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    FDI restriction on e-commerce to stay: Report

    Synopsis

    Govt's decision to allow foreign supermkt chains such as Walmart & Tesco into the country does not extend to non-store formats such as teleshopping & mail order.

    Govt's decision to allow foreign supermkt chains such as Walmart & Tesco into the country does not extend to non-store formats such as teleshopping & mail order

    NEW DELHI: The government's decision to allow foreign supermarket chains such as Walmart and Tesco into the country does not extend to non-store formats such as teleshopping and mail order, a senior official has clarified.

    Such chains will not be allowed to sell products through e-commerce, the official in the department of industrial policy & promotion told ET on the condition of anonymity. The clarification comes amid confusion over the full implications of the government's decision last month to allow 51% foreign direct investment in multi-brand retail.

    "While foreign investment is allowed in various non-store format activities such as mail order and e-commerce as long as it is B2B (business-to-business), we are not permitting it for B2C (business-to-consumer) activities," the official said.

    Though leading global retailers, including Walmart, Tesco and Carrefour, have expressed interest in investing, they have said the terms and conditions are not entirely clear.

    Experts, however, point out that the FDI policy restricts foreign investors from engaging in e-commerce but not from other forms of non-store retailing.


    "Investment in non-store formats such as teleshopping and mail ordering are not specifically prohibited for foreign investors. This could lead to investors assuming that it is allowed," said Icrier professor Arpita Mukherjee. She added that even if these non-store formats were disallowed on paper, it would be very difficult to implement the policy.

     
    Global retailers routinely provide product catalogues in their stores for consumers, who can use them later for placing orders on the phone. Retailers also sell their products through television, allowing consumers to see the products on the small screen before placing orders. Teleshopping business in India is estimated at an annual $430 million (Rs 2,200 crore), out of the total retail business of $500 billion (Rs 25 lakh crore), of which just about 5% is organised retail.

    Several details in the FDI policy for multi-brand retail will fall into place once applications come in, the official said. "The foreign investors will first have to decide what format they want to adopt in India. They have to be clear on the entity that they want to set up before we decide on their proposal," the official added.

    A number of foreign investors have also sought clarity on whether they would be allowed to invest in the existing ventures of Indian retailers. "The lack of clarity in the policy could be a way of allowing flexibilities to retailers on a case-to-case basis. This could lead to controversies and corruption," said a researcher with a Delhi-based organisation.

    "The government should, instead, come out in the open and clearly lay down what is allowed and what is not," added the researcher, who did not wish to be identified.
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