There is a good news in store for e-commerce companies in India as they could get full foreign direct investment (FDI) if a proposal of Department of Industrial Policy and Promotion (DIPP) passes. Currently, the proposal is awaiting approval from the Finance Ministry and the Union Cabinet and just one step away for home-grown e-commerce firms like Flipkart and Snapdeal which have marketplace model.
As of now, the FDI norms do not allow a direct inflow of foreign funds in online or offline multi-brand retail or the online marketplace venture, thereby skirting the FDI hurdle
PTI reported on Tuesday that the government was considering permitting 100 percent FDI in the marketplace format of e-commerce to attract more foreign investments. This follows a recent meeting of top officials in DIPP, and the department of economic affairs and corporate affairs.
If the proposal gets green signal then e-commerce startups having marketplace format such as – Flipkart, Snapdeal, Paytm, Jabong, and Myntra, have been able to raise billions of dollars in FDI.
Till now, 100 per cent FDI is permitted in single-brand as well as in cash-and-carry or wholesale business. While no FDI is allowed in e-commerce activities, the online marketplace has been out of the purview of any rules.
The FDI proposal would also help the government sort out the ongoing legal matters and investigations into a number of e-commerce ventures after the Delhi High Court in November last year had asked the central government to probe 21 e-commerce entities for alleged violation of FDI rules. These 21 websites were listed in a petition by an industry body – All India Footwear Manufacturers and Retailers Association – that wanted the government to probe the violations of foreign investment laws.
[Top Image – Iksula]