Current rules allow up to 100 per cent FDI under automatic route in the marketplace model of e-commerce, but bar any investments in the inventory based model of e-commerce. In December 2018, the government had tightened the FDI conditions in the online space, stating that an e-commerce platform with foreign investment cannot exercise ownership or control over the inventory sold on its platform.
Subsequently, a draft of the e-commerce policy, that went public in February, faced heat from both companies and civil society alike. While Indian businesses argued the interest of domestic businesses were not protected sufficiently, consumer groups said it was heavily tilted in favour of players such as Ola, MakeMytrip and Paytm (all funded by marquee foreign investors), rather than consumers and small businesses.
For making an e-commerce policy, yet another committee, the third so far, has officially been formed now. Under the authority of the Department for Promotion of Industry and Internal Trade (DPIIT), it will be headed by the additional secretary, with representatives from the commerce department and ministries of MSME and Consumers Affairs besides legal experts as members.
The committee will provide necessary clarifications on issues related to FDI in e-commerce, it is learnt. India’s e-commerce industry is expected to reach $125-150 billion by FY20 on increased internet penetration, according to estimates by Care Ratings.
On FDI rules
"We are not that concerned about FDI in e-commerce issues as we are now compliant with all the norms. We have anyway changed our business structures and now changing back to the original form would be counter productive. Right now our main concern is a balanced ecommerce policy," said a senior executive of a major digital commerce firm present during the Monday meet.
Among other things, the government had last year also restricted flash sales and deep discounting for e-commerce companies with foreign investment. There was a clampdown on the sale of private labels on such platforms as well. "The government has told the companies that Press Note 2 of 2018 on FDI in e-commerce was clarificatory in nature and no changes have been made in the existing law," a senior official said.