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100% FDI on ecommerce gets a green signal in India

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Department of industrial policy and promotion (DIPP)has permitted 100% FDI to eCommerce and Market Place Model.

India stands on the 9th position under the list of largest consumer market in the world. The country share’s 2.57% of the world’s consumers market that contribute 57% of GDP. Recent move taken by Indian Government, allowing a 100% FDI in ecommerce can expand the market, but it will also affect the small sellers and can put impact on offline retail market as well.

Technology driven ecommerce are booming in India. We have seen a high amount of growth in pretty less time. After having a 100% FDI permission, more foreign companies would step ahead to invest in popular ecommerce stores or they might invest in newer ventures. Department of Industrial Policy and Promotion (DIPP) have recently issued a guideline for the same.

Inventory based model of ecommerce are restricted from this. Popular ecommerce sites like Flipkart, Snapdeal, Amazon, Ebay, etc are mostly market place model that tend to change their selling policy on the basis of consumer interest. Amazon and eBay are the two biggest giant in online market place having their strong presence in India also. Flipkart and Snapdeal are home grown models that will attract a lot of investment.

DIPP has set definition for different models inorder to avoid any kind of misconception about the direct investment policy. It has categories the sector into three sections, first is e-Commerce. A technology driven platform for online good selling. Second is inventory based model, where the retailer has full control of the stock, its dispatch and after sales issue. And the last one is market place model where a technology driven ecommerce platform just act as a facilitator between the seller and consumer.

Takeaways:

  • Department of Industrial Policy and Promotion has permitted 100% FDI in ecommerce and Market Place model.
  • Such investment will draw a lot of foreign investment but can have impact on small and mid size retail sector.
  • Inventory based models are not included under the scheme.
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