India’s foreign direct investment (FDI) policy on e-commerce does not allow foreign investments in multi-brand retail, the Department of Industrial Policy and Promotion (DIPP) under the Ministry of Commerce and industry recently clarified. FDI is allowed only in the business-to-business (B2B) e-commerce segment and not in the business-to-consumer (B2C) segment.
“Certain averments suggest that Press Note 3/2016 had covertly allowed multi-brand retail trading. Such a view is completely contrary to the specific provisions of Press Note 3/2016, which unambiguously provided that FDI is not permitted in inventory based model of e-commerce which amounts to multi-brand retail,” the DIPP statement said.
As FDI is allowed only in B2B e-commerce, an e-commerce entity providing marketplace will not, directly or indirectly, influence the sale price of goods or services, which also renders such business as an inventory based model, according to a report.
The DIPP noted receiving complaints about certain marketplace platforms violating the policy and indirectly engaged in inventory-based model despite the regulations not allowing a e-commerce player to influence pricing of products.
“An e-commerce platform operating an inventory based model does not only violate the FDI policy on e-commerce but also circumvents the FDI policy restrictions on multi-brand retail trading,” the statement said. The Commerce Ministry in December revised the FDI policy for e-commerce players.