Indian government may extend FDI in e-tailing to categories such as selling of financial products and rail-ticket booking, in addition to transacting in goods, according to a report by The Hindu.
It says the Department of Industrial Policy and Promotion (DIPP) is looking to open up FDI in consumer-to-government (C2G), business-to-government (B2G) and consumer-to-business (C2B) categories. It will soon circulate a paper to all the ministries and departments concerned, including Finance, Consumer Affairs and Micro, Small and Medium Enterprises, before starting work on a Cabinet note for the same.
Meanwhile, FDI in multi-brand e-commerce seems to have got more supporters with NASSCOM favouring it as long as the government makes local sourcing mandatory to a certain amount. Earlier, Assocham had also requested the government to withdraw the ban and had written to Telecom and IT minister Kapil Sibal seeking his support to remove current limitation on this category.
The FDI limitations on this category has forced many businesses to change business models from direct-to-consumer retail to a marketplace model (since marketplaces are allowed under the current FDI norms). Around 15-20 e-commerce businesses have shut shop or merged in the past year and few of the bigger players like Indiatimes Shopping had to scale down their operations, since the investments has significantly dried up and the existing investors playing it safe by investing in players like Flipkartand Snapdeal who are already firmly established in the country.
Currently the government permits 51% FDI in multi-brand retail, but does not allow the same for e-commerce. The size of India’s e-commerce market is estimated to be Rs 50,000 crore and companies such as Flipkart follow a dual-company route to work around the restrictions.
Earlier, in March, Planning Chairman deputy chairman Montek Singh Ahluwalia had also said that e-commerce shouldn’t be discriminated and the same FDI policy should be extended to online retail. He had also mentioned that he would take up this issue with the Commerce and Industry Minister Anand Sharma, although there is no further updates on this.