Govt rules out FDI in B2C e-commerce
11-06-2015 00:00:00
Govt rules out FDI in B2C e-commerce
The government has categorically denied that there was any move to allow foreign direct investment (FDI) in electronic commerce (E-Commerce) business environment in India.

The government's earlier move to invite top officials of leading ecommerce companies Flipkart and Snapdeal along with industrial bodies like FICCI and CII for a meeting with Minister of State for Commerce and Industry Nirmala Sitharaman has triggered speculations that the NDA government might relax the FDI norm for e-commerce business.

It is reliably learnt that New Delhi is under pressure from Washington and Tokyo to relax its FDI policy for e-commerce though China and Tokyo are yet to open up their ecommerce market to foreign funds.

Defending government's decision to allow FDI in B2B business activities, a top official with the department of industrial policy and promotion (DIPP) told Business Standard that, "Business-to-business is the best policy. We will just not allow business-to-consumer (B2C). India believes that B2C is against the consumer's interest. If China and Japan have not opened up, why should we?"

During the meeting, industry representatives opined that FDI in e-commerce would affect small retailers drastically and the market would be flooded with imported goods. It was also learnt that government wanted to open up FDI in e-commerce after adequately strengthen local traders and business houses to take on the completion from international players.

The industry leaders wanted government to safeguard Indian companies in terms of privacy, local sourcing, checking e-wastage and safety against tax evasion.

As of now, 100 per cent FDI is permissible in business-to-business (B2B) e-commerce ventures, while it is now allowed in business-to-consumer (B2C) trade practices. However, foreign companies can operate in India with 30 per cent local sourcing as a separate Indian entity.

Leading Indian e-commerce firms like Snapdeal and Flipkart have shown good growth since their inception in 2010 and 2007, respectively. International e-commerce leaders like Amazon can do business in India under the 30 per cent marketplace model. In some cases, foreign companies have entered into business agreement with local retailers to enter Indian market.
-K Ramanathan

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