The government of India today permitted 100 per cent FDI in the market place format of e-commerce retailing with a view to attract more foreign investments.

As per the press note issued by the Department of Industrial Policy and Promotion (DIPP) on FDI in e-commerce, foreign direct investment (FDI) has not been allowed in inventory-based model of e-commerce.

Global ecommerce giants like Amazon and Ebay are operating online marketplaces in India while Indian players like Flipkart and Snapdeal have foreign investments even as there were no clear FDI guidelines on various online retail models.

To bring clarity, the DIPP has also come out with the definition of ‘e-commerce’, ‘inventory-based model’ and ‘market place model’.

Market place model of e-commerce as defined by DIPP means providing of an IT platform by an e-commerce entity on a digital and electronic network to act as a facilitator between buyer and seller.

The inventory-based model of e-commerce means an e-commerce activity where inventory of goods and services is owned by e-commerce entity and is sold to consumers directly, according to the guidelines.

A market place entity will be permitted to enter into transactions with sellers registered on its platform on business-to-business basis, DIPP said.

DIPP further clarified that an e-commerce firm, will not be permitted to sell more than 25% of the sales affected through its market place from one vendor or their group companies.

“In order to provide clarity to the extant policy, guidelines for FDI on e-commerce sector have been formulated,” DIPP informed.

Prior to this announcement, 100% FDI was already allowed in business-to-business (B2B) e-commerce.

This notification is a huge boost to the ecommerce sector looking into the present economic condition where everything is going the electronic way.

 

Source: Economic Times