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NASSCOM re-iterates demand for 100% FDI in B2C e-commerce

19-May-2015
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NASSCOM re-iterates demand for 100% FDI in B2C e-commerce

The National Association of Software and Services Companies (NASSCOM) was a part of the government’s all stakeholder meeting chaired by commerce and industry minister Nirmala Sitharaman to discuss a review of Foreign Direct Investment (FDI) in ecommerce retailing. Clarifying its position on the issue, NASSCOM stated that the policy should address diverse needs of entrepreneurs and investors supporting both scaling up of operations and entrepreneurship ideas and therefore the need for 100% foreign investments in B2C e-commerce. The current policy recognizes need for FDI investment in a limited portion of the e-commerce value chain which is the B2B ecommerce. It is imperative that entrepreneurs, who have already made significant investments and are looking ahead to a robust growth and market share, should be allowed to seek investments to support business operations.

The government should work towards creating conditions that motivates ecommerce start-ups and investors, and not bog them down with regulatory conditions and unviable restrictions. As companies have no control on consumer buying behaviour and will have no say in the choices made by them, there should be no mandate to conclude sale of products sourced from India. Instead, companies will continue to offer local products on their website, but linking it to buying behaviour would be unfair and difficult to comply with. Hence, the policy should stipulate that companies should offer 30% locally sourced products, without any criteria related to sourcing from SMEs.

The government should recognize and support the growth of e-commerce companies who are dedicated to Indian ethnic products, helping MSMEs and artisans to expand their outreach. Presently, the FDI in retail policy gives power to the states to decide. In the context of e-commerce, any geographical limitations will go against the basic tenet of outreach and market access that e-commerce promises. Further any restrictions imposed by states will serve to deprive it from the inherently efficient processes and infrastructure development opportunities, contributing to employment and revenue generation opportunities. Market development is an important priority for the Internet economy and is akin to infrastructure development in the physical world

While talking about NASSCOM’s recommendations, R. Chandrasekhar, President, NASSCOM said, “E-commerce has seen funding to the tune of USD 3 billion and is growing tremendously. It is also attracting global interest as is evident from SoftBank’s investment of USD 10 billion in India over the next few years. To enable continued growth in the sector, NASSCOM has emphasized that 100% FDI should be allowed in B2C ecommerce and there should not be any conditions and stipulation on investment in back end infrastructure.”NASSCOM also reiterated to the Minister, the numerous regulatory challenges faced by the e-commerce companies across different states in the country and recommended the need for the government to publish broad guidelines that enable ease of doing business for these companies and could be adopted by the state governments. NASSCOM would work in partnership with the government and ecommerce companies to make its recommendations.

The eCommerce sector has seen unprecedented growth in India. The growth was driven by rapid technology adoption led by the increasing use of devices such as smartphones and tablets, and access to the internet, which has led to an increased online consumer base. Today, the industry accounts for revenue of USD 14 billion growing at CAGR >25 per cent since FY2010. This has also paved the way for many entrepreneurs to set up businesses that are unique in nature, helping unlock the demand in underserved regions, increasing private consumption and increasing market size, helping the Government’s “Make in India” vision. E-commerce transactions will also lead to better governance and transparent tax collections. As orders are fulfilled through net banking and credit cards, there is an audit trail available.

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