Foreign Investment in Multi-Brand Retail Trading in India: Government issues clarifications

In September 2012, the Government of India (GoI) permitted foreign direct investment (FDI) up to 51% of the equity of Indian entities engaged in multi-brand retail trading (MBRT) in India (see our earlier alert of October 2012).

In view of the significant political opposition to this decision, FDI in this sector was subject to various conditions. These conditions included (a) obtaining prior GoI approval for all such investments, (b) investing a minimum of US$100 million in the Indian MBRT entity, with at least 50% of such FDI to be invested in backend infrastructure within 3 years; (c) the Indian MBRT entity sourcing locally (from small industries) at least 30% of the manufactured/processed products purchased by it; and (d) the Indian MBRT entity engaging in retail trade only in specific states and union territories in India that have approved FDI in MBRT (currently 12 states and union territories out of 35 in India have approved FDI in MBRT) and only in cities and towns having a minimum population of 1 million.

With a view to addressing some of the ambiguities in these conditions, the GoI issued several clarifications on June 7, 2013. Certain key clarifications are summarized below...

Please see full alert below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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