Government plans to allow FDI in e-commerce before April

Floats discussion paper for stakeholders' feedback with a deadline of January 28

The Department of Industrial Policy and Promotion (DIPP), after a push from the Prime Minister’s Office, has started consultations with stakeholders on allowing foreign direct investment in retail e-commerce, to open the sector for foreign investors before the end of this financial year.

Sources said a discussion paper had been distributed by DIPP, under the commerce and industry ministry for feedback. Responses should be given by January 28. A Cabinet note would be prepared based on the inputs received, a senior DIPP official told Business Standard.

According to the official, the main sticking point is whether to allow FDI in e-commerce only in goods, which has taken off in a big way in the country, or to include services as well. Including FDI in e-commerce in services will have larger implications as the ambit is huge.

“Once we get all the feedback, we will circulate the Cabinet note (to all ministries for an inter-ministerial discussion). It should be there before March,” said the official, adding the government could also allow sale of insurance policies and shares online.

Sources said the PMO wants the policy to be in place by the end of the current financial year.

At present, 100 per cent FDI is allowed in business-to-business (B2B) e-commerce, while business-to-consumer (B2C) is prohibited. Besides, there is a mandatory 30 per cent local sourcing norms for foreign players.

In India, online services such as ticketing, net-banking, payment of taxes, bill payment, matrimonial sites are developing by the day. So are goods retailing sites such as flipkart.com, jabong.com, and firstcry.com, among others, that sell anything from books to bags.

DIPP is faced with another problem. In some cases, foreign players have already tied up with domestic companies. As a result, these players are now not so enthused with the government’s decision to allow FDI at this juncture.

Large international players such as Amazon and eBay are currently in discussion with DIPP on what the possible outcome in case FDI is allowed. Apparently, they are pushing for this heavily as they find the Indian market “extremely lucrative”.

The discussion paper also deals with the issue concerning mandatory sourcing norms, something that has been sharply criticised by global retailers.

Recently, Nasscom, Indian information technology industry body, had demanded mandatory local sourcing. DIPP could add this in the final Cabinet note.