Following its decision to allow Foreign Direct Investment in multi brand retail upto 51%, the Indian government has clarified that the policy does not extend to e-commerce. In a press note issued yesterday, the government has clearly stated that "Retail trading, in any form, by means of e-commerce, would not be permissible, for companies with FDI, engaged in the activity of multibrand retail trading." What does this mean: This puts an end to ambiguity surrounding the government's decision and it's clear that foreign e-commerce companies and retail majors will not be able to set-up and control new ventures in India. Companies like Amazon will not be able to launch independent Indian operations, while retail majors such as Walmart and Tesco will not be able to open online shops, even if they launch physical retail operations. The riders: Note that FDI in multi brand retail comes with several conditions such as requirement for companies to invest a minimum of $100 million, invest 50% of total FDI in 'backend infrastructure' which includes processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, ware-house, agriculture market produce infrastructure but excludes land cost and rentals, and that at least 30% of the value of procurement of manufactured processed products purchased need to be sourced from Indian small industries. Since the central government had left the final decision for implementing the policy on State governments, it would have been difficult to decide how this would affect e-commerce companies, but separate guidelines could have been laid out. Also, existing e-commerce ventures will not be…
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