Stating that it was not currently taking a stand on allowing foreign direct investment (FDI) in B2C (or retail) e-commerce, the government on Thursday — after a meeting with stakeholders — said it would soon hold discussions with the states on the issue.

Currently, the government allows 100% FDI in B2B e-commerce activities (as in wholesale trade), but foreign investment is not allowed in B2C e-commerce companies.

After the over-an-hour long meeting with representatives from industry bodies such as CII, Ficci and Nasscom, trade body Confederation of All India Traders, e-commerce companies such as Amazon, Flipkart, eBay, Ikea, Snapdeal, H&M and Decathlon, commerce and industry minister Nirmala Sitharaman said: “We have heard everybody. In fact, this meeting is not going to be sufficient.”

Global e-commerce firms and countries such as Japan have been pushing for easing of foreign investment restrictions in the sector.

The bigger concern, however, was that if FDI is allowed, India might see a huge influx of foreign goods, sourced from China and other low-cost manufacturing destinations. This might have a negative impact on the MSME sector, which has witnessed a spurt driven by online retail buying and nation-wide accessibility.

A Snapdeal spokesperson said, “We are committed to enabling MSMEs across the country to grow, by providing them nationwide reach for their products and services.”

While it is known that in brick-and-mortar retailing, 49% FDI is allowed with 30% sourcing from India, some of the stakeholders, including Amazon, suggested that the same should be applied to e-commerce. However, the discussion ended at the fact that its e-commerce should have a different model, and not follow the offline retail route.

An e-commerce firm representative said that it is likely that in the beginning there will be 26% FDI, which will later be increased.

Sitharaman said the government wants to look into the broader context of e-commerce and “the manner in which FDI is needed or not needed, and whether it (allowing FDI) will affect the level-playing field of the brick and mortar stores.”

She said she will hold discussions with states on issues, including taxation and definition of e-commerce.

Nasscom reiterates 100% FDI demand

Nasscom has reiterated its demand for a 100% FDI in B2C e-commerce to address the diverse needs of entrepreneurs and investors, supporting both the scaling up of operations and entrepreneurship ideas. The trade body said it is imperative that entrepreneurs, who have already made significant investments and are looking ahead to a robust growth and market share, should be allowed to seek investments to support business operations.

Nasscom president R Chandrasekhar said, “E-commerce has seen funding of $3 billion and is growing tremendously.

It is also attracting global interest as is evident from SoftBank’s investment of $10 billion in India over the next few years. To enable continued growth in the sector, Nasscom has emphasised that 100% FDI should be allowed in B2C e-commerce and there should not be any conditions and stipulation on investment in back end infrastructure.”

RAI seeks equal status for e-commerce, brick & mortar retail

The Retailers’ Association of India (RAI), a body representing the small, independent and large retail businesses in the country, has criticised the stakeholders’ consultation meeting on the FDI policy in the ecommerce sector. It said retail is a business which should be classified on the basis of category of goods and services provided and not on the basis of channels like brick and mortar stores or e-commerce.

It is due to this contention that retailers have decided to not participate in Thursday’s stakeholders consultation meeting on FDI policy in the e-commerce sector called by the DIPP, said Kumar Rajagopalan, CEO, RAI.

According to him, RAI had earlier requested the government to create a simple FDI policy without segregating retail by brands and channels.

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