Pure play e-commerce ,which implies sale of products by an online retailer directly to consumers,would be permitted to have up to 100 percent foreign direct investment(FDI),if a latest proposal of NITI Aayog is accepted by the Union government.But a rider,that products sold through e-commerce must be manufactured in India to gain from the liberalised regime,could play a spoil sport,said analysts.The idea behind such a condition is promoting Make In India,a signature campaign of the Narendra Modi government.
At present,FDI is not allowed in ecommerce,but there’s no baron foreign investment in the online market place format.There striction forced American major Amazon totweak its inventory-ledglobal business model and operate a market place platform instead in India.Even home-grown Flipkart,funded by marquee foreign investors,switched from inventory model to market place format to comply with the policy guidelines.
In case FDIine-commerce is permitted,as visualised by Niti Aayog and discussed amongst top government officials,the likes of Amazon and Flipkart may be encouraged to shift back to their original inventory model,but the India manufacturing rider may just hold them back,industry stakeholders pointed out. In fact,they cited the mandatory 30 per cent local sourcing in there tail policy (both multi-brand and single-brand)as a hurdle for several international brands starting from Walmart to Ikeato Apple. They added that the rider on India manufacturing in thee-commerce policy may be seen as an extension of mandatory local sourcing.
In March,the government allowed 100 percent FDI in online retail of goods and services under the “market place model”via automatic route,in a step to give a stamp of approval to existing e-commerce companies operating in the country.
Under the market place model,an ecommerce company does not holdany inventory of its own and sells products sourced from multiple third parties.
Sources in NITIA ayog said that the plan is to take a multi-pronged approach to help various different sectors via ecommerce and promote manufacturing in a liberalised FDI regime.“FDI in B2C would help in increased retail sector growth of India made goods,which wouldfurtherhelpsmallandmedium enterprisesandcottageindustry,”saida NITIAayogofficial.
The new norms,if rolled out,would also help improve infrastructure development including logistics,to meet the demand of underserved areas. The revised policy is also targeting to create around 10 million additional jobs by 2020.However,experts said that the move might just endup benefiting a few companies and sectors as they may not be ready to sell only ‘Made in India’products in electronics and other highly specialised segment.
“This could help vertical players in categories lik efurniture,food and groceries,apparel,lingerie,babycareamong otherthings,where they could source the products fully from India.Horizontal market places may not benefit much from such a moves incethe largest category of mobiles,electronics and accessories may not be manufacture din India,”said Sreedhar Prasad,partnerecommerceandstart-ups,KPMGIndia
Business Standard New Delhi,09th November 2016
At present,FDI is not allowed in ecommerce,but there’s no baron foreign investment in the online market place format.There striction forced American major Amazon totweak its inventory-ledglobal business model and operate a market place platform instead in India.Even home-grown Flipkart,funded by marquee foreign investors,switched from inventory model to market place format to comply with the policy guidelines.
In case FDIine-commerce is permitted,as visualised by Niti Aayog and discussed amongst top government officials,the likes of Amazon and Flipkart may be encouraged to shift back to their original inventory model,but the India manufacturing rider may just hold them back,industry stakeholders pointed out. In fact,they cited the mandatory 30 per cent local sourcing in there tail policy (both multi-brand and single-brand)as a hurdle for several international brands starting from Walmart to Ikeato Apple. They added that the rider on India manufacturing in thee-commerce policy may be seen as an extension of mandatory local sourcing.
In March,the government allowed 100 percent FDI in online retail of goods and services under the “market place model”via automatic route,in a step to give a stamp of approval to existing e-commerce companies operating in the country.
Under the market place model,an ecommerce company does not holdany inventory of its own and sells products sourced from multiple third parties.
Sources in NITIA ayog said that the plan is to take a multi-pronged approach to help various different sectors via ecommerce and promote manufacturing in a liberalised FDI regime.“FDI in B2C would help in increased retail sector growth of India made goods,which wouldfurtherhelpsmallandmedium enterprisesandcottageindustry,”saida NITIAayogofficial.
The new norms,if rolled out,would also help improve infrastructure development including logistics,to meet the demand of underserved areas. The revised policy is also targeting to create around 10 million additional jobs by 2020.However,experts said that the move might just endup benefiting a few companies and sectors as they may not be ready to sell only ‘Made in India’products in electronics and other highly specialised segment.
“This could help vertical players in categories lik efurniture,food and groceries,apparel,lingerie,babycareamong otherthings,where they could source the products fully from India.Horizontal market places may not benefit much from such a moves incethe largest category of mobiles,electronics and accessories may not be manufacture din India,”said Sreedhar Prasad,partnerecommerceandstart-ups,KPMGIndia
Business Standard New Delhi,09th November 2016
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