Currently, with the FDI ban on multi-brand retail trade, the only viable avenues available to foreign retail players is to enter into license agreements with Indian corporates to enter the India market.
GOI has proposed the opening up of the multi-brand retail trade sector to foreign equity participation, to permit foreign retailers to enter the country through joint ventures for multi-brand stores.
The proposals, which are still at the drawing board, would, if implemented, require the foreign partners to carry on their operations within the framework of stringent guidelines. Foreign investors would be permitted only small equity participation, a limited management role in the new India venture, restricted board representation, etc. Furthermore, prior approval of GOI would have to be obtained in the event the formats of the existing ventures were changed or new ventures were undertaken.
The proposed structure could prove to be a beneficial move to spearhead trade in this sector, particularly with conglomerates like Tesco, Wal-Mart and Carrefour having recognized the potential of the USD 330 billion Indian retail industry estimated to grow to USD 427 billion by 2010 and USD 637 billion by 2015.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.