India’s policy on foreign direct investment permits such fund flows into the country under either the automatic or approval routes. Under the latter route prior approval from the Government of India is required for any foreign investment in an Indian company involved in a retail business.
The FDI policy classifies retail trade as either single brand retail trading (SBRT), involving such companies as Marks & Spencer, Ikea, Uniqlo, Nike and Apple or multi brand retail trading (MBRT), covering the likes of Walmart, Carrefour and Tesco. Traditionally, there have been restrictions on fund flows involving both SBRT and MBRT under the FDI policy.
Prior to January 2018, India allowed 49% of FDI in SBRT under the automatic route and government approval was required for fund flows beyond that level, which could rise to 100%. With a view of liberalizing the policy, the government decided, effective January 2018, to allow 100% of FDI in SBRT under the automatic route without the need for any approval.
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Ravi Singhania is the managing partner and Manish Kumar Sharma is a partner at Singhania & Partners
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