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Doors May Soon Open For Foreign Investments In Indian E-commerce

Sep 26, 2013

Global e-commerce majors such as Amazon and eBay that have been eyeing the Indian e-retail market may soon have reason to cheer.

The Industry Department is working on a draft foreign direct investment (FDI) policy on e-commerce, which includes e-retail. It is also holding consultations with industry and experts.

DIPP Secretary Saurabh Chandra is scheduled to meet Som Mittal, chief of IT industry body Nasscom, on Thursday to take inputs for what the policy should hold for both global players and Indian companies wanting foreign finance.

“The proposed policy has to look at the requirements of Indian companies that are in need of foreign finance, such as Flipkart and Myntra, and foreign e-commerce companies, such as Amazon and eBay, which want to invest in the country,” a Department of Industrial Policy and Promotion (DIPP) official told Business Line.

At present, India does not allow FDI in the e-commerce segment. The country, however, allows up to 100 per cent FDI in single-brand retail stores and 51 per cent FDI in multi-brand retail stores, subject to sourcing and investment conditions.

The Prime Minister’s Office recently asked the Commerce and Industry Ministry to examine the possibility of a clarification that the provisions for FDI in multi-brand retailing and single-brand retailing would also apply for all e-commerce/e-retail activities.

The US Government wants India to allow foreign investments in e-retail so that American companies such as Amazon and eBay can start operations here. The issue may feature in Prime Minister Manmohan Singh’s talks with US President Barack Obama in Washington DC on September 27.

While allowing FDI in e-retail, which means selling products online, will not be difficult, opening up the entire e-commerce sector could be complicated, said Arpita Mukherjee of ICRIER, a research body.

“E-commerce would include the entire gamut of activities, such as data protection and data exclusivity. Proper laws and regulations have to be framed for the same. Allowing FDI just in e-retail, on the other hand, would be a simple exercise,” Mukherjee said.

Once the DIPP concludes its consultations and determines what should be part of the policy, it would finalise a Cabinet note and send it for approval.

“We are not sure how long the process will take. But we hope to do it some time soon,” the official said.

The Government will also have to make sure it gets the political support for the proposal, as it is yet to get through the Rajya Sabha the FEMA Amendment required for legally implementing the FDI policy for multi-brand retail.

Source: The Hindu Businees Line

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