Nod to 100 per cent FDI in e-commerce

In a big boost to Flipkart, Snapdeal, Amazon and Paytm, the Modi government on Tuesday allowed 100 per cent FDI through automatic route in the marketplace format of e-commerce retailing.

However, the BJP-led NDA government will not allow FDI directly in e-commerce retail as it has been opposed to FDI in multi-brand retail.

This decision clears the Modi government stand on the FDI in e-commerce which was long overdue and also removes uncertainty for e-commerce companies.

This clarification will result in flow of foreign investment in e-commerce firms which follow marketplace model such as like Flipkart, Snapdeal, Amazon and Paytm among many others.

It may pave the way for the direct entry of world’s biggest online commerce firm Alibaba.com into India.

This will also give e-commerce market place firms legal backing as traders sued e-commerce companies claiming that the marketplace model violates FDI norms which bar foreign investment in e-commerce.

As FDI is barred in e-commerce retail, companies like Flipkart, Ama-zon and Snapdeal — which have foreign investment — had adopted a marketplace model, where they do not own the inventory but act as facilitator between the seller and buyer for a fee.

“Great to see the guideline around 100 per cent FDI in e-commerce marketplaces. Glad that the government recognises and supports an industry transforming India,” tweeted Snapdeal co-founder Kunal Bahl who was one of the first to adopt to marketplace model.

However, traders who saw their sales taking a hit due the entry of e-commerce firms said that the government’s decision on allowing 100 per cent FDI in market place companies will hit them hard.

“It is nothing but a back door entry to global retailers which will facilitate them to side step restrictions in multibrand retail since e-commerce has no geographical restrictions,” said Confederation of All India Traders (CAIT) secretary general Praveen Khandelwal.