With an aim to attract more foreign investments, the Government has approved 100% Foreign Direct Investment (FDI) for marketplace model of e-commerce in India.
As per the guidelines issued by the Department of Industrial Policy and Promotion (DIPP) on FDI in e-commerce, FDI has not been allowed in inventory-based model of e-commerce. Currently in India, international e-tailers like Amazon and Ebay are operating online marketplaces while homegrown players like Flipkart and Snapdeal have foreign investments, even as there were no clear FDI guidelines on various online retail models. DIPP has also released definition of ‘e-commerce’, ‘inventory-based model’ and ’market place model’.
Market place model of e-commerce means providing an IT platform by an e-commerce entity on a digital and electronic network to act as a facilitator between buyer and seller. Meanwhile, the inventory-based model of e-commerce means an e-commerce activity where inventory of goods and services is owned by e-commerce entity and is sold to consumers directly, mentioned the guidelines.
DIPP mentioned that a market place entity will be permitted to enter into transactions with sellers registered on its platform on business-to-business basis. However, an e-commerce firm will not be permitted to sell more than 25 per cent of the sales affected through its market place from one vendor or their group companies. DIPP further stated that guidelines for FDI on e-commerce sector have been formulated in order to provide clarity to the extant policy. The government has already allowed 100 per cent FDI in business-to-business (B2B) e-commerce.
The latest move comes only days after Chinese e-commerce giant Alibaba announced that is planning to enter India this year. Even Apple is looking forward to open retail stores in the country and has resubmitted proposal with the department of industrial policy and promotion (DIPP) to open its own branded stores.