The Indian Government is likely to stick to its 30 percent local sourcing clause set for global single-brand retailers seeking to set shops in India through the foreign direct investment (FDI) route, according to an Economic Times report.
Since the Indian Government allowed 100 percent FDI in single-brand retail last year, several international retailers have been pushing the Government of India to consider their exports outside India for satisfying the 30 percent domestic sourcing requirement for their single-brand retailing ventures in India. However, the Department of Industrial Policy and Promotion (DIPP), in its note to the Cabinet Committee of Economic Affairs (CCEA), has turned down Swedish home furnishings retailer IKEA’s proposal of considering sourcing by its entities for exports under the 30 percent clause, the Economic Times report says.
The CCEA is soon likely to decide on IKEA’s Rs. 105 billion investment proposal, which has already been cleared by the Foreign Investment Promotion Board (FIPB). The DIPP, which is the first agency to approach for single brand retailers seeking to invest in India, also mentioned in its note to the CCEA that IKEA has accepted to satisfy the condition of sourcing 30 percent of its Indian stores requirement from domestic market within five years from the date it introduces its first set of investment in the country. DIPP said that for its India plans, IKEA would have to operate two separate firms – one exclusively for retailing, and the other for sourcing goods to be sold only in India.
