Nasscom lauds conditional foreign equity in e-tail segment

Indian IT industry's representative body Nasscom on Tuesday welcomed the opening up the retail e-commerce segment to 100 percent foreign equity through the clause of automatic route.

"The Department of Industrial Policy and Promotion (DIPP) guidelines are an indication of the government identifying the segment as an electronic intermediary, operating a technology platform to facilitate sales and transactions between third party sellers and buyers," it said in a statement here.

The move is expected to benefit not only foreign multi-brand retail entities like Amazon and e-Bay, but also single-brand overseas chains like Adidas, Ikea and Nike. Indian players like Snapdeal, Myntra, BigBasket and Flipkart can also opt for foreign equity tie-ups.

"Reiteration of FDI policy 'as is' on the services sector, on sale of services through e-commerce and add-on services like order fulfilment services offered to third party sellers will help in ending misinterpretations in the domain," said Nasscom.

Noting that restricting sales of a vendor to 25 percent of the total sales in the marketplace may prove to be restrictive, especially for high value goods, it said the e-tail industry may face difficulties in case of electronic goods.

"Marketplaces have no control on how a product is priced and organise 'sales' where vendors participate. As the segment offers consumers choices and attractive prices, we hope such consumer-friendly practices similar to sales being offered by retailers will not be restricted," the statement added.

Observing that the guidelines on allowing conditional foreign equity into the sunrise sector was overdue, BMR Advisers partner Vivek Gupta said the government had chosen to bless the retail e-commerce model with safeguards that it should not act like a retailer.

"The initiative comes after the emerging sector attracted $10 billion investments amid legal challenges and ED (enforcement directorate) inquiries at various stages," he said in a statement.