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Business opportunities in India

The Indian retail sector is highly fragmented with 97 per cent of its business being run by the unorganized retailers like the traditional family run stores and corner stores.

The organized retail however is at a very nascent stage though attempts are being made to increase its proportion to 9-10 per cent  bringing in a huge opportunity for prospective new players. The sector is the largest source of employment after agriculture, and has deep penetration into rural India generating more than 10 per cent of India’s GDP.

The sector is expected to see an investment catapulting modern retail in the country to $175-200 billion by 2016, according toTechnopak estimates.

Trading is permitted under automatic route with FDI upto 51% through the FIPB route in single brand retail shops. FDI in multiple brand shops would continue to be banned, even if they belong to the same manufacturer, provided it is primarily export activities, and the undertaking is an export house/ trading house / super trading house/ star trading house. However, under the FIPB route:

100% FDI is permitted in trading for the following activities:

(i) exports;

(ii) bulk imports with export/ ex-bonded warehouse sales;

(iii) cash and carry wholesale trading;

(iv) other import of goods or services provided at least 75% is for procurement and sale of the same group and not for third party use or onward transfer/ distribution/sales.

 The following kinds of trading are also permitted , subject to provisions of Exim Policy.

(i) Companies for providing after sales services( that is not trading per se)

(ii) Domestic trading of products of JVs is permitted at the wholesale level for such trading companies who wish to market manufactured products on behalf of their Joint ventures in which they have equity participation in India

(iii) Trading of hi-tech items/ items requiring specialised after sales service

(iv) Trading of items for social sector

(v) Trading of hi-tech, medical and diagnostic items.

(vi) Trading of items sourced from the small scale sector under which, based on technology provided and laid down quality specifications, a company can market that item under its brand name

(vii) Domestic sourcing of products for exports

(viii) Test marketing of such items for which a company has approval for manufacture provided such test marketing facility will be for a period of two years, and investment in setting up manufacturing facilities commences simultaneously with test marketing.

FDI upto 100% permitted for e-commerce activities subject to the condition that such companies would divest 26% of their equity in favour of the Indian public in five years, if these companies are listed in other parts of the world. Such companies would engage only in business to business (B2B) e-commerce and not in retail trading.
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