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FDI in Retail Trade and E-commerce

August 2, 2018     by bsamrishindia.com

India is assessed as having huge population falling in Middle Income Group band with high purchasing power and with majority population being young and with smart phones in excess of four hundred million, Retail and E-commerce sector would remain the hottest destination. Due to concerns with respect to protection of local kiryana stores, agriculture sector and village and cottage industry (the sectors which have employed largest number of people in India), certain restrictions are there on FDI in Retail Trade and for similar concerns FDI is not permitted in inventory based model of E-commerce as E-commerce is also B2C like Retail trade.

FDI in inventory based model is similar to FDI in multi brand retail trade which is highly regulated. Inventory based model of E-commerce is the one in which E-commerce company buys inventory and do sales from its E-commerce platform which is different from market place model where sellers list their respective inventories on the market place platform of E-commerce company and ownership of inventory continues to be with sellers. Gradually, we might see easing when it gets demonstrated that FDI has helped developments in these sectors and improved employability besides improvement of back-end infrastructure of warehousing, packaging, logistics etc.

FDI in E-commerce Sector:

E-commerce means buying and selling of goods and services including digital products over digital & electronic network.

Sector/Activity % of Equity/FDI Cap Entry Route
E-commerce activities 100% Automatic
  • 100% FDI under automatic route is permitted in marketplace model of e-commerce.
  • FDI is not permitted in inventory based model of e-commerce.
  • Marketplace e-commerce entity will be permitted to enter into transactions with sellers registered on its platform on B2B basis and provide support services to sellers in respect of warehousing, logistics, order fulfillment, call centre, payment collection and other services
  • An e-commerce entity will not permit more than 25% of the sales through its marketplace from one vendor or their group companies calculated on financial year basis.

So, market places like Amazon cannot permit sales of more than 25% of the sales from one vendor or group companies of Amazon. All major e-commerce companies are operating through separate entities for B2B Sales and B2C sales.

 You may like to read about FDI in Single Brand Product Retail Trading 

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