcing norms will make it viable for them to comply with the regulations.
Akila Agarwal, Partner, Shardul Amarchand Mangaldas, says that earlier, the local sourcing norm was to be met in five years from commencement of business on an average basis and annually thereafter. Now, it is applicable only after five years from commencement. Goldie Dhama, Partner-Regulatory, PwC India, added that this will provide single brand retail trading companies the flexibility and time to align their retail and sourcing business.
Relaxation in the mandatory sourcing norms had been the long-standing demand of some of the international retailers that have already set up shop in India, and have been sourcing from India for many years for their international operations. Janne Einola, Country Manager at H&M India, says they are happy to hear about the India sourcing requirement being offset towards H&M’s global sourcing from India. While it is in the right direction, the company looks forward to the same relaxation for the period beyond the initial five years as well, which works towards ease of doing business in India.