Three golden words have got India’s pulse racing at the moment. It’s not the nation’s eternal romance with cricket or Bollywood. It’s a new found love affair with foreign direct investment (FDI)!
After teasing foreign investors for months, India allowed FDI in multi-brand retail up to 51% in December 2012 – a bold step for the government bearing in mind that retail is one of the pillars of the economy and accounts for 14-15% of GDP. With an economic value estimated to be US$450 billion, India’s retail market is among the top five in the world and the world’s fastest growing retail market, with 1.2 billion people.
The central government’s recent reforms for both multi-brand and single-brand retail have paved the way for multi-brand giants such as Walmart, Carrefour and Tesco, as well single-brand majors such as IKEA, Nike and Apple. With India allowing 100% ownership of single-brand stores subject only to the condition that 30% of the goods be sourced from India, IKEA announced an investment of ₹105 billion (US$1.9 billion) and 25 retail stores in India.
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Priyanka Khimani is an associate at Mulla & Mulla & Craigie Blunt & Caroe in Mumbai.
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