Government strongly considers 100% FDI in ecommerce; closer to Marketplace definition

The government is considering permitting 100% foreign direct investment (FDI) in the marketplace format of e-commerce retailing with a view to attract more foreign investments.

The norms on FDI in the sectors of e-commerce, and IT and ITeS are expected to be part of detailed guidelines, which would be rolled out soon by the government, sources said.

Last week, a group of senior officials from departments of DIPP, corporate affairs and economic affairs, among others, discussed these matters in great detail. According to sources, the DIPP has suggested that 100% FDI should be allowed in “marketplace model e-commerce” activities. In such a model, the e-commerce company provides an online platform for buyers and a sellers.

At present, global e-tailer giants such as Amazon and Ebay are operating online marketplaces in India while homegrown players such as Flipkart and Snapdeal have foreign investments even as there are no clear FDI guidelines on various online retail models.

An e-commerce firm carry its business either through marketplace model or inventory based model. In the inventory based model, a company owns and keeps the goods in warehouses.

The officials also deliberated upon the definition of “e-commerce”. It may broadly cover transactions between buyer and seller through electronic mode like internet, mobile and televisions.

The Department of Industrial Policy and Promotion (DIPP) is working on guidelines for e-commerce sector in the backdrop of ongoing tussle between online and offline retailers. The department has already carried out stakeholders consultations with states, e-commerce companies and other departments.

At present, 100% FDI is allowed only in business-to-business (B2B) e-commerce and not in the retail segment.