Five months after H&M filed its application to invest Euro100 million (About Rs 700 crore) in setting up single-brand retail stores in India, the government has asked H&M about its commitment to comply with the mandatory 30 % sourcing. According to single-brand FDI guidelines, in the cases where foreign investment is more than 51 %, sourcing of 30 % of the value of goods purchased must be done from India, preferably from small and medium enterprises. The products so sourced would have to be used for single-brand retailing in India.
However, in its application, the company had confirmed compliance, saying: "H&M will source from India (preferably from MSMEs) the equivalent of 30 % of the value of the goods (excluding taxes and duties) purchased by H&M Retail India, the proposed investee company is to be incorporated in India." It had added: "The goods sourced from India for the purposes of meeting the 30 % sourcing requirement will be utilized for export sales, as well as for domestic sales, through retail stores in India." The latter part of the statement is understood to have raised doubts in the minds of the government officials and they have sought a clarification from the company.
The H&M proposal to establish a 100 % foreign-owned subsidiary in India is the second-largest single-brand application after IKEA's proposal, which was cleared by the Cabinet earlier this year.