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Centre to review FDI in e-commerce; Nirmala Sitharaman to chair the meet |
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NEW DELHI|AHMEDABAD: The government will review its position on allowing foreign investments in the e-commerce sector, just months after it said the administration is committed to keeping it open only for Indian-owned enterprises.
The Union government has called for a meeting this week to reassess India's policy on foreign direct investment, or FDI, in e-commerce. The meeting will be chaired by the minister for commerce and industry, Nirmala Sitharaman.
Discussion points at the meeting are likely to revolve around whether 100% FDI should be allowed in business-to-consumer (B2C) ecommerce, should it be open for all products or only non-food products, and whether it should be automatic up to 50%.
"The government is thinking to differentiate its FDI policy on offline retail from e-commerce as trade associations have eased opposition to e-commerce," said head of an industry association invited to the meeting. While India allows 100% FDI in single-brand retail, it does not allow this for online retail as it fears big global retailers may bypass offline norms by entering through online means.
India's $12-billion e-commerce sector is divided on the matter, debating if FDI should be allowed, or to what extent the sector can be opened to foreign investment, and how. Bengaluru-based Flipkart, the country's largest electronic marketplace, said allowing FDI in inventory-based ecommerce "will have no bearing" on it. "Global marketplaces like eBay are already operating in India. Alibaba and Rakuten can enter India, as no regulations prevent them from doing so," said a spokeswoman for Flipkart.
But last year, Flipkart had expressed reservations about allowing 100% FDI in ecommerce. "The only e-commerce player that will benefit from such a move is a company which is already operating in India as a marketplace and wants to enter the country through an inventory-based model," Flipkart had said in a statement, taking a potshot at Amazon. E-commerce companies garnered a lion's share of the $4.7 billion of foreign capital that flowed into India in 2014.
Amazon, which has committed to invest $2 billion in its India operations, last year said that opening up the e-commerce sector to FDI will be good for customers. "Opening it will also be good for Indian businesses as it would allow us to partner with local manufacturers. Allowing FDI also positively impacts infrastructure development," said an Amazon India spokesperson.
Invitees to the government's meeting include online marketplaces Flipkart, Snapdeal and Amazon as well as industry associations such as CII, FICCI, Nasscom, E-commerce Coalition of India, US India Business Council, Internet and Mobile Association of India and Indian Venture Capital Association. The review is likely to impact all small ecommerce companies that have not yet turned into marketplaces if the government opens the gates to foreign investors, according to experts. Industry chambers also seem to be divided on the issue.
E-commerce Coalition of India, which represents smaller inventory based e-commerce players, is also asking for opening up the sector to FDI. "Allowing ecommerce companies to access FDI for B2C will enable them to source directly in bulk from the manufacturers. It will create a larger pool of entrepreneurs," said Aamir Jariwala, member, ECAI. India's biggest industry chamber Confederation of Indian Industries (CII) said 100% FDI under automatic route should be opened for all products - food or non-food.
Source : economictimes.indiatimes.com
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