Modi Government to give good news and relief to e-commerce sector. The much discussed matter in this sector is now looked upon and finally may be resolved very soon.

Modi Government to welcome FDI in e-commerce. The Government is considering permitting 100 per cent FDI in the market place model of e-commerce. Such move will attract large amount of foreign investment in the country. At present, 100% FDI is allowed only in business-to-business (B2B) e-commerce and not in the retail segment.

 

In such a model, the e-commerce company provides an online platform for buyers and sellers. An e-commerce firm carry its business either through market place model or inventory based model. In the inventory based model, a company owns and keeps the goods in warehouses.

 

E-commerce companies, many of them unicorns, could get full FDI if this proposal of Department of Industrial Policy and Promotion (DIPP) passes musters. It is believed that while DIPP is bullish on permitting no-holds-barred FDI in the sector, finance ministry is yet to give a green light to the proposal. If it does get a go-ahead, online marketplace FDI rules would be a part of the detailed guidelines to be issued soon.

 

In recent days, e-commerce companies have remained in news for the funds raised by them from foreign investors. Major online players, including Flipkart, Snapdeal, Amazon, Shopclues and Paytm, which are funded by marquee international investors, operate as marketplace firms, thereby skirting the FDI hurdle. In regard to FDI, the rules in the retail sector have remained complex, resulting in confusion.

 

However, clarity is expected in the online commerce space as Prime Minister Narendra Modi has backed it as a model for the future. The recent start-up action plan, announced by the prime minister, is also meant to benefit a large number of e-commerce players among other IT sectors.

 

The DIPP is working on guidelines for e-commerce sector in the backdrop of ongoing tussle between online and offline retailers. The department has already carried out stakeholders’ consultations with states, e-commerce companies and other departments.

 

Past year has been sumptuous in terms of liberalization of FDI norms in the country. Also, the Government had eased FDI norms when they exempted NRI/PIO investments from the scope of FDI. Again, this indeed is an appreciated move by the Modi Government. This idea will hit the economy and the e-commerce sectors with the huge foreign investment and it is also expected that whole chaos about FDI prohibitions will get resolved.

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