Recently elected Prime Minister Narendra Modi's government could allow foreign direct investment (FDI) in India's e-commerce sector as early as next month, which will help big players like FlipKart, Amazon and Snapdeal to expand their business.
Currently in India global online retailers are restricted from selling goods directly to customers but allows them to own 100 percent of a marketplace business, where third-party suppliers can use their platform. Both Amazon and eBay use such a platform to operate in the country.
If the sources are to be believed an announcement on FDI in e-commerce is expected in next month's budget.
Foreign players like Amazon and eBay have been lobbying the government since last one year for easing restriction of FDI in potentially big Indian e-commerce market, which is expected to make up about 4% of gross domestic product by 2020.
Earlier in 2013 the Prime Minister's Office (PMO) was said to be keen to allow FDI in multi-brand e-commerce to bring it at par with foreign investment norms in offline retail. In 2012, Indian government opened up the retail sector to foreign players by allowing up to 51 per cent FDI in multi-brand retail, it had specifically excluded e-commerce firms.
Opening up of the FDI in e-commerce sector will benefit existing companies who need more capital to expand their business in a rapidly growing market, which is estimated to have expanded to around $16 billion from $3.8 billion in 2009.
All in all the decision of removing the restriction of FDI in E-Commerce in India will definitely provide benefits for key players in industries as well new entrants to allow foreign VCs and private equity firms to invest in their companies.
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