Single-brand retail trade and regulatory overreach

The policy relating to foreign direct investment (FDI) in single-brand retail trade (SBRT) has the avowed objective of “attracting investments in marketing, improving the availability of such goods for the consumer, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices”. Recent statistics from the Department of Industrial Policy and Promotion (DIPP) indicate that the policy may have fallen short of its desired agenda.

From 2006 to January 2015, the SBRT sector in India attracted only about US$275 million in FDI, despite being gradually liberalized, albeit with a few hiccups along the way. This may have largely been due to the strict – and often vacillating – interpretation that the policy has received from the regulatory authorities, particularly in the recent past. Instances of regulatory overreach, which often are at variance with commercial realities, have impacted investor interest by creating unintended ambiguities and hurdles in the implementation of the SBRT policy.

Highlighted below are a few instances of regulatory overreach, which are not borne out from the text of the policy and are at variance with its more liberal intent.

Luthra & Luthra Law Offices is a full-service law firm with offices in Delhi, Mumbai, Bangalore and Hyderabad. Aparna Mittal is a partner and Hina Doon is a senior associate, with the M&A practice of the firm. The views of the authors are personal. This article is intended for general informational purposes only and is not a substitute for legal advice.