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100% FDI in Single Brand Retail could boost advertising budgets

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 100% FDI in Single Brand Retail could boost advertising budgets

The Union Cabinet’s approval of 100 per cent foreign direct investment (FDI) through automatic route in single brand retail, could potentially lead to a double-digit percentage growth in the marketing and advertising budgets of the brands.

The much-awaited regulation is aimed at providing a more investor-friendly climate to foreign players and attracting more FDI to revitalise economic growth and create jobs. This move will boost the retail sector which is in a flux in India. Industry analysts expect the infusion of foreign capital to drive not only the retail market but also the advertising industry as a result.

“It increases confidence in the retail market and in terms of regulation, it allows a company to feel far more secure in terms of ownership of the business,” said Aditya Save, co-founder, Agilio. “Therefore, anything that is brand building in nature will always see more investment - not just in advertising spends but also in teams, supplier networks and more. All of that will grow,” he said. Save expects a double-digit growth in the advertising budgets of single brand retailers entering the Indian market.

Arnab Mitra, MD, Liqvd Asia, explained that single brand retailers who have so far been operating on a revenue-sharing model in India will now have the leeway to spend the margins that they set aside for the partnerships on advertising. “In addition, the retailers would be entering a new market so they will invest their own brand and there will be a lot of push towards advertising in the market,” he said. Mitra suspected that there could be at least 18-20 per cent growth in the advertising budgets of the single brand retailers.

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