Govt allows 100 pc FDI in E-commerce but with conditions
31st March 2016Category : E-CommercePublished by :Rahul Verma Reading Time : 4 Minute News Sourced : India
Traders wing call it 'unfortunate'
May bar big discounts rolled by e-tailers
Described capacity for vendors
In a major decision, govt. allowed 100 per cent foreign direct investment (FDI) in e-commerce marketplaces, paving smoother passage for international e-tailers in India. However, made it conditional, that FDI is not permitted in inventory based model of e-commerce.
The government decision made industry react as clearly defined, ‘100 per cent FDI to the company provides a platform to act as a facilitator between buyers and seller’.
“In order to provide clarity to the extant policy, guidelines for FDI on e-commerce sector have been formulated,” DIPP said.
The Confederation of All India Traders (CAIT), reported Business Standrad, this as “extremely unfortunate”, while other traders lobby said the decision was “really shocking”. Both said the move would negatively impact not just traders and businessmen but also the micro, small and medium enterprises (MSME) sector. Traders and small businessmen have traditionally comprised a key support base of the BJP.
Moneycontrol reported, “Biz growth to be hit if FDI on single-brand e-comm barred.”
As a large chunk of capital for e-commerce entities comes from international markets, the likely restrictions on foreign direct investment (FDI) in single-brand e-commerce business will create problem in business growth, says Sumant Kasliwal, Founder & CEO of 20Dresses.com.
Although the government on Tuesday explicitly stated 100 percent foreign direct investment is allowed into online market places, clarity is awaited on whether FDI will be allowed in single-brand entities as well, he says.
In a press note, the government rolled out the following norms:
a) 100% FDI under automatic route permitted in the “marketplace model of e-commerce
b) Marketplace e-commerce entity may enter into transactions with its registered sellers on B2B basis
c) Marketplace e-commerce entity may provide logistic, warehousing , order fulfilment, call centre, payment collection and other services
d) More than 25% of the total sales should not be done by one vendor or its group companies
e) The name, address and contact details of seller should be clearly mentioned
f) The seller shall be responsible for post sales, warranty and guarantee of goods sold by it
g) Marketplace e-commerce entity should not influence the pricing of goods sold on its platform.
The decision will further noose the business driven by vendors. The norms may push online marketplaces to restrict from influencing customers from price war.
Online retail is expected to increase to $48-60 billion by 2020 from $4.47 billion in 2014, the verdict may anticipate dwindling e-commerce in India, to go bigger and consumer centric.
This reform is much celebrated news for Chinese major Alibaba, planning to make entry into the country after e-ailing bigwig ebay and Amazon.
DIPP - DEPARTMENT OF INDUSTRIAL POLICY & PROMOTION (MINISTRY OF COMMERCE & INDUSTRY)