Ahead of the 2014 general elections starting next month, commerce and industry minister Anand Sharma has said he is in favor of allowing 100% FDI in the e-commerce sector, in an interview with The Indian Express.
Sharma mentions that they are looking to relax the existing FDI guidelines in the business-to-consumer (B2C) e-commerce segment and are currently awaiting the approval of Election Commission. This approval is necessary since the commission has already announced the election schedule, following which the model code of conduct has come into effect. This prohibits the existing government from making any policy decisions which might tilt the polls in their favor.
Remember that the Government had earlier approved a 51% FDI in multi-brand retail in September 2012, however it had later clarified that the policy does not extend to e-commerce, which led to several companies opting for a dual company route (Eg: Flipkart – WS Retail or more recently Koovs – Marble E-retail) and shifting to a marketplace model where foreign investments are allowed in the country.
Discussion Paper On FDI In E-Commerce
Earlier in January, Department of Industrial Policy and Promotion (DIPP) had floated a discussion paper on e-commerce in India, mentioning that several MNCs, industry bodies and an international council have made a case for allowing FDI in B2C e-commerce while a national body of traders had strongly opposed this move. In its submission, E-commerce venture Yebhi had sought 100% FDI in e-commerce of all goods, except for food (Read: Medianama’s submission on FDI in E-commerce sent to the central government).
Amazon India which opened its India marketplace in June last year, has been continuously engaging with the Indian government to relax the regulations against foreign e-commerce companies and allow foreign direct investment in online retail.
Amazon’s global vice president Paul Misener had also met with Sharma in February 2013 and again in July 2013 to discuss this issue and it has also been lobbying with the US government to seek their support for pushing foreign direct investment in India among other issues. Amazon director and general manager (seller services) Amit Deshpande had also told PTI in November 2013 that they have been engaging with the government to relax FDI norms in e-commerce space, which will allow them to adopt a US-like hybrid model wherein Amazon will start retailing products along with the existing marketplace. Amazon marketplace accounts for only 40% of their business in the US.
Earlier this month, US retail giant Walmart had requested the Indian government to open up foreign investments in e-commerce considering it is reportedly planning an e-commerce marketplace in India, after a troublesome offline retail stint with Bharti Enterprises which ended last year.
This being said, it’s worth noting that competing party BJP’s views on E-Commerce are unclear yet. Responding to a query on the party’s stand on FDI in E-commerce Arvind Gupta, Head of the BJP’s IT Cell had said in August last year, that the political party was going to review Industry needs because “More and more businesses want to operate out of India. FDI in e-commerce is a huge issue because companies are dying here”. (More on that here).