Govt looking at allowing FDI in e-commerce

Prime Minister Manmohan Singh will strongly oppose the US Immigration Bill that could lead to imposition of heavy penalties on Indian IT companies operating in the country. He will take up the issue during his meeting with US President Barack Obama later this month.

The Prime Minister may also assure the US on a possible opening up of the e-retail sector for foreign direct investment (FDI) and push for a Totalisation Agreement that would exempt short-term Indian workers from contributing to the American social security kitty.

An inter-ministerial meeting, called by National Security Advisor Shivshankar Menon and Principal Secretary to the Prime Minister Pulok Chatterji for preparing the agenda of the Prime Minister’s forthcoming US visit, also discussed issues such as extension of the expired generalised system of preference (GSP) scheme for Indian exports to the US, possible cooperation in public safety networks and concerns of foreign banks in the US.

The meeting convened last month was attended by the Secretaries of key Ministries and Departments, including Foreign Affairs, Economic Affairs, Commerce, Agriculture, Civil Aviation, IT and Telecom.

It was agreed that India should continue to oppose the provisions of the Immigration Bill that could lead to Indian companies such as Infosys, Wipro, TCS and others that employ a majority of non-Americans in their US operations, paying steep visa fees as penalty that could render them uncompetitive.

“The US Administration should be asked to oppose the Congressional initiative,” a note on the Action Points emerging from the meeting stated.

The Commerce & Industry Ministry has been asked to work on the issue.

e-commerce rules

The PMO has also asked the Commerce & Industry Ministry to examine if FDI could be allowed in the e-retail or e-commerce sector on the lines of rules guiding single brand and multi-brand retail sectors.

“As regards the possible US requests for FDI in e-commerce/e-retailing, the possibility of a clarification that the provisions for multi-brand retailing/single-brand retailing would apply on all such activities would be examined. The need for Indian e-commerce companies to seek FDI would also be kept in mind,” the note said.

Action on the matter would be taken by the Commerce Department, the note adds.

While the present FDI policy bans foreign investment in e-commerce, multi-brand retail stores are allowed up to 51 per cent FDI and single-brand retail ventures could have 100 per cent FDI subject to sourcing clauses. US e-retail companies like eBay and Amazon have been lobbying hard to convince India to open up the sector.

On the issue of a Totalisation Agreement or Social Security Agreement with the US, it was noted that despite the introduction of a National Pension Scheme in India, the US was not being receptive for discussions on such an agreement.

The Prime Minister is likely to stress on the importance of such an agreement for India that could save the country more than $1 billion in lost salary every year.

(This article was published on September 8, 2013)
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