Good news in the offing for Flipkart, Amazon, Snapdeal?

Flipkart, Amazon, Snapdeal and other Indian online marketplaces may get an impetus in their businesses as the Union Government is looking to open doors for Foreign Direct Investment (FDI) in the e-Commerce sector, a month after it said there was no proposal under consideration to review FDI policy on the aforesaid sector.

The Government, which had maintained that the administration was committed to keep FDI open only for Indian-owned enterprises, has called for a meeting to reassess its position on the policy and will be chaired by Union Commerce Minister Nirmala Sitharaman.

The discussing points in the meeting are likely going to be over whether 100% FDI should be allowed in Business-to-Consumer (B2C) e-Commerce, should it be open for all products or only non-food products and whether it should be automatic up to 50%.

Online marketplaces like Flipkart, Snapdeal and Amazon as well as industry associations such as CII, FICCI, Nasscom, E-commerce Coalition of India, US India Business Council, Internand Mobile Association of India and Indian Venture Capital Association are among the invitees for the meeting.

"The government is thinking to differentiate its FDI policy on offline retail from e-Commerce as trade associations have eased opposition to e-Commerce," Head of an industry association invited to the meeting told Economic Times.

Presently, India allows 51% FDI in the multi-brand retail sector and 100% FDI in single-brand retail. It does not allow this for online retail as it fears big global retailers may bypass offline norms by entering through online means.

Meanwhile, India's $12-billion e-Commerce sector is divided on the matter, as to if FDI is allowed then to what extent the sector can be opened to foreign investment and how.

However, India's biggest industry chamber Confederation of Indian Industries (CII) said 100% FDI under automatic route should be opened for all products.

Country’s largest electronic marketplace, Flipkart, said allowing FDI in inventory-based e-Commerce "will have no bearing" on it.

"Global marketplaces like eBay are already operating in India. Alibaba and Rakuten can enter India, as no regulations prevent them from doing so," a spokeswoman for Flipkart told ET.

But last year, Flipkart had expressed reservations about allowing 100% FDI in e-Commerce.

"The only e-Commerce player that will benefit from such a move is a company which is already operating in India as a marketplace and wants to enter the country through an inventory-based model," Flipkart had said in a statement, taking a potshot at Amazon.

As per the financial daily, e-Commerce companies garnered a lion's share of the $4.7 billion of foreign capital that flowed into India in 2014.

Amazon, which has committed to invest $2 billion in its India operations, last year said that opening up the e-Commerce sector to FDI would be good for customers, adding it would allow them to partner with local manufacturers and also positively impact infrastructure development.

Experts point out that the review was likely to impact all small e-Commerce companies that have not yet turned into marketplaces if the government opens the gates to foreign investors. Industry chambers also seem to be divided on the issue.

E-commerce Coalition of India, which represents smaller inventory based e-Commerce players, is also planning for opening up the sector to FDI.

"Allowing e-Commerce companies to access FDI for B2C will enable them to source directly in bulk from the manufacturers. It will create a larger pool of entrepreneurs," Aamir Jariwala, member, ECAI, told ET.

(Image:Reuters)