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FDI in Ecommerce: Homegrown players vote against the move

By Sujata Sachdeva

3 Jun 2015

Physical retailers and organisations like Retailers Association of India (RAI) and CAIT are opposing every move hinting at the entry of foreign investment in India’s ecommerce. What’s more homegrown ecommerce biggies such as Flipkart and Snapdeal too have voiced their reservations against it.

While the government is discussing with domestic and ecommerce players about FDI in online multi-brand retail, it has said that rules remain unchanged for now. After meeting stakeholders commerce and industry minister reiterated there is no change stand on allowing FDI in e-retail. Around 60 players from the industry, including representatives of Amazon India, Snapdeal, Ikea, Japan Plus, eBay and Flipkart attended the meeting.

Strong opposition to FDI in ecommerce

The Delhi High Court has directed the government to consider a plea by the Retailers Association of India (RAI), before taking a call on foreign investment in ecommerce and physical retail. As per the association, FDI rules must be the same for both.

The order has the potential to reopen policy debate on rules pertaining to foreign investment in e-commerce companies as well as multi-brand retail. The petition has asked for an equal footing between retailers and e-tailers in terms of FDI regulations introduced by the government. RAI had expressed strong opposition to the government’s move to approach stakeholders of the ecommerce market to seek their views on FDI policy in e-commerce segment. The association feels that the retail industry must be classified on the basis of category of goods and services provided and not on the basis of brick and mortar stores or e-commerce. So the retailers decided to not participate in the stakeholders’ consultation meeting on FDI policy on e-commerce sector called by DIPP.

The Confederation of All India Traders (CAIT) too has demanded suspension of any move to allow FDI in e-commerce.​ “A National Trade Policy for retail trade should be formulated and a separate ministry of internal trade needs to be set-up to look after domestic trade in India,” it said.

Foreign players lobby for FDI

Meanwhile, American biggies Amazon and Walmart, have been lobbying to get access to the inventory-based model in India—where they can sell own products directly to consumers. At present, 100 per cent FDI is allowed only in marketplace models, where 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.

The Centre had mandated Amazon to get backing from an industry association from its country for its proposal on allowing 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 on December 17, last year.

Both, Walmart and Amazon have announced their intention of becoming aggressive with their ecommerce plans in the country. However, as of now FDI up to 100 percent is allowed only in B2B ecommerce, posing a hurdle to their ambitious targets but helping the growth of online players in India.