Domestic traders oppose 100% FDI in e-commerce

Himanshu Vatsa | The Dollar Business

Though the government is yet to decide on allowing 100% Foreign Direct Investment (FDI) in e-commerce, domestic traders say the move will have adverse impact on small retailers and manufacturers within the country. The Ministry of Commerce will hold a meeting with online retailers and other trade bodies on July 10 to discuss various issues before taking a final decision on the matter. Earlier, the ministry held a consultation with stakeholders in May this year. The Confederation of All India Traders (CAIT) said that allowing 100% FDI in e-commerce will “kill the Indian trade” and give all control of retail business in to the hands international players. “We are going to oppose any such move. We demand that the government should frame a proper policy to promote e-commerce in India. Such policies are already in place in the US, China and other countries. It’s a developing sector and the development should be carried out through brick and mortar shops,” Praveen Khandelwal, Secretary General, CAIT, told The Dollar Business. As per the existing policy, 100% FDI is allowed only in single brand retail. Traders are worried that allowing foreign investments in multi-brand online retail will enable big players to bypass norms required to enter the offline trade. Khandelwal said that the entry of larger players in online retail will also hamper the growth of domestic grocery shops and small manufacturing units trading in individual brands across the country. “Indian shopkeepers will not be able to compete with international players because of uneven level playing field. Imported goods will be dumped in the Indian markets, which will pose a major challenge for small manufacturers,” Khandelwal said. Vipul Sharma, Director, E-Commerce Association of India (ECAI), suggests phase-wise opening of the sector. “We need to tread with caution when it comes to liberalising the sector. In general, opening up of the FDI in B2C ecommerce is a viable option, however a phase wise liberalisation of the sector should be the way to go about it by starting with up to 50% through automatic route,” Sharma told The Dollar Business. Sharma, however, said that enabling FDI would create better opportunities for the inflow of capital and boost the entire e-commerce ecosystem. “Many companies are now building partnerships with kirana stores for pickup and delivery points. India is still a nascent retail market and it is important to enable both online and offline retail to function optimally to create the right growth. It is not correct to link the FDI in multi brand retail with FDI in B2C e-commerce. Both the models of retail are different and their impact is also different,” he said. Sharma said that the entry of foreign players will also help domestic players to share technological expertise, adopt best practices and contribute to the aspirations of consumers beyond metros to tier-2 and 3 cities as well. Industry body FICCI (Federation of Indian Chambers of Commerce and Industry) had also suggested allowing FDI in business to consumer (B2C) e-commerce in phased manner with a focus on sourcing from domestic manufacturers so as to ensure parity between online and offline retail policies. “FICCI feels that to encourage domestic manufacturing, there could be a prescribed percentage of sourcing from domestic enterprises and the limit could be based depending on the level of FDI. It is crucial for the government to address this issue in a more detailed approach of consultations with groups of stakeholders,” the industry body had said in an earlier statement. The Ministry of Commerce has also asked FICCI to submit a study report on the matter.    

July 8, 2015 | 5:39 pm IST.