In­dia ap­proves for­eign in­vest­ment in e-com­merce sec­tor

The Pak Banker - - MARKETS/SPORTS -

In­dia on Tues­day ap­proved 100 per­cent for­eign in­vest­ment in mar­ket­place e-com­merce com­pa­nies, for­mal­is­ing rules for the first time for the multi-bil­lion dol­lar sec­tor. Af­ter years of pro­tec­tion­ist poli­cies, In­dia started open­ing up its re­tail sec­tor in 2011 but so far had not laid down ex­plicit rules gov­ern­ing for­eign in­vest­ment in the fast-grow­ing ecom­merce seg­ment.

In a no­ti­fi­ca­tion on Tues­day, In­dia's com­merce min­istry said it would al­low 100 per­cent for­eign di­rect in­vest­ment in mar­ket­place ecom­merce com­pa­nies, which would also be al­lowed to pro­vide ser­vices in­clud­ing ware­hous­ing, in­ven­tory and pay­ments pro­cess­ing to mer­chants.

How­ever, the no­ti­fi­ca­tion said e-com­merce com­pa­nies would not be al­lowed to in­flu­ence prices of the goods sold on their web­site, and that not more than 25 per­cent of goods sold can come from a sin­gle mer­chant.

The min­istry also said for­eign in­vest­ment in in­ven­to­ry­based e-com­merce com­pa­nies, where goods sold are owned by the on­line re­tailer, would still not be al­lowed.

Global e-com­merce giant Ama­ Inc along with home grown but for­eign-funded ri­vals Flip­kart and Snapdeal have been op­er­at­ing mar­ket­place e-com­merce com­pa­nies that do not own in­ven­tory, but in­stead act as plat­forms con­nect­ing buy­ers and sell­ers through sup­port ser­vices and for a com­mis­sion.

"An ex­plicit po­si­tion from the gov­ern­ment on where it stood with ref­er­ence to e-com­merce has been long over­due. In that sense, it is good that some clar­ity has been pro­vided," said Vivek Gupta, a part­ner at BMR Ad­vi­sors.

Bank of Amer­ica Mer­rill Lynch has forecast In­dian ecom­merce will surge to $220 bil­lion in value of goods sold by 2025 from about $11 bil­lion last year, out­pac­ing growth in bricks and mor­tar re­tail.

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