Government Of India Permits 100% FDI In Online Marketplace

New Delhi: The government on March 29 permitted 100 percent Foreign Direct Investment (FDI) in the marketplace model of e-commerce under the automatic route for retail trading, opening up more avenue for the e-commerce sector in India.

E-commerce is the buying and selling of goods and services, or the transmitting of funds or data, over an electronic network, primarily the internet. These business transactions occur either Business-to-Business (B2B), Business-to-Consumer(B2C), Consumer-to-Consumer(C2C) or Consumer-to-Business(C2B). The term e-tail is also sometimes used in reference to transactional processes around online retail.

At present, global e-commerce giants like Amazon and Ebay are operating online marketplaces in India while homegrown players like Flipkart and Snapdeal have foreign investments even though there are no clear FDI guidelines on various online retail models.  To increase clarity in understanding various models in e-commerce, the Department of Industrial Policy and Promotion (DIPP) came out with the definition of ‘e-commerce’, ‘inventory-based model’ and ‘market place model’.

Market place model of e-commerce means providing of an IT platform by an e-commerce entity on a digital and electronic network to act as a facilitator between buyer and seller, whereas The inventory-based model of e-commerce means an e-commerce activity where the inventory f goods and services is owned by e-commerce entity and is sold to consumers directly, according to the guidelines.

DIPP also said that an e-commerce firm, however, will not be permitted to sell more than 25 per cent of the sales affected, through its market place from one vendor or their group companies.