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Single brand retailers welcome govt’s move to ease global sourcing norms

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Leading single brand retailers hailed the government’s move to ease local sourcing norms and allow online sales, saying it is an encouraging step to attract investments in the sector. The government on Wednesday expanded the definition of mandatory 30 percent domestic sourcing norm. It also allowed single brand retailers to start online sales, waiving the previous condition of setting up a mandatory brick-and-mortar store.

According to a PTI report: Swedish fashion retailer Hennes & Mauritz (H&M) welcomed the Government’s decision, saying it will help attract investment from global companies.

“We are delighted! H&M has been sourcing from India since the last 30 years for its international markets, its great to see global sourcing is now part of the 30 percent local sourcing norms.

“We see this supporting the ease of doing business in India and driving in larger investments from global companies,” Janne Einola, Country Manager, H&M India was quoted by PTI as saying.

The Government has also decided to include global sourcing by the single brand retailers for adjusting their 30 percent manadatory local sourcing norm.

Terming the government’s move as ‘encouraging, Swedish furniture giant IKEA has said that the move would enhance ease of doing business in India.

“IKEA India welcomes the relaxation of local sourcing norms for single brand retailers. Government of India’s efforts to enhance ease of doing business for single brand retailers is encouraging. IKEA has been sourcing from India for more than 30 years,” said IKEA India in a statement.

IKEA further said that it was committed to increase local sourcing from India.

“We have ambitious and optimistic plans to work with affordability and offer everyday low prices for the many people in India,” it added.

According to consulting firm Deloitte, it has brought goodies for the global retail companies whichever have been holding on their decisions to invest to tap the Indian market.

“Allowance of seamless usage of the goods to be procured either for domestic or exports, relaxation of the current deadline of 5 years as well as determination of incremental sourcing, permission of sourcing of goods for global operations will go a long way to give a final nudge to the retailers to take this long awaited decision,” Anil Talreja, Partner, Deloitte India was quoted by PTI as saying.

KPMG said the move to add exports for adjusting local sourcing requirements will help to create larger capacities.

“Adding exports to the local sourcing norms may help build larger capacities, reinforcing India’s stand as a potential global manufacturing hub,” Harsha Razdan, Partner, Consumer Markets, Life Sciences and Internet Business, KPMG in India told PTI.

Moreover, allowing single brand retailers to start online stores, while meeting local sourcing norms would give them time to build their brick-and-mortar presence in parallel.

According to Shobhit Agarwal, MD & CEO – ANAROCK Capital, “The government is on a roll and is making concerted efforts to bring India’s economic growth back on track. In line with the overall demand, the government today relaxed the FDI norms in single-brand retail and expanded the definition of mandatory 30% domestic sourcing norms.

This is excellent news for foreign retailers giants like IKEA and Apple who will now find Indian market more lucrative to invest and conduct business in. Many foreign brands have been in a wait-and-watch mode on account of the difficulties so far perceived in meeting the mandated sourcing norms. With more clarity, many of such players can now make their foray into India to tap into India’s consumption story – and to boost investments here.

Also, the announcement to allow single-brand retailers to start online sales, effectively doing away with the previous condition of first setting up a mandatory brick-and-mortar store, is also commendable. Massive capital is required for setting up a physical store vis-à-vis online platforms. Now retailers can start online sales without having to open physical stores. This will significantly ease capital pressure on small retailers who are looking to start afresh.”

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