Ecommerce sites in India could be in some real deep trouble!

The Department of Industrial Policy and Promotion (DIPP), has backed ecommerce companies, saying their marketplace models are not recognised under India’s FDI policy.

In its reply to the Delhi High Court, DIPP said that in case the government wants to check violations by the online marketplaces on FDI policy, financial watchdogs can investigate independently.

"FDI is a capital account transaction and thus any violation of FDI regulations are covered by penal provisions of FEMA (Foreign Exchange Management Act)," DIPP told the high court.

India’s brick and mortar firms, who had filed a petition, complain that e-tailers violate FDI norms.

DIPP said India's FDI policy was "transparent and predictable" and that the rules are an effective regulatory mechanism.

"The petitioners have failed to show that the FDI policy is arbitrary, mala fide or ultravires of the constitution," the DIPP statement read.

(Image: Thinkstock)
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