Indian authorities have initiated discussion on whether to allow foreign investment in e-commerce aimed at consumers, a demand long pursued by global online giants likeAmazon.com Inc.AMZN -0.67% and Wal-Mart Stores Inc.WMT -0.03%
The department of industrial policy and promotion under the Trade Ministry late Tuesday floated a so-called “discussion paper“ seeking comments from stakeholders by the end of this month on the advantages and disadvantages of allowing foreign firms.
New Delhi currently blocks foreign e-commerce companies from direct sales to consumers. However, foreign companies are allowed to engage in business-to-business, or wholesale e-commerce, in which up to 100% FDI is permitted.
India’s e-commerce industry has been rapidly growing over the last five years, thanks to rising disposable incomes and easier access to the Internet.
Global retailers’ interest in expanding in India comes at a time when local startups such as Flipkart Internet Pvt. Ltd. and Snapdeal.com are taking off in the country’s growing online retail market.
The broad range of products that these retailers offer with discounted prices and their easy payment options have made them huge hits in India, especially with younger consumers.
Flipkart has been operating in India since 2007 while Snapdeal has been around since 2010, according to their respective websites.
Seattle-based Amazon is already operating in India but only as a platform through which Indian retailers can sell their products.
India’s e-commerce industry is estimated to have grown more than 30% from a year earlier to $12.6 billion in 2013, according to the discussion paper.
India has long been very protective of its retail industry, which is mostly made up of tiny mom and pop shops that cannot compete on price.
Last September, India introduced several policy changes, including allowing foreign retailers to invest in supermarkets. But online retailers were left out.
“Walmart is committed to India and the market. We continue to study the feasibility of the FDI policy, including in e-commerce,” a Walmart India spokeswoman said in an emailed response Wednesday.
Foreign direct investment in e-commerce for consumers will boost infrastructure development and spur manufacturing but could also lead to huge job losses, the discussion paper said.
It won’t be easy to go ahead with the proposal as several trade bodies are opposed to it, said a trade ministry official who asked not to be identified.
“It will seriously impair small time trading of brick and mortar stores,” he said. “Small shopkeepers are not highly qualified and will not be able to compete with sound e-retail business.”