Quote from CEO & co-founder of PolicyBazaar.com Yashish Dahiya on FDI in e-commerce:
They say to make money, you need money, and so the recent news of the e-commerce Industry being opened to foreign investment can be expected to be a source of tremendous joy to digital entrepreneurs nationwide. India has the potential of becoming one of the largest e-commerce markets in the world and with good reason. According to IAMAI-KPMG report released last December, there are 213 million internet users in India. That’s not even 16% of our population and it is still 10 times more than the current internet using population in Australia. Add to that our trajectory in online retail businesses. We are growing at a compounded rate of 34% even with our investment limitations. According to the government opening foreign investments could push this sector to contribute up to 4 percent to India’s economy by 2020 from under one percent now.
Some realities of the e-commerce business in India are the sector is cost intensive and profitability is a long term goal. Unlike Indian investors, foreign investors have the risk appetite to work in such environment. This along with industry expertise, transparency in financial transactions, and access to wider markets are some of the positive attributes we can expect to gain when this move is finalized.
Many feel that allowing FDI in e-commerce may negatively impact the brick and mortar businesses in the country, but that is an incorrect notion. Fact is, better availability of capital will allow e-commerce businesses, which work on marketplace models, to partner with local manufacturers giving the end consumer more choices at lower prices. Also, there will elimination of any middlemen which will reduce transaction, overhead and labour costs, ultimately leading to profitability. Bottom line, for a country that has been at a growth rate of less than 5% for two years now, measures to make the online market more robust will surely spur manufacturing and boost consumption paving way for revival.