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E-commerce ripe for FDI, Walmart writes to govt

PM might discuss sector with US Prez on Sept 27 in Washington, DC

Nivedita Mookerji  |  New Delhi 

It's not the international online retailers alone such as Amazon and eBay which are pitching for foreign investment in the e-commerce sector. The largest brick-and-mortar retail chain of the world, Walmart, with $466 billion sales last year and more than 10,000 stores worldwide, has joined in to tell India that e-commerce is ready for foreign investment. Walmart Asia President and Chief Executive Scott Price is learnt to have written to Finance Minister P Chidambaram that "several other sectors stand poised for exponential growth and are ripe for foreign investment, and foremost among them is e-commerce".

Currently, foreign direct investment (FDI) is not permitted in e-commerce, though up to 51 per cent FDI is allowed in multi-brand retail and 100 per cent in single brand. So, e-commerce or online retail players are either routing foreign money through complex corporate structures or by having a marketplace model, which does not restrict FDI.

Internationally, Walmart is trying to aggressively expand its online business, competing with the likes of Amazon. Replying to a Business Standard query on the company's stand on e-commerce in the country and its communication with the government on the matter, a Walmart India spokesperson said: "We would like to serve our customers in ways that can help them save money and live better."

She added Walmart's experiences worldwide supported the fact that e-commerce was an important and growing area that met customers' shopping needs. "Toward this, we encourage the government of India to consider opening e-commerce for FDI."

Recently, the government had appointed a probe committee, headed by retired justice Mukul Mudgal, to inquire if Walmart lobbied in India for gaining wider access. The Mudgal committee report was inconclusive due to inadequacy of data, and is currently awaiting inter-ministerial inputs.

The Walmart letter, which is perhaps a follow-up to Chidambaram's July meeting with the top representatives of the company in the US, coincides with the government thrust on opening up the e-commerce sector to woo foreign investors. Ahead of Prime Minister Manmohan Singh's meeting with US President Barack Obama on September 27 in Washington DC, the government is believed to be giving FDI in e-commerce a new look, and the subject may form a part of the dialogue between the two sides.

While pointing out that e-commerce has the potential to be a positive force in increasing consumption and generating employment across the country, Price has discussed the benefits of opening up the sector in a detailed document. Walmart's experience in e-commerce in the Chinese market finds a special mention in the document. "While the Indian market is still trying to absorb the dramatic possibilities of shopping through ecommerce, China's ecommerce has grown by leaps and bounds due to congenial policy and economic fillip." Walmart has retail operations in 27 countries and e-commerce portals in 10 of these.

Even as the size of the e-commerce market was pegged at below $2 billion in India till the end of 2011, it could grow to $13.3 billion to $17.6 billion by 2020, according to an Ernst & Young report. The same report says that from 11 million online transactions in 2011, the number could rise to 38 million by 2015.

The American chain has a 50:50 joint venture with Bharti Enterprises for operating cash-and-carry (wholesale) stores.

First Published: Fri, August 30 2013. 00:50 IST