India could likely remove the restrictions on foreign online retailers next month permitting foreign online retailers such as Amazon.com to sell their own products, according to Reuters.
Four people privy to discussions within the government told Reuters that officials believed a more robust online retail sector would spur manufacturing and consumption, helping revive an economy that has been growing at below 5 percent for two years, the longest period of sub-par expansion since the late 1980s.
“Most stakeholders support FDI (foreign direct investment),” said a senior government official, referring to e-commerce. “We have pitched for opening it up completely.” Industry surveys say e-commerce could contribute as much as 4 percent to India’s economy by 2020.
The industry ministry that drafts FDI rules recently met officials from companies including Amazon, Google, eBay Inc, Wal-Mart and Indian e-tailer Flipkart to finalise the investment guidelines, the people said.
Global online retailers like Amazon and eBay are currently banned from selling products they have sourced themselves, and must rely on third-party suppliers. Their platforms, which they own fully, are marketplaces for the outside suppliers.
The government is likely to end this ban, paving the way for global retailers to bring their formidable supply chain, and cheaper goods, into India, potentially boosting consumption and benefiting small manufacturers and traders.
Opening up the online retail business for foreign direct investment is also widely expected to eliminate middlemen, leading to lower transaction, overhead, inventory and labour costs, industry officials said.
Modi, who last month won the first outright parliamentary majority in three decades in Asia’s third-largest economy, wants to arrest a two-year-old economic slide by winning back domestic and foreign investor confidence.
Regulatory uncertainty under the previous government had prevented foreign supermarket chains from setting up shop in the country. So far, only Britain’s Tesco has announced an investment.