Companies like Flipkart and Snapdeal can now be owned entirely by foreign firms, the government has decided by formally allowing 100 per cent Foreign Direct Investment or FDI for e-commerce retailers which are a "marketplace" or aggregate products from different manufacturers and sell them to customers.
The new sanction does not apply to e-commerce sites that own the products they sell.
Global giants Amazon and EBay currently own and run online marketplaces in India without local partners while home-sprung majors like Flipkart have raised billions of dollars from foreign investors.
So what the new policies offer is clarity - and considerable comfort - for e-commerce after brick-and-mortar retailers - or traditional shopkeepers- have in court accused online retailers of violating foreign investment rules.
Snapdeal founder Kunal Bahl was all thumbs-up for the new move. Prime Minister Narendra Modi has pledged to make business easier and draw more foreign investment for the rapidly growing e-commerce space in India, whose surge is led by the ubiquitous mobile phone.
“Despite concerns that industry valuations may have gotten ahead of present reality, with a Morgan Stanley fund writing down its Flipkart stake by more than a quarter, the lure (of India) is a $25 billion market growing at up to 40 per cent annually that's still considered virgin territory. A historic rate of first-time smartphone usage and under-developed logistics and payments render the industry ripe for investment,” the Washington Post reported today.
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