FDI in e-Commerce – Pros and Cons and reaction by Director of ESET India Pankaj Jain:
The current policy in India does not allow foreign investment in the business of selling via online to consumers. There are no restrictions on FDI in the business-to-business segment. Opening up of the sector will benefit existing companies who need more capital to expand their business in a rapidly growing market, which is estimated to have expanded to $12.6 billion from $3.8 billion in 2009. Allowing FDI in e-commerce will provide e-commerce players complete geographical reach which will be against the spirit of FDI in multi-brand retail trade, i.e. being restricted to cities with a population of more than one million or any other city as per the choice of consenting states. FDI would boost infrastructure development and manufacturing, result in more efficient supply-chain management and reduce costs. However, FDI in the sector may lead to multinationals dumping their cheaper products on the market causing a negative impact on the Indian manufacturing sector in general, and to micro, small and medium enterprises in particular. Small kirana stores remain the largest source of employment in the country. Opening of B2C e-commerce on
inventory based model is likely to seriously impact these shopkeepers leading to large scale unemployment.
Comments on FDI in e-commerce
We welcome FDI in e-commerce. The move will lead to a pickup in investments in the sector which will further help for infrastructure development, increase outreach & adoption of global best practices & above all improve customer service.