FDI in e-commerce not to be allowed for now

After junking Foreign Direct Investment (FDI) in the multi-brand retail sector, the BJP Government is set to consign the proposal to open up e-commerce to the back-burner.

Faced with increased resistance from the trading community, elections in three States, including Delhi, and a lack of clarity on the definition of e-commerce, the Modi-led Government has decided not to act on the matter in a “hurry’’.

“There is opposition within the party (BJP) to allowing FDI in e-commerce. Some say it is backdoor entry for FDI in multi-brand retail,” a Government official told Business Line .

The Government is unequivocally opposed to FDI in multi-brand retail, with Commerce Minister Nirmala Seetharaman recently stating that there was no question of reconsidering the matter at present.

The UPA Government had allowed 51 per cent FDI in the multi-brand retail sector in September 2012, but it was not able to take a decision on e-commerce as its term came to an end.

Officials say that even after several rounds of consultations with stakeholders, there is still no clarity on what e-commerce should comprise — whether it should be restricted to just e-retailing of goods or be extended to services such as e-ticket booking or financial operations such as those offered by Sharekhan, Alibaba and others.

“There is just no clarity on the definition of e-commerce. Even the World Trade Organisation does not define it. In the absence of a proper definition and legislation, we do not want foreign investors to face the problems besetting direct marketing companies in the country,” the official said.

Domestic e-retailers such as Flipkart and Snapdeal have been opposing FDI fearing competition from big global companies such as US-based Amazon.

In fact, even some foreign e-commerce companies such as eBay, that operate in India through the marketplace model, which allows other brands to sell products on the company’s platform, have been opposing FDI in the sector. But the bigger issue before the Government right now is opposition by traders — the BJP’s vote-bank across the country, including Delhi.

India’s largest traders’ body, Confederation of All-India Traders, has declared that it will hold a rally on August 9 to protest the fallout of FDI in e-commerce on small retailers.

“We have to have more consultations with stakeholders to arrive at a policy acceptable to all. The Government is just not ready to take a decision on the matter yet,” another official said.

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