Foreign equity will propel e-commerce retailing: Experts

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SME Times News Bureau | 31 Mar, 2016
The e-commerce sector in India is poised for multi-fold growth, with the government allowing 100 percent foreign equity in e-retail, trade and industry experts said on Wednesday.

"Allowing 100 percent FDI in e-commerce will enable companies and investors to draw long-term plans with certainty as the government has dispelled ambiguities," Ficci e-commerce committee co-chair Pawan Kaul said in a statement in New Delhi.

The government on Tuesday permitted 100 percent conditional foreign equity in the retail e-commerce segment when the products sold are also manufactured in the country, as also for single-brand foreign entities.

Terming this a progressive initiative, Federation of Indian Chambers of Commerce and Industry (Ficci) secretary general A. Didar Singh said the conditions under which foreign equity was allowed would help in attracting more investment into the country.

"Clarity in the FDI policy and the market potential will attract more overseas investment, create more jobs and provide stimulus to manufacturing," Singh said.

Singh, however, wanted the central government to prevail upon states to abolish entry taxes to prevent double taxation, which was affecting the industry's growth.

Leading American research and advisory firm Gartner research director Sandy Shen said allowing foreign equity in the e-commerce industry would make it easier for all stakeholders, global and local, to compete online under well-defined rules of the game, especially on pricing.

"Foreign equity in e-commerce retailing, however, will not reduce competition in the market where players are in a land-grabbing mode to increase customers and merchants," Shen said.

More than getting foreign equity, present and potential e-commerce players will have to make their platforms more appealing with better logistic, payment and purchase experience.

"Price pressures will remain for merchants as its primary reason for people to shop online. Even when marketplaces are not allowed to influence pricing, there are still levers they can use," Shen noted.

GreenDust founder and chief executive Hitendra Chaturvedi said the move would strengthen the investor confidence in the Indian economy and help create cleaner e-commerce models.

Noting that the riders on foreign equity had removed confusion, IndiaMart founder and chief executive Dinesh Agarwal said though business-to-business (B2B) had 100 percent FDI, clarity in the business processes would facilitate similar investments in business-to-customer (B2C) segment.

"The nascent SME sector may fall prey to the predatory pricing and the 25 percent limit for a single player is high and may not be in the interest of the sector," Agarwal claimed.

Echoing views of other industry players, ShopClues co-founder Sanjay Sethi said foreign equity in e-retailing would benefit consumers, help in making more goods in the country and create more jobs for locals.

"Clarity on the definition of e-commerce and marketplace model will allow many national and international players to enter the industry through marketplace route," Sethi pointed out.

Observing that foreign investment was a key component to drive the 'Make in India' campaign, CareOnGo co-founder Aditya Kandoi said the government had helped lift the bureaucratic mindset around the business.

"The initiative will give push to the spirit of start-up culture. The 25 percent cap on total sales and other rules will help pave a level-playing field and curb predatory pricing," Kandoi added.