New Delhi, May 23 (KNN) Days before the Modi government of the BJP led NDA gets sworn in, Secretary, Department of Industrial Policy and Promotion (DIPP), Amitabh Kant has batted for foreign investment in the e-commerce space even though a section of the domestic brick and mortar retailers are opposed to the idea.
“I just had a meeting and I was pleasantly surprised that each one of the e-commerce players want the sector to be opened up. These are young players and all of them are wanting to grow and expand, however they are facing a huge problem of liquidity. They want to expand in a far bigger way, they want increased amount of FDI flows or more investments into their projects. We need to just open up e-commerce fully,” Kant told TV 18 in an interview.
“The world has moved the e-commerce way everywhere, why shouldn’t India do that, why should India remain behind in this sector? There is no logic at all. Everybody is doing e-commerce all across the world. The whole world has grown on e-commerce and you want to keep India backward,” he said adding, “The process of consultation is over…we will put this up before the new government. It is for the new government to take a call.”
Earlier this month, DIPP had called a meeting with the stakeholders and industry bodies to ascertain their views on the issue of FDI in e-commerce.
MSME industry body FISME has said that the government should study the impact of inventory based e-commerce model on small scale enterprises although a model which can act as a platform for domestic suppliers should be taken advantage of.
“As far as the market-based model is concerned, we have no problems, and rather feel that the government should assist us in taking advantage of it. Whereas, the impact of an inventory-based model on small-scale enterprises needs to be studied, Secretary General of Federation of Indian Micro and Small & Medium Enterprises (FISME), Anil Bhardwaj said.
The current FDI policy does not allow foreign direct investment in business-to-consumer e-commerce. As such, 100 per cent FDI is allowed in business-to-business e-commerce.
According to the FDI in single-brand retail policy, companies need to comply with a 30 per cent domestic sourcing condition while in case of multibrand retail, they need to source 30 per cent from MSMEs.
According to a DIPP discussion paper on e-commerce, “Around 90 per cent of the global e-commerce transactions are stated to be in the nature of B2B, leaving a meagre 10 per cent as B2C e-commerce. Case of India is no different where most of such transactions are in the nature of B2B.
Moreover Indian e-commerce industry is characterized by “Market Placeâ€Ÿ model. It allows a large number of manufacturers/ traders especially MSMEs to advertise their products on the “Market Placeâ€Ÿ and benefit from increased turnover, the discussion paper said.
A national level body of internet and mobile phone companies, highlighting the challenges as regulatory restriction to raise funds from foreign PE/VC, has suggested a caveat based approach to allowing FDI in the sector, the paper said.
It further added, “One body of industries has stated that MSMEs / traders are currently benefitting from e-commerce in India and there is huge scope of further involvement and growth of MSMEs / traders with further boost to e-commerce. Even small traders have enhanced their coverage by using e-commerce platforms like Just Dial, Quikr etc.”