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The new FDI (Foreign Direct Investment Policy) policy by Indian government has committed more of a confusion than a reform as far as ‘online’ retail sector or E-Commerce in India is considered, as the Indian government disallowed FDI in online retailing. As per the new policy yet to be implemented at state level in India, it has allowed 100% FDI for single brand retail outlets, and 51% for multi-brand retail outlets.

For example Apple can sell its branded products without any hassles what so ever, however it would be trouble some for other foreign e-commerce players which sells multi-brand products online.

In year 2012 the total e-commerce revenue in India is $1.6 billion, as per research firm Forrester and expected to be nearly 5 folds by $8.8 billion by 2016. But the new policy enforced, is this figure remain the same.

The lack of clarity in the policy has raised many question on future of e-commerce in India especially the Indian startups arena which have seen numerous success from past 4-5 years.

3 Biggest questions after new FDI policy:

  1. The E-Commerce biggest benefit is that it has no geographical location, however new policy will be implemented by state level (with choice for implementing or not), thus now suppose if one state allow FDI in e-commerce and other doesn’t than can products be shipped across the boundaries of states within one country ?
  2. For existing single-brand online portals which have less than 100% stake (<51% due to restriction before new FDI policy) does this new policy allow them to eat local  stakeholders rights.
  3.  Can Indian owned E-Commerce entity get investments from foreign bodies be it foreign venture capital, private equity (PE) funds or foreign angel investor, as this is the big question which can hurt most to Indian e-commerce startups (if NO, than where is the reform?).

Some resolved question and clarification as of now:

  1. NOT Affected by new FDI policy –
    • E-commerce players which have no inventory or say does not sell multi-brand products but only do the listing of products or comparision website such as eBay,  Junglee.com etc. which send users to other websites to buy product rather than selling its own.
    • Companies engage only in B2B e-commerce and not B2C model remain unaffected such as Alibaba.com.
  2. FDI in retail for e-commerce in any case i.e both single-brand or even multi-brand is disallowed because of the fact that FDI norms for multi-brand retail apply only to offline stores not for e-commerce.
The new policy has undoubtedly screened the big companies/brands from entering Indian market and can possibly hurt the local e-commerce companies/ start-ups in India seeking strategic investment from foreign companies through FDI.
Indian E-Commerce vs New FDI Policy [with Infographic]

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