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Being one of the most diligent sources of revenue for the Indian economy, foreign direct investment (FDI) is gaining importance with each passing day. Investments made by any individual or firm in one country into business streams situated in a foreign country are termed as FDI. Generally, FDI takes place when the following conditions are satisfied by an investor:
With the purpose of fortifying the investor’s and stakeholder’s sentiments in the Indian e-commerce sector, refined policy is introduced to ensure that online and offline business to customer (B2C) models are kept on the same pedestal as business to business (B2B) models.
Precarious regulations:
There are few tricky regulations but befitting efforts to alter the like have been made thus, offering guidance to the companies to adopt FDI.
In prior 2 – 3 years, Indian multi-brand e-commerce sector has been in the limelight for a while as well as proclaimed to be on an all-time rise witnessing exponential growth, investments covering millions of dollars, numerous mergers and acquisitions, businesses being valued for costs unbelievable and dynamic competition among domestic as well as global champions. However, these are coupled with few ambiguities too. For instance, the retail face of IndiaMart, Tolexo abruptly discontinued its operations after release of a government notification leading to a lot of disarray regarding FDI in the retail sector. Imposition of ceiling of 51% FDI in multi-brand retailing, subject to government approval as mentioned in FDI policy issued by Department of Industrial Policy and Promotion (DIPP) observed relatively complex situation.
Present day scenario
Amazon and E-bay, US based e-commerce companies have been continuously propelling the Indian government to liberalize the e-commerce sector further enabling them in selling their products directly to consumers. Traders have dismissed the proposed policy to allow FDI in e-commerce, but the views expressed by the global and domestic e-commerce companies are mixed. India’s retailer association is further diverged on the matter of FDI influx in e-commerce. FDI in e-commerce will lead to boosting infrastructure development and spurring manufacturing sector but it could also resulting in large scale job losses. Currently, the government is still at halt for views of all stakeholders before allowing FDI in e-commerce.
To sum up, e-commerce including online retail in India comprises of a decent fraction of total sales and is set to grow to a substantial amount owing to a lot of factors including
We need to make sure that policies governing the sector are designed to lubricate the future and not regulate the past. The crucial element is to develop a policy with a road map for the future rather than adjusting the past.
For detailed information on FDI, check other blogs, India: The nucleus for FDIs, FDI in retail sector
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