FDI Policy For E-Commerce Blocks Overseas Investment in Multi-Brand Trade
The Centre recently proclaimed that the Foreign Direct Investment (FDI) policy on electronic commerce does not permit the overseas investments into multi-brand trade. The Department of Industrial Policy and Promotion (DIPP) released a statement. In this statement, the DIPP ensured that FDI is permitted only in the business-to-business (B2B) electronic commerce segment. It also cleared that FDI is not permitted in the business-to-consumer (B2C) segment. In fact, this segment is the inventory-based electronic commerce model or the multi-brand retail.
The statement reads as “Certain averments suggest that Press Note 3/2016 had covertly allowed multi-brand retail trading. Such a view is completely contrary to the specific provisions of Press Note 3/2016, which unambiguously provided that FDI is not permitted in inventory based model of electronic commerce which amounts to multi-brand retail.” Further, it added that, as FDI is sanctioned only in B2B electronic commerce, an electronic commerce unit providing marketplace is supposed not to, straightforwardly or obliquely, impact the sale cost of goods or services, which also makes such commerce as an inventory-based model.
On a similar note, giant retailers Amazon and Walmart came into the news as they announced that they have collaborated in India to lobby the government on regulations. Reportedly, these regulations terrorize to diminish the expansion goals of these firms. Amongst other things, the giant retailers are requesting a delay of up to February 1, 2018 deadline to implement those rules, according to individuals with knowledge of the issue.
The recently stiffened regulations terrorize to pinch Walmart’s Flipkart and Amazon in one of the world’s fastest developing online commerce fields, where both the firms have invested billions of dollars. They need online markets so that they can treat all their vendors equally. This would effectively bar overseas firms from featuring exclusive products on their platforms. This would own inventory and thus let influence pricing of these products and offer big discounts to their customers.