“DIPP India, to push for FDI in E-commerce” : “strategy to give an impetus to manufacturing” | by: Dilasha Seth | ET Retail

” The Department of Industrial Policy & Promotion (DIPP) will push for Foreign Direct Investment (FDI) in E-commerce with the New Government elected today (16th May’2014) as part of its strategy to give an impetus to manufacturing”…

DIPP held a stake-holders meeting on Thursday(15th May’2014), a day before the election results, to firm up its views on the issue. The current FDI policy does not allow foreign direct investment in business-to-consumer (B2C) E-commerce…!! Whereas such, 100% FDI is allowed in business-to-business (B2B) E-commerce…

The meeting was attended by 36 stakeholders, including “Amazon, Walmart, Google, Flipkart, eBay, CII, Ficci, CAIT, Fismi, Nasscom, KPMG”, among others. “It was to examine issues related to FDI in ecommerce. We feel that FDI is needed in the e-commerce segment to boost manufacturing in the economy. FDI in E-commerce is required for capital infusion in SMEs,” said a DIPP official…!!

DIPP will hold another meeting with the stakeholders in the next 10 days to formalise its view on the matter and present to the Next Government(New-Government). This push to FDI in e-commerce comes even as the exit poll forecasts a BJP-led government after the election. BJP has on the record said it is opposed to FDI in multi-brand retail.


“Twelve States, mostly Congress party led, had allowed Foreign Retailers to open Front-end stores in multi-brand retail “, which was opened to foreign investment amidst massive opposition. The new BJP-ruled government in Rajasthan has said it would reverse the Congress Government’s  permission Confederation of All India Traders (CAIT), which has vocally opposed FDI in retail and e-commerce, questioned the timing of Thursday’s meeting. “Why was the meeting called a day before the election results. DIPP could have waited for the new government to take charge,” said Praveen Khandelwal, secretary general, CAIT.

He added that they would vociferously oppose an inventory based FDI E-commerce model as it will affect the business of small local brick & mortar players…!!  The department is in favour of same riders for FDI in e-commerce as FDI in multi-brand retail except for the one related to geographical boundaries.

In the current FDI policy for multi-brand retail, the final decision rests with states. In the case of E-commerce, the policy will be a national one – retailers will be able to deliver goods in any state….” We cannot have geographical boundaries in E-commerce, let us be clear on that. You do not have that anywhere in the world,” said the official…

The DIPP, in the discussion paper floated in January, had raised the question whether retail sale under multi-brand retail (MBRT), should be restricted to states that have agreed to open front-end stores. The paper received over 100 comments.

Industry surveys suggest E-commerce could contribute as much as 4% of GDP by year 2020…!!

In the Thursday meeting , None of the MNCs had an issue with the sourcing rider. Walmart pointed out that it already sources about 95% from India while Flipkart said that it sources about 66% from India..!!

As per the FDI in single-brand retail policy, companies need to comply with a 30% domestic sourcing condition while in case of multibrand retail, they need to source 30% from MSMEs. Sources said DIPP secretary Amitabh Kant firmly supported FDI in e-commerce…

Foreign retailers like Amazon & eBay have been strongly lobbying with the Indian government to allow FDI in E-commerce. Some of India’s big E-tailers such as Myntra & Flipkart are already under investigation for possible violation of FDI policy.

While MNCs pushed for an inventory-based model, domestic retail and SMEs only showed comfort over a marketplace model… “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,” said Anil Bhardwaj of Federation of Indian Micro & Medium Enterprises…!!