India approves foreign direct investments in e-commerce
This week, the Indian Government proposed allowing foreign retailers, who manufacture products in the country, to sell via e-commerce platforms, a step towards liberalising foreign investment in the country’s $13 billion e-commerce sector.
The move is likely to benefit, in the first phase, the local units of retailers such as Marks & Spencer, Nike, Puma and Benetton among others, who currently sell online in India through local franchisees or licensing agents. In the mid to longer term, the move could prove beneficial for luxury brands too.
The proposal, presented by Finance Minister Arun Jaitley as part of his budget for the fiscal year through March 2015, will also end the ambiguity around who can sell their products using online platforms, an industry consultants said.
Jaitley in his budget speech said manufacturing units will be allowed to sell products through retail channels, including e-commerce platforms, without any additional approvals. India allows 100 percent foreign investment in manufacturing barring a few areas such as defence. “The move to relax FDI rules in e-commerce for manufactured goods by foreign retailers is a very important step in helping the e-commerce industry grow,” said Paresh Parekh, tax partner for retail and consumer products at consultancy EY.
Reuters last month reported India could allow global online retailers such as Amazon to sell their own products as early as July, removing restrictions that have held back competition in one of the world’s biggest, and most price-sensitive, retail markets.
Small Indian traders have organised a protest rally against the possible impact of such a decision on the livelihoods of small “bricks and mortar” retailers.