USIBC asks for Foreign Direct Sales in e-commerce in India

The US India Business Council in a letter to Union Finance Minister P Chidambaram has asked to remove the current restrictions in the Foreign Direct sales to consumers by e-commerce and has also asked to allow foreign companies to acquire direct ownership in real estate for investment, stated Economic Times.

“USIBC believes the next step in retail sector development is lifting current restrictions in foreign direct sales to Indian consumers via e-commerce,” asked the American Companies Apex body doing businesses in India to the Finance Minister.

The 23 page detailed memorandum submitted later this month by USIBC before the annual budget mentions the recommendations by the USIBC to the Finance Minister, it also said that such an on-line approach to India’s retail market could benefit the country in several ways.

The memorandum stated

  • Unrestricted e-commerce would give Indian consumers a wider variety of goods at lower prices, thus directly advancing the goal of inclusive growth.
  • This online activity would dramatically lower the costs of government procurements, thus reducing the budget deficit.
  • It would increase the productivity of Indian exports, which would narrow the trade deficit.
  • E-commerce lowers the barriers to entry for small and medium-sized businesses that often lack the capital to create physical stores.

The Memorandum also states that the fuelling the creation and growth of small business would promote employment, especially in rural areas that lack access to the infrastructure of India’s major cities; USIBC added that e-commerce promotes the development of infrastructure because it creates the need for warehouses, customer fulfillment centres, systems for transportation and delivery, and a virtual network to support the process. The infrastructure development would in turn trigger more employment as workers would be hired to build and operate the new systems.

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“The demand would certainly rise for IT and customer care specialists, skill sets where India has already achieved world-class status,” stated the memorandum.

The present FDI policy announced in September last year for retail, blocked foreign investments in e-commerce and allowed up to 51% FDI in multi-brand retail stores and 100% FDI in single-brand retail which made leading ecommerce firms having substantial foreign investments come under scanner.

Recently, Industry body Assocham has also asked the government to remove ban on Foreign Direct Investment in retail e-commerce business. Assocham stated that estimated revenue from ecommerce sector is expected to be about $15 billion by 2015 and can lead to wider reach of farmers and other domestic product firms, helping them realize better value of their products.

Online Retailer Amazon is also in plans to send its top brass officials to India to discuss about policy change in Foreign Direct Investment so as to allow its entry in India; Amazon was disappointed that the foreign investment policy liberalisation for retail announced last year did not include e-commerce.

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