Japan submits proposal at RCEP for FDI in India’s e-commerce

With global companies showing their interest in investing in the Indian e-commerce market, the government is under pressure from various stakeholders to relax FDI norms in this space. For instance, recently Japan submitted a proposal at the Regional Comprehensive Economic Partnership (RCEP) forum proposing relaxation in the foreign direct investment (FDI) norms in the e-commerce sector.

The RCEP with 10 ASEAN countries as members and its six free trade agreement partners -- India, China, Japan, Korea, Australia and New Zealand are in the process of negotiating a mega trade deal. Now, after proposing for relaxation of FDI norms, in their forthcoming meeting scheduled in Kyoto (Japan), sources say India will have to present its case and decision on the paper. As of now, India does not allow FDI in companies from offering services directly to retail consumers. However, 100 percent FDI is allowed in business-to-business e-commerce.

Recently, the Centre mandated American online retail giant Amazon to get the backing from an industry association from its country for its proposal on allowing foreign direct investment (FDI) in the B2C sector. The issue was discussed at the first inter-ministerial committee to fast-track investment proposals from the US in India last December.

While Amazon and Walmart lobbying to get access to the inventory-based model in India, where they can sell own products directly to consumers, at present, 100 percent FDI is allowed only in marketplace models, a company can provide an online platform to local vendors to sell their products in return for a commission. Amazon has asked the government to allow 49 percent foreign direct investment in e-tailers selling directly to consumers.