The Government of India has clarified through the Secretary of Department of Industrial Policy and Promotion (DIPP) that it has no intention of relaxing its policy of not allowing foreign direct investment (FDI) in ecommerce business, where the investor is also holding inventory and selling them.
The only exception to this rule is in the case of food retailing. To put this in perspective, a company like Amazon, which has forayed into food retailing, can store inventory and sell on its platform, but for all other products sold through its platform, the FDI license issued to Amazon does not permit it to hold inventory at its end. This directive will hold good even if the goods are manufactured in India.
These were the details given out by the Secretary DIPP Ramesh Abhishek, in a Swadeshi Jagran Manch event. SJM, an offshoot of the RSS, has been in the forefront of opposing 100% FDI and had joined the trade bodies in raising objections to the takeover of Flipkart by Walmart, claiming it hurts the interests of the Indian traders.
This policy clarification comes at a time when an internal recommendation was made by a task force that 49% FDI be allowed if the goods sold through such an ecommerce venture is ready to sell only India-made products.
According to Ramesh Abhishek, the policy is being maintained common for both the brick and mortar model where 100% FDI is not permitted in multi-brand retail and in the ecommerce space.
The other issue raised with the DIPP Secretary was regarding the deep discounts being offered by the ecommerce firms. His reaction was that it was an issue to be investigated by the designated agency, the Enforcement Directorate, and that whatever complaints they had received at DIPP had been forwarded to the ED.
There is a recommendation with the government to act on the deep discounts issue. The companies in the midst of the controversy argue that they themselves are not into offering any discounts, but the sellers on their platforms do. But even this argument has been questioned by none other than the CCI, which permitted the takeover of Flipkart by Walmart but while doing so had indicated that there is a lopsided picture when it comes to sellers on the ecommerce platforms.
The whole issue boils down to different arms of the government with DIPP and CCI taking the stand that their job is only to formulate and administer policies while its implementation and enforcement are with the RBI and ED.
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