India reviews FDI rules to woo international firms

India is looking to clarify rules on foreign direct investment (FDI) in order to woo more international firms into the multi-brand market.

FDI laws in India were amended in September 2012 to allow global retailers to enter a market that Indian consulting firm Technopak Advisors estimates will grow to $725 billion by 2017. However, no overseas companies have yet sought licenses to begin operations in the sector, which is thought to be a result of obscure rules framed by the government which are vague and open to interpretation.

The Department of Industrial Policy & Promotion released a statement discussing issues that are thought to be impacting investor appetite among international firms. Among other things, the authority has looked to clarify rules on the location of operations used to support retail stores, such as warehouses, confirming that these can be placed anywhere in India, including states that don’t permit foreign investment in retail.

Anil Talreja, a partner at consultant Deloitte Haskins & Sells in Mumbai, told Bloomberg that back-end investment was a sticking point for companies, and the announcement that it can be done in any part of the country is good news. However, the government still needs to clarify key rules relating to local sourcing and most aspects of the multi-brand retail policy were left unchanged.

Dhvani Bavishi, a retail analyst at ICICI Direct in Mumbai, believes that it is the details of the sourcing that worry companies the most, and those are still not clear. Prime Minister Manmohan Singh will be pushed to review these areas in his attempt to attract funds to finance a record current-account deficit and revive a struggling economy.

Companies interested in investing in India should seek advice on regulations from local experts. TMF Group has teams located in Mumbai, New Delhi and Bangalore which can help with accounting, legal and HR and payroll problems, leaving you free to focus on your global ambitions.

TMF Group experts 
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