he government has plans to cap the number of product
categories that may be sold under a single foreign brand in India. The
department of industrial policy and promotion (DIPP), the nodal department
for formulation of FDI policy in the country, is working out the
modalities and a policy may soon be in place.

The issue came up in a recent meeting of foreign investment promotion
board (FIPB), the government agency that clears foreign investment
proposals into India, where it was not convinced about Italian textiles
and clothing company Loro Piana's proposal to sell products in around 80
categories under a single brand in India. FIPB has deferred the proposal
and asked DIPP to scrutinise the matter and pick out products that cannot
be traded in India under the brand name of Loro Piana.

"The range of products proposed to be traded by Loro Piana is too large
and diverse from apparel to machinery equipment," a DIPP official, who did
not wish to be named, said, adding that the FIPB has rejected similar
proposals in the past where the list of product categories were too large
and heterogeneous.

If the government approves Loro Piana's proposal with a pruned list of
product categories, it would set a precedent for all future proposals from
single-brand retailers, wishing to come to India. Loro Piana has opted for
a 51% stake in a joint venture called LP Retail (via its Swiss arm Loro
Piana SA) with the Kishor Bajaj-promoted Bada Saab Design, the master
franchisee of another legendary Italian brand Brioni in India.

The current laws allow 51% foreign direct investment in a single-brand
retail venture. The rules, however, apply no ceiling on categories of
products a single-brand retailer with foreign investment can sell. Most
major foreign brands that have so far come to India retail are products
generally in 5-6 categories.

For instance, a fashion brand would retail men's and women's clothing line
as well as footwear and accessories, under a single brand. Similarly, a
home furnishing retailer would have stuff related only to homes and not
retail products in apparel or eyeware categories. In the developed world,
there are several retailers with products in multiple categories under the
same brand name. Even as it helps company capitalise on its brand, it also
helps consumer access a range of products from a trusted brand.

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