New Delhi, Sept. 12: The government is in favour of allowing foreign direct investment in e-commerce, making way for global giants such as Amazon and eBay to start operations here.
At present, foreign entities provide online platforms for third parties and consumers to sell and buy products. However, they are not allowed to sell from their own inventories.
Top officials said the Prime Minister’s Office was keen that the government permitted 51 per cent foreign ownership in e-retail.
At present, India does not allow FDI in e-commerce. The country, however, allows up to 100 per cent FDI in single-brand retail and 51 per cent FDI in multi-brand retail.
The Obama administration wants India to open up the FDI window in e-retail. It may expect some commitment on the issue from New Delhi when Prime Minister Manmohan Singh visits the US later this month.
Amazon India head Amit Aggarwal told The Telegraph, “If regulations are allowed (FDI in e-commerce), we believe it would be great… not only for Amazon but also for small businesses.”
According to Aggarwal, “worldwide Amazon follows a hybrid model” which sells both third-party sellers’ products as well as its own inventories. It would like to follow the same model in India, too. This, analysts say, is true for most global retailers who have been keeping a close watch on Indian e-commerce regulations.
Domestic e-retailers, who desperately need funds, however, want FDI to be allowed but not with majority control. The commerce ministry, which reflects the interests of local business, is consequently reluctant to allow 100 per cent, or 51 per cent, FDI in e-commerce.
It has been consulting domestic e-commerce firms to work out the cap. Once this is done, the matter is likely to be pushed before the Union cabinet for its approval, said officials.
Officials expect permission for FDI in e-commerce to be subject to sourcing conditions, with the e-retailers directed to procure a percentage of their stocks from small and medium businesses on the lines of FDI in retail.
Aggarwal was unwilling to speculate on the cap which Amazon would seek.
The country’s e-retailing business has grown around 150 per cent in three years, between 2009 and 2012, to touch $9.5 billion.
However, despite the impressive growth, the actual number of Indians who shop online is still small compared with the West as well as other Asian countries.