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Japan eyes India's e-commerce boom, to take up FDI demand at RCEP meet in Thailand |
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NEW DELHI: India's ties with Japan, which have strengthened after Narendra Modi's visit to that country months after taking over as prime minister, may be in for a test— over substantial liberalisation of the ecommerce sector. That, and retail in general, is one of the few segments in which the administration is not too enthusiastic about overseas entry due to domestic political considerations.
But the Shinzo Abe government wants India to open the ecommerce sector to foreign investment, seeking space for the likes of Rakuten, one of Japan's big online retail companies that has plans to become a global player, and Uniqlo, a clothing retailer with a strong global presence both online and offline and looking to expand in the country. Tokyo has not made the demand directly and has instead proposed it as part of talks at the Regional Comprehensive Economic Partnership (RCEP) grouping.
This grouping comprises the Association of Southeast Asian Nations (Asean) and countries that Japan has free trade agreements (FTAs) with — China, India, South Korea, Australia and New Zealand.
India does not allow foreign direct investment in the business to consumer (B2C) segment but 100% FDI is allowed at the business to business (B2B) level.
In the paper floated by Japan at the previous round of negotiations in New Delhi, it sought most favoured nation and national treatment to be accorded to the ecommerce sector, which is not in line with the Modi government's current policy.
India wants to politely resist the Japanese pressure. "We don't think we are in a position to take on any commitments right now as far as e-commerce is concerned (but) the Japanese are pushing very hard," said a government official.
An expert-level meeting has been planned on ecommerce in the wake of this.
"They want some commitments on non-discrimination of digital products as far as national treatment is concerned. We need to know what the definition of 'digital products' is," the official said. Japan is pushing for a permanent zero tariff structure for 'electronic transmission' that includes software and books. This is a concern as this segment is yet to take off in India.
The 16-member RCEP will meet in Pattaya, Thailand, on February 9-13 for the seventh round of talks.
The RCEP pact seeks to include goods, services, investments, competition and intellectual property.
The official said Japan hasn't talked about the investment aspect yet but is likely to bring that up in discussions soon.
The Japanese ecommerce market looks saturated and companies are looking to expand their presence overseas.
Uniqlo plans to invest and open close to 100 stores in India. Meanwhile, Japanese telecom company and investor SoftBank has become the largest investor in the Indian ecommerce segment, having bought into companies such as Snapdeal and Olacabs.
Most overseas companies including Amazon and eBay operate in India through the marketplace model, where sellers use the firm's platform to reach out to buyers, rather than being involved in retailing goods themselves.
The paper by Japan makes no distinction between B2C and B2B, the way ecommerce is seen globally. It seeks minimum barriers in ecommerce, seeking harmonisation of the regulatory framework.
"India is not keen on that at the moment. There are several complexities including no distinction between B2B and B2C model. Australia and New Zealand also want a separate chapter on ecommerce," said another government official. Amazon has been lobbying India to allow 49% FDI in B2B and B2C ecommerce. However, the BJP-led government regards opening up ecommerce as giving a backdoor entry to foreign multi-brand retailers, something it's opposed to. The BJP government is against its predecessor's decision to allow 51% FDI in multi-brand retail, but hasn't yet done anything to reverse that decision.
India has FTAs with Japan, South Korea, Singapore, Malaysia and the Asean grouping. Trade experts feel it will be too early for India to sign a pact on ecommerce when the sector is still evolving in the country.
"This is not the right time. At the moment, we are just trying to understand the dynamics of this form of enterprise in India. Only after gaining some experience can we think of a fruitful plurilateral discipline. Once we commit under RCEP, it will be almost irreversible. All these ecommerce companies in India are just a few years old and it must be ensured that they keep their momentum," said Biswajit Dhar, professor at Jawaharlal Nehru University.
"Ecommerce has become very important and there is a strong interest to enter the Indian market. India distinguishes between B2B and B2C, which creates a grey area for international companies. Government needs to take a consistent position on ecommerce policy in India," said Arpita Mukherjee, professor at ICRIER (Indian Council for Research on International Economic Relations), a thinktank.
Source : economictimes.indiatimes.com
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