In a move that will allow global online retail giants like Amazon and eBay to set shop in the country, India may soon open up the fast growing e-commerce space to foreign investors with the Department of Industrial Policy and Promotion (DIPP) in the process of preparing a paper on the same.
A positive sign in this direction is a meeting between senior officials of the department ? which is the nodal agency for FDI policy ? and Som Mittal, president of Nasscom, which is the apex body of the Indian IT industry, on Thursday.
The two parties will discuss the business models and needs of three kinds of e-commerce firms ? foreign players who want to invest in India like Amazon, pure Indian firms and Indian companies that want to raise more money by extending their businesses.
?We are preparing a paper as desired by the finance ministry and will listen to the needs of the IT industry, which is keen on expanding in this area. Besides, we have had consulting firms prepare reports on the feasibility of permitting foreign investment in e-retail,? said a senior DIPP official.
At present, retail trading, in any form, by means of e-commerce is not permissible though 100% FDI is allowed B2B e-commerce through the automatic route.
E-commerce activities refer to the activity of buying and selling by a company through the e-commerce platform.
Such companies would engage only in Business-to-Business (B2B) e-commerce and not in retail trading, implying that existing restrictions on FDI in domestic trading would be applicable to e-commerce as well.
?A few of our partners are interested in commerce and Internet and they will accompany us to the meeting,? Mittal told FE.
The DIPP has till now vehemently opposed the opening up of e-commerce to foreign players because it is difficult to enforce FDI norms on these virtual stores. It had also said that online retail will be a problem in states that do not approve the FDI policy.
However, the Prime Minister’s Office is in favour of opening up the sector to FDI and has suggested that DIPP extend the FDI provisions for multi-brand retail stores to e-commerce as well. In fact, Prime Minister Manmohan Singh is meeting US President Barack Obama on September 27 in Washington DC and the PMO wants the issue to be sorted out before the visit. Both Amazon and eBay have been in talks with the the government, trying to persuade it to open up the sector.
Top officials from the two companies met commerce and industry minister Anand Sharma during his US visit to discuss prospects.
In February this year, Amazon Global vice-president Paul E Misener met Sharma. Early last year, Amazon made its first foray into India with the launch of a shopping website, Junglee.com, which is a modified version of the world’s top online retailer’s shopping portal, allowing customers to search for different products and compare prices.