Indian Government to Halt Foreign Direct Investment Approval in Ecommerce

The regulation meant to support global online retailers, but the government retracted citing lack of clear cut definition to Ecommerce:

Approval for Foreign Direct Investment (FDI) in India will soon take a hit as the Bharatiya Janata Party (BJP) Government is working on plans to backburner the proposal as the result of an uproar from local traders.
amazonThe original regulations meant to ease up the financial activity of online retail and financial services companies such as Amazon, currently operating under a set of restrictions forcing them to adopt a business procedure labeled as “Marketplace Model”. The Marketplace Model is when Ecommerce companies pose as a platform for other merchants to sell their goods.

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The problem, according to the government, lies in the unclear definition of the Ecommerce realm’s borderlines, and the difficulty to assess what exactly falls under the criteria. “There is just no clarity on the definition of Ecommerce. Even the World Trade Organisation does not define it. In the absence of a proper definition and legislation, we do not want foreign investors to face the problems besetting direct marketing companies in the country,” a government official said.

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In 2012, similar to now, a lack of clarity on what would be considered Ecommerce halted government approval. Government officials and traders are not sure if the restrictions should be directed strictly at online retailers of physical goods, or be extended to online services like E-travel and financial tools as well.

India has always stood out when examining the BRIC nations and their local Ecommerce markets. Where countries like Brazil, China and Russia are hard to enter due to local shopping habits and payment methods, e.g. Boleto Bancario, Alipay and Yandex Money respectively, India’s primary obstacle for foreign firms is the government itself.

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