The commerce sector in India grew at a rate of 17 percent this year, according to the National Association of Software and Services Companies’ (NASSCOM) Strategic Review 2018. As the segment becomes more competitive, sellers are presented with the opportunity to take their business online and ride this wave. The Micro, Small and Medium Enterprises (MSMEs) also faced stiff competition from online sales this year, and the rate of ecommerce growth shows how crucial it is for them to open up their inventories to sell online. According to a NASSCOM report, the Indian ecommerce market was valued at $33 billion in 2017-18 and reached $38.5 billion in financial year 2018-19.
As per extant Foreign Direct Investment (FDI) policy, FDI up to 100 percent is permitted under automatic route in ecommerce companies, provided the company has engaged only in Business to Business (B2B) ecommerce. Further, 100 percent FDI under automatic route is permitted in ecommerce marketplace models but is not permitted in inventory-based models. Moreover, an entity is permitted to undertake retail trading through ecommerce under the following circumstances, subject to FDI policy provisions -
A manufacturer is permitted to sell his products in India through online retail.
A single brand retail trading entity operating through brick and mortar stores is permitted to undertake retail trading through ecommerce.
A food product retail trading entity is allowed to undertake retail trading, including ecommerce, with respect to food products manufactured and/or produced in India.
For foreign investment in sectors under automatic route, no prior permission of the government is required.
CR Chaudhary, Minister of State for Commerce and Industry, said that FDI in retail has been allowed in a calibrated manner after having consultations with stakeholders including concerned ministries, departments, state governments, apex industry chambers, associations and other organisations.