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Government to stay 51% FDI in e-commerce for now

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The government has stayed on its decision to allow 51% stake for foreign investors in multi-brand retail in India, reports the Indian Express. The commerce ministry will conduct multiple rounds of consultations with state governments and other concerned ministries before it takes a decision on allowing Foreign Direct Investment (FDI) above 51%. Commerce minister Nirmala Sitharaman’s predecessor Anand Sharma had said that he was in favor of allowing 100% FDI in the e-commerce sector.

Yesterday, the government held discussions about issues in FDI with stakeholders like Flipkart, Snapdeal, eBay, Ikea, Amazon, Decathlon and bodies like FICCI, NASSCOM and CII. These included taxation, inclusion of e-commerce within the domestic trade policy framework, definition of e-commerce and level playing field between e-commerce and physical companies with Sitharaman.

Manufacturing units can sell through retail and e-commerce

The government currently allows up to 100% FDI under the automatic route in data processing, software development, computer consultancy, software supply, business and management consultancy services along with market research, technical testing and analysis services. Previously, the government had stated that it would not allow Foreign Direct Investment (FDI) in e-commerce, adding that “FDI in the manufacturing sector is today on the automatic route. The manufacturing units will be allowed to sell its products through retail including E-commerce platforms without any additional approval.”

So far, the government said, that it had not received any proposals to allow FDI above 51% from companies or organisations and since these proposals need government approval, it will continue to allow 51% stake at the most by foreign investors. Also, global online retailers cannot sell self-sourced products. Their Indian platforms function only as marketplaces. Wholesalers are also denied from doing retail.

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Amazon has been pro-FDI for e-commerce in India for over a year now. It has lobbied US government agencies on issues related to foreign direct investment in India, international data flows and free trade agreements, according to a lobbying disclosure for the quarter filed by the company. In India, Amazon 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. In February last year, e-commerce portal Yebhi had also stated that it was pro 100% FDI in the e-commerce sector.

In February this year, the Foreign Investment Promotion Board (FIPB) launched a sleek new website for secure e-filing of applications which needed government approval for Foreign Direct Investment in India. With the introduction of the new website, applicants will have to submit only a single copy of the application for records with the FIPB Secretariat instead of 15-18 copies which needed to be filed earlier.

Image Credit: Flickr user Mike Smutts

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