Assocham for allowing FDI in e-commerce retailing

India's FDI policy restricts e-commerce companies from offering services directly to retail consumers. At present, 100 per cent FDI is allowed in business -to-business e-commerce but not in retail trading

Pitching for foreign direct investment (FDI) in e-commerce retailing, industry body Assocham on Sunday said the Flipkart fiasco should not be used as an excuse by the government to over-regulate the e-commerce business which is in its infancy.

"The Flipkart incident resulting in inconvenience to enthusiastic customers on the Diwali sale should be taken at the most as one-off case and let it not be used as a ploy or an ammunition to subject the fledgling and a hugely promising e-commerce space to regulation over and above the rules of the game which are applicable to normal business," the chamber said.

It said after the promoters of the company have expressed regrets, the matter should rest here.

"If at all any regulatory issue is involved, let it be dealt within the existing laws concerning interests of the consumers," it added.

On October 7, Indian e-commerce giant Flipkart apologised for the glitches encountered during the 'Big Billion Day' sale, admitting its "failure" in living up to the expectations of its customers. The sector holds big promise in terms of creating new market among the aspirational middle-class consumers and any over-regulation will "kill the business in its infancy, denting the entrepreneurial spirit of the promoters, most of whom are young," it said.

While the unorganised retail has been estimated at about $550-600 billion, the organised retailers have been able to corner a market of about $25-30 billion and e-commerce is just about $3-4 billion, it said.

"But given the kind of enthusiasm both on part of the e-commerce players and the consumers, the sector holds a great promise of $15-18 billion in the next three years," it said. It added that as far as the policy issues are concerned, there is a need for clarity in the area of foreign direct investment.

"The FDI in e-commerce can be allowed as the neighbourhood kirana stores are not really going to be affected by the kind of technology-driven delivery platforms and the supply chain linked to e-tailing," the statement said. India's FDI policy restricts e-commerce companies from offering services directly to retail consumers. At present, 100 per cent FDI is allowed in business -to-business e-commerce but not in retail trading.