E-commerce poised to be allowed with FDI in retail

In a change of stance, the government is considering a proposal to allow companies applying for foreign direct investment (FDI) in multi-brand retail to enter the e-retailing segment as well. Mahua Venkatesh reports.

In a change of stance, the government is considering a proposal to allow companies applying for foreign direct investment (FDI) in multi-brand retail to enter the e-retailing segment as well.

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Despite opening up the sector to foreign investors in December last year, the government is yet to receive a single application for FDI in multi-brand retail, mainly due to lack of clarity on policy that also requires state-level clearances. Most companies including Wal-Mart, Tesco and Carrefour are awaiting clarifications from the government on various issues.

The move to allow foreign retailers into e-commerce is expected to boost the sector, besides showcasing India as a key investment destination with a friendly business environment, a government official said. “We need to take steps to encourage investors. We would do whatever we can.”

The government had earlier barred foreign companies applying for FDI in multi-brand retail from offering e-retailing services.

The e-retail segment, with a 40% annual growth on the back of a furious expansion in Internet penetration in India, is expected to touch Rs 3,600 crore in value by 2013, and global companies are betting on it. The recent $50-million-investment, led by eBay, into Indian deals site Snapdeal.com is a recent instance that showed a thumbs-up for e-commerce in India.

“Opening up e-commerce in retail needs an amendment to the press note 5 of 2012” said Manoj Kumar, managing partner of corporate law firm Hammurabi and Solomon.