FDI in ecommerce: Existing players opposes it again

The excising ecommerce players have opposed the idea of allowing FDI in the sector in the second meeting convened by the government.

Under pressure from free trade partners, government is continuing its consultation with existing stake holders to allow FDI in ecommerce.

The meeting of the various stake holders including existing ecommerce players – Flipkart, Snapdeal, Amazon etc., was held in New Delhi on Friday. The meeting was chaired by DIPP Secretary Amitabh Kant.

All the players were reported to have objected fresh liberalization of FDI norms in the sector.

In the previous discussion that was held in May this year, the ecommerce players and brick and mortar firms have strongly objected to open up the sector to FDI.  

At present, the ecommerce FDI norm is a curious one as there is no restriction on FDI participation on Business to Business (B2B) mode. Almost all the players in the country are following this mode to deliver their services by arranging a market place.

Here, the Amazon and Ebay as foreign firms are having operation in India as they are following a market place model adopting B2B model.

On the other hand, the inventory model followed by Alibaba etc is a business to customer (B2C) model.  FDI is not allowed in this model.

Many trade blocs, with whom India is engaging in fresh trade liberalization discussions are demanding opening up of the ecommerce sector.

When these free trade agreements are finalized, it will become mandatory for the country to allow FDI in the B2C mode also. Especially, the next high degree trade liberalization is expected to be with RCEP or the Regional Cooperation Economic Partnership Agreement that involves the main East Asian countries besides Australia and New Zeeland.

Another trade liberalization move is that is happening within the BRICS. An isolated Russia is pushing for any trade discussions and liberalization agreement that involves China. It is expected that given the high growth nature of the ecommerce sector and big market advantage, India has to open its ecommerce sector to FDI under the major FTAs.

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