India’s new Prime Minister might have come as an angel for the eCommerce companies in India. According to a report by Reuters, Modi Government could give a green signal to FDI in eCommerce in India next month.
Once Foreign Direct Investment is allowed, the international players (eBay, Amazon) who operate in a marketplace model in India, will be able to start selling their products to the Indian consumers and thus expand their business in the country. Also, other retail chains like Walmart, Carrefour etc will not be bound to launch their online presence in this model.
The biggest effect of this move will be for the Indian eCommerce companies, which shut down often due to lack of funds. Additional investment will help in overall strengthening of the infrastructure to boost the sector and setting a stage for competitive pricing. The heavy discounts culture set by players in India to acquire customers is not viable.
At the same time, allowing FDI in eCommerce could impair small-time traders with a possibility of monopolies in eCommerce, manufacturing, logistics and retail as the industry is in a nascent stage. Moreover, this might lead to manufacturers dumping their cheap products in the market, causing a negative impact on the manufacturing sector in general, especially to small and medium businesses.
At IRE2014 Nimisha Jain, Principal, BCG said Nimisha said, “The opportunity is tremendous. There is a strong rationality to do this. There is tremendous logic to grow this sector, it is at a tipping point today.” Below is the complete video of the session “FDI in eCommerce: Understanding the Opportunities, Roadblocks and Workarounds”