FDI reform makes investing in India easier for cosmetics companies

By Pooja Kondhia

- Last updated on GMT

Related tags: Investment

FDI reform makes investing in India easier for cosmetics companies
The Indian government has approved 100 per cent foreign direct investment (FDI) for single brand retailing, making investment into the consumer goods market easier for global investors including cosmetics companies.

“Foreign direct investment is an effective way to enrich both ​[US and India] economies as it often results in the creation of new jobs and expanded consumer choice”​, a spokesperson for the US India Business Council (USIBC) told CosmeticsDesign-Europe.com

Previously, non-Indian cosmetics brands wanting to open stand-alone stores were limited to 51 per cent ownership and a domestic partner was required. However, this reform gives 100 per cent ownership making it easier to expand in to India.

Market open to further expansion

This reform will open up India’s rapidly growing market, which already boasts a middle class population of more than 300 million, and “will undoubtedly increase its consumption of cosmetics as the economy continues to grow”​, the USIBC spokesperson added.

According to market analyst Euromonitor, as an important emerging market as a result of its consistently strong growth, India has already attracted a number of multinational beauty companies to focus their expansion on the country.

Previously cosmetic brands such as Estée Lauder and Calvin Klein were operating different models that did not allow full ownership of the Indian business, as Indian government demanded that brands from outside the country would have to go through partnership companies.

Open for business

The single-brand retail reform now allows companies to increase their ownership, broaden brand awareness and drive further growth. However, sourcing requirements mandate that a minimum 30 per cent of the value of products sold is to be sourced from Indian small industry.

“The opening of India’s single-brand retail sector sends a crystal clear signal that India is open for business at a time when economic opportunity is certainly welcome amidst global uncertainty,”​ said Ron Somers, President of USIBC.

According to a recent survey conducted by the United Nations Conference on Trade and Development (UNCTAD), India was ranked number two just behind China, as one of the top five destinations for FDI in 2010-2012.

India’s single-brand retail market is valued at approximately $7bn (€5.5bn), and is expected to reach $20-25bn in value over the next five years.

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