The department of Industrial policy and promotion (DIPP) may do away with the 30 percent domestic sourcing clause for FDI in single brand retail leading to increased foreign direct investment inflows, according to a leading daily. Luxury retailers like LVMH and Gucci as a stumbling among others consider the clause as a hindrance as it is not possible to locally source the premium luxury goods.
As per the report, in the last two years over Rs 300 crore foreign investment was made in the country which resulted in job generation too. The UPA government had introduced the mandatory 30 percent sourcing clause allowing 100 percent FDI in single-brand retail in 2011.
In September 2012, government changed the sourcing norm to a preferable option rather than a mandatory clause for FDI in single-brand retail to accommodate Ikea. Despite of that the policy still seems to lack the clarity as applications for several companies got stuck with DIPP for months. The initiative to completely allow single-brand retail will help brands like Swarovski, for which the applications got rejected as it wanted to open both cash and carry and single-brand retail together.
The government also plans to come up with an initiative where single-brand retailers can launch their sub-brands or sell under different trademarks.