‘The Indian market is not yet ready to take on big giants such as Amazon’

The Commerce and Industry Ministry is not keen on opening up e-commerce retail for foreign direct investment (FDI) despite a recent push by the Prime Minister’s Office (PMO).

Highly placed sources in the Commerce Ministry told The Hindu that Indian e-commerce players were new, and had not yet settled in or fully found their feet. It would not be in the interest of domestic players to open up e-commerce for FDI, as it would not bring any kind of impact on direct employment . Companies such as Flipkart and Myntra are some of the major e-commerce domestic players, and they have been against allowing any kind of FDI in this sector.

“E-commerce does not entail any kind of manufacturing or employment on large scale. It would only add some infrastructure to the warehousing industry at the most.

“The Indian market is not yet ready to take on the big giants such as Amazon, Walmart and eBay and need some more time to settle down and establish. As such, one can buy anything from even foreign e-commerce sites at any point of time as there is no restriction on any such purchases,” the senior official said.

The stand of the Commerce and Industry Ministry comes close on heels of a communication sent by the National Security Adviser Shivshankar Menon to the Department of Industrial Policy and Promotion (DIPP) suggesting that FDI provisions for multi-brand retail stores be extended to e-commerce.

This is being done in the run-up to the visit of Prime Minister Manmohan Singh to the U.S., where he will be meeting President

Barack Obama on September 27.

“The U.S. Government has been pressing the Indian government to open up the e-commerce sector to foreign investors. U.S. companies such as Amazon and eBay have been lobbying hard for it both in the U.S. and India, and, in the past, have met Commerce and Industry Minister, Anand Sharma, on the issue a number of times,” the official said.

The Government had allowed 51 per cent FDI in multi-brand retail stores in September last year, but categorically stated that foreign investments would not be allowed in e-commerce.

The size of the e-commerce market has been pegged at below $2 billion in India till the end of 2011 but has the potential to grow to $13.3 billion to $17.6 billion by 2020, according to an Ernst & Young report.

Shivshankar Menon, National Security Adviser had suggested that the sector be opened up Amazon and eBay have lobbied hard for FDI in e-commerce to be opened up

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