Foreign investment in Single-Brand Retail Trade (SBRT) is generally open to 100% foreign equity under the automatic route (without the need to obtain prior government approval), but certain restrictions apply in the following cases:
- Majority foreign investments in SBRT are subject to a discriminatory local content requirement policy whereby the sourcing of 30% of the value of goods purchased must be done from India. Note, however, that a 3-year exemption can be granted starting from the commencement of the business for products that are technologically relevant and where local sourcing is not possible.
- Foreign investment in SBRT engaging in both physical and online (e-commerce) SBRT activities is permitted. However, foreign investment in online SBRT activity is prohibited as it would be subject to the FDI Policy on e-commerce activity which establishes that e-commerce is only allowed for business to business trading and not in retail trading. 
- FDI in the SBRT of Indian brands is not permitted. Pursuant to the FDI Policy, [SBRT of] Indian brands should be owned and controlled by resident Indian citizens and/or companies which are owned and controlled by resident Indian citizens.
"CHAPTER 3: GENERAL CONDITIONS ON FDI [...]
3.4   ENTRY ROUTES FOR INVESTMENT 3.4.1 Investments can be made by non-residents in the equity shares/fully, compulsorily and mandatorily convertible debentures/fully, compulsorily and mandatorily convertible preference shares of an Indian company, through the Automatic Route or the Government Route. Under the Automatic Route, the non-resident investor or the Indian company does not require any approval from Government of India for the investment. Under the Government Route, prior approval of the Government of India is required. Proposals for foreign investment under Government Route, are considered by respective Administrative Ministry/Department. 
[...]
3.5   CAPS ON INVESTMENTS
3.5.1 Investments can be made by person resident outside India in the capital of a resident entity only to the extent of the percentage of the total capital as specified in the FDI policy. The caps in various sector(s) are detailed in Chapter 5 of this Circular. 
3.6   ENTRY CONDITIONS ON INVESTMENT
3.6.1 Investments by non-residents can be permitted in the capital of a resident entity in certain sectors/activity with entry conditions. Such conditions may include norms for minimum capitalization, lock-in period, etc. The entry conditions in various sectors/activities are detailed in Chapter 5 of this Circular.
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5.2 PERMITTED SECTORS
a) In the following sectors/activities, FDI up to the limit indicated against each sector/activity is allowed, subject to applicable laws/regulations; security and other conditionalities. In sectors/activities not listed below, FDI is permitted up to100% on the automatic route, subject to applicable laws/regulations; security and other conditionalities. [...]
c) Foreign investment in sectors under Government approval route resulting in transfer of ownership and/or control of Indian entities from resident Indian citizens to nonresident entities will be subject to Government approval. Foreign investment in sectors under automatic route but with conditionalities, resulting in transfer of ownership and/or control of Indian entities from resident Indian citizens to non-resident entities, will be subject to compliance of such conditionalities. 
[...]
5.2.15 TRADING [...]
5.2.15.2 E-COMMERCE ACTIVITIES
E-commerce activities  | % of Equity/FDI Cap: 100% | Entry Route: Automatic
5.2.15.2.1 Subject to provisions of FDI Policy, e-commerce entities would engage only in Business to Business (B2B) e-commerce [classified as wholesale activity] and not in Business to Consumer (B2C) e-commerce. 
5.2.15.2.2 DEFINITIONS:
i) E-commerce- E-commerce means buying and selling of goods and services including digital products over digital & electronic network. [...]
iii) Inventory based model of e-commerce- Inventory based model of e-commerce means an e-commerce activity where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly.
iv) Marketplace based model of e-commerce- Marketplace based model of e-commerce means providing of an information technology platform by an e-commerce entity on a digital & electronic network to act as a facilitator between buyer and seller. 
5.2.15.2.3  GUIDELINES FOR FOREIGN DIRECT INVESTMENT ON E-COMMERCE SECTOR 
i) 100% FDI under automatic route is permitted in marketplace model of e-commerce. 
ii)  FDI is not permitted in inventory-based model of e-commerce. 
5.2.15.2.4  OTHER CONDITIONS 
ii) Marketplace e-commerce entity will be permitted to enter into transactions with sellers registered on its platform on B2B basis.
iii) E-commerce marketplace may provide support services to sellers in respect of warehousing, logistics, order fulfillment, call centre, payment collection and other services. iv)  E-commerce entity providing a marketplace will not exercise ownership or control over the inventory i.e. goods purported to be sold. Such an ownership or control over the inventory will render the business into inventory-based model. Inventory of a vendor will be deemed to be controlled by e-commerce marketplace entity if more than 25% of purchases of such vendor are from the marketplace entity or its group companies. v) An entity having equity participation by e-commerce marketplace entity or its group companies, or having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity.
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5.2.15.3 SINGLE BRAND PRODUCT RETAIL TRADING 
Single Brand Product Retail Trading | % of Equity/FDI Cap: 100% | Entry Route: Automatic
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(2) FDI in Single Brand product retail trading would be subject to the following conditions: [...]
(e) In respect of proposals involving foreign investment beyond 51%, sourcing of 30% of the value of goods purchased, will be done from India, preferably from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors. The quantum of domestic sourcing will be self-certified by the company, to be subsequently checked, by statutory auditors, from the duly certified accounts which the company will be required to maintain. This procurement requirement would have to be met, in the first instance, as an average of five years' total value of the goods procured, beginning 1st April of the year of the commencement of SBRT business (i.e. opening of the first store or start of online retail, whichever is earlier). Thereafter, SBRT entity shall be required to meet the 30% local sourcing norms on an annual basis. For the purpose of ascertaining the sourcing requirement, the relevant entity would be the company, incorporated in India, which is the recipient of foreign investment for the purpose of carrying out single-brand product retail trading. 
(f)    For the purpose of meeting local sourcing requirement laid down at para (e) above, all procurements made from India by the SBRT entity for that single brand shall be counted towards local sourcing, irrespective of whether the goods procured are sold in India or exported. SBRT entity is also permitted to set off sourcing of goods from India for global operations against the mandatory sourcing requirement of 30%. For this purpose, 'sourcing of goods from India for global operations' shall mean value of goods sourced from India for global operations for that single brand (in INR terms) in a particular financial year directly by the entity undertaking SBRT or its group companies (resident or non-resident), or indirectly by them through a third party under a legally tenable agreement.
(g) An SBRT entity operating through brick and mortar stores can also undertake retail trading through e-commerce. However, retail trading through e-commerce can also be undertaken prior to opening of brick and mortar stores, subject to the condition that the entity opens brick and mortar stores within 2 years from date of start of online retail. 
NOTE:
(i) Conditions mentioned at Para 5.2.15.3 (2) (b) & 5.2.15.3 (2) (d) will not be applicable for undertaking SBRT of Indian brands.
(ii) Indian brands should be owned and controlled by resident Indian citizens and/or companies which are owned and controlled by resident Indian citizens. 
(iii)Sourcing norms will not be applicable up to three years from commencement of the business i.e. opening of the first store or start of online retail, whichever is earlier for entities undertaking single brand retail trading of products having 'state-of-art' and 'cutting-edge' technology and where local sourcing is not possible. Thereafter, provisions of Para 5.2.15.3 (2) (e) will be applicable. A Committee under the Chairmanship of Secretary, DPIIT, with representatives from NITI Aayog, concerned Administrative Ministry and independent technical expert(s) on the subject will examine the claim of applicants on the issue of the products being in the nature of 'state-of-art' and 'cutting-edge' technology where local sourcing is not possible and give recommendations for such relaxation.  [...]" (Government of India/Ministry of Commerce and Industry (2020), Consolidated FDI Policy (Effective from October 15, 2020))
Government of India/Ministry of Commerce and Industry (2020), Consolidated FDI Policy (Effective from October 15, 2020)
[<a href="https://dpiit.gov.in/sites/default/files/FDI-PolicyCircular-2020-29October2020_0.pdf">Policy</a>]