Indian officials have been working on a proposal to allow up to 51% foreign direct investment in e-commerce ventures, something US retailers such as Amazon and eBay have been lobbying hard for. Such a move will bring it on a par with FDI allowed in multi-brand retailing.
The progress the government has made in this regard will give Singh, who arrived in the US on Thursday, something to discuss in his interaction with CEOs of American companies should the e-commerce issue be raised.
The Department of Industrial Policy and Promotion has also commissioned a study to understand the structure of the industry before moving a firm proposal.
"We are certainly getting a paper prepared on the e-commerce sector. Based on that, we will work out the policy to allow foreign investment in the sector," said a senior DIPP official.
The government allowed FDI in multi-brand retail last year, but clarified that this didn't apply to e-commerce. However, 100% FDI is allowed in business-to-business, or B2B, e-commerce through the automatic route.
DIPP has already held meetings with Nasscom, which has strongly recommended FDI in e-commerce to support fund-starved Indian ventures.
"FDI is absolutely essential for the capital-hungry nature of business that requires substantial investment in infrastructure and services," Nasscom noted in its policy suggestions to DIPP.
While online retail is increasing rapidly in volume, it's doing so on a small base, with most companies still in their investment phase as they focus on customer acquisition. With few companies able to sustain the required burn rates, some have closed or been acquired.
Amazon, which confines itself in India to acting as a marketplace for other online sellers, has outlined the way in which it's likely to operate if FDI is allowed. It will only have, for instance, deliveries in the states and Union territories that are open to FDI in multi-brand retail - currently 12.
Overseas online retailers are keen on entering India because of the potential. The Indian e-commerce market has grown from $2.5 billion in 2009 to $6.3 billion in 2011 and $14 billion in 2012. lndia has 10 million online shoppers, expanding at an estimated compounded annual growth rate of 30%.
The progress the government has made in this regard will give Singh, who arrived in the US on Thursday, something to discuss in his interaction with CEOs of American companies should the e-commerce issue be raised.
The Department of Industrial Policy and Promotion has also commissioned a study to understand the structure of the industry before moving a firm proposal.
"We are certainly getting a paper prepared on the e-commerce sector. Based on that, we will work out the policy to allow foreign investment in the sector," said a senior DIPP official.
The government allowed FDI in multi-brand retail last year, but clarified that this didn't apply to e-commerce. However, 100% FDI is allowed in business-to-business, or B2B, e-commerce through the automatic route.
DIPP has already held meetings with Nasscom, which has strongly recommended FDI in e-commerce to support fund-starved Indian ventures.
"FDI is absolutely essential for the capital-hungry nature of business that requires substantial investment in infrastructure and services," Nasscom noted in its policy suggestions to DIPP.
While online retail is increasing rapidly in volume, it's doing so on a small base, with most companies still in their investment phase as they focus on customer acquisition. With few companies able to sustain the required burn rates, some have closed or been acquired.
Amazon, which confines itself in India to acting as a marketplace for other online sellers, has outlined the way in which it's likely to operate if FDI is allowed. It will only have, for instance, deliveries in the states and Union territories that are open to FDI in multi-brand retail - currently 12.
Overseas online retailers are keen on entering India because of the potential. The Indian e-commerce market has grown from $2.5 billion in 2009 to $6.3 billion in 2011 and $14 billion in 2012. lndia has 10 million online shoppers, expanding at an estimated compounded annual growth rate of 30%.
ONIKA JAISWAL
PGDM 1ST YEAR
2013-15
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