FDI in e-commerce: Nasscom for mandatory local sourcing

At present, 100% FDI is allowed in B2B e-commerce and not in retail trading

The Indian IT-ITes industry body Nasscom favours FDI in e-commerce in the retail sector, but wants the government to make some amount of local sourcing mandatory, officials said.

"After much delay, Nasscom has finally submitted their recommendations to the DIPP yesterday. They have favoured permitting FDI in e-commerce in the retail sector. However, it has asked to impose conditions on local sourcing," an official told PTI.

Last month, Nasscom President Som Mittal had met DIPP Secretary Saurabh Chandra on the matter. Mittal was asked to submit the industry body's views on the matter.

The Department of Industrial Policy and Promotion (DIPP), under the Commerce and Industry Ministry, deals with foreign direct investment (FDI) related matters.

The official said the DIPP would now formulate a discussion paper on allowing FDI in e-commerce activities, which will also include selling of insurance and shares, besides retail.

"The issue requires wider consultations. E-commerce is not related only with retail. It includes financial services like insurance and shares," the official said.

Global online retailer Amazon.Com has sought relaxation in the FDI policy which restricts such companies from offering services directly to retail consumers.

At present, 100% foreign direct investment (FDI) is allowed in business-to-business (B2B) e-commerce and not in retail trading. Besides, there is a mandatory 30% local sourcing norms for foreign players.

Several global retailers have already raised their concerns over the sourcing norm.

As per the foreign direct investment policy for multi-brand retail trading, at least 30% of the value of procurement of manufactured/processed products shall be sourced from Indian 'small industries'.

While foreign companies cannot directly offer online retailing, there is no FDI restriction in the marketplace format, which is about offering a platform for third parties and consumers to sell and buy products.

The US Government wants India to allow FDI in e-retail so that American companies such as Amazon and eBay can start operations here.

The DIPP is also looking at issues like international practice in permitting FDI in e-commerce besides analysing the sector.

The subject of e-commerce was relatively new, but had become extremely crucial due to global digital integration, widespread use of Internet and convenience of on-line business transactions.

During the July meeting of the United Nations Conference on Trade and Development (UNCTAD), India had communicated its strong viewpoint supporting regulation of e-commerce to protect interest of global consumers.