Indian government aims to open up online retailing

Published Jun 5, 2014

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Mumbai and New Delhi - India could allow global online retailers such as Amazon.com to sell their own products as soon as next month, removing restrictions that could boost competition in one of the biggest and most price-sensitive retail markets.

The decision, which is likely to be announced in the Budget, is one of the first tangible signs of economic reform by the business-friendly government of Prime Minister Narendra Modi, who was sworn in 10 days ago.

The move is likely to allow the government to circumvent political opposition to opening up India’s $500 billion (R5.3 trillion) retail sector to global retail giants such as Walmart.

Four people privy to discussions within the government said yesterday that officials believed a more robust online retail sector would spur manufacturing and consumption, helping revive an economy that had been growing at below 5 percent for two years, the longest period of sub-par expansion since the late 1980s.

Referring to e-commerce, a senior government official, who declined to be named as the matter was confidential, said: “Most stakeholders support FDI [foreign direct investment]. We have pitched for opening it up completely.”

Industry surveys show that e-commerce could contribute as much as 4 percent to India’s economy by 2020.

When asked about the decision, a spokesman for India’s Commerce and Industry Ministry declined to comment.

The ministry that drafts FDI rules had recently met officials from companies including Amazon, Google, eBay, Walmart and Indian e-tailer Flipkart to finalise the investment guidelines, sources said.

Global online retailers may not sell products they have sourced themselves, and must rely on third-party suppliers. Their platforms are marketplaces for outside suppliers.

The government is likely to end this ban, paving the way for global retailers to bring their formidable supply chains, and cheaper goods, into India, potentially boosting consumption and benefiting small manufacturers and traders.

These politically influential small-scale traders have traditionally opposed any FDI into retail, fearing they would be eclipsed by larger global rivals.

The sources said the government supported the online retail expansion as global players would still have to rely on small traders to generate business. – Reuters

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