Hold implementation of new FDI policy in e-commerce for 6 months: India Inc

E-Commerce 1

As India allowed 100 percent conditional foreign equity in online marketplaces, India Inc has urged the government to keep the implementation of its guidelines for Foreign Direct Investment (FDI) in e-commerce segment in abeyance for six months. “The industry has expressed the need to examine the provisions in greater detail and assess its impact on their business, as such we would request the government to extend implementation date of rules governing FDI in e-commerce till September 30,” said ASSOCHAM in a communication addressed to Mr Ramesh Abhishek, secretary, Department of Industrial Policy and Promotion (DIPP).

“It would provide the industry with adequate time to review all aspects and evaluate the impact on existing business models,” said ASSOCHAM. The new rules have provided clarity on investing in Indian ecommerce by removing much of the policy-related ambiguity that existed until now. The FDI norms will benefit not just foreign multi-brand retail entities like Amazon and eBay, but also single-brand overseas chains like Adidas, Ikea and Nike. The new clarity in rules in this segment will prompt online firms like China’s Baidu and Tencent and Japanese internet giants like Rakuten and Recruit Holdings consider making an entry in Indian market.

India’s e-commerce industry is likely to cross $100 billion during the course of next five years from the current value of about $25 billion thereby clocking a compounded annual growth rate (CAGR) of 35-40 per cent, noted a recent ASSOCHAM-PwC joint study. Online shopping in India is likely to increase by about 78 per cent this year as against 66 per cent clocked by the sector in 2015 owing to attractive deals and aggressive marketing of ever-expanding range of merchandise including clothes, jewellery, electronics and others.

Besides, the number of online shoppers in India is likely to grow to 80 million this year from about 55 million in 2015, this owing to better infrastructure like logistics, broadband, internet ready devices and others. In 2015, it showed that a higher amount was being spent on average for popular categories such as bags by 110 per cent, apparel by 68 per cent and cosmetics by 25 per cent, when it comes to online shopping. There was also a significant increase in spending on categories such as watches by 126 per cent and artificial jewellery by 65 per cent.

The smartphone and tablet shoppers will be strong growth drivers. Mobile phones already account for 11 per cent of e-commerce sales, and their share will jump to 25 per cent by 2017, according to the study. Computer and consumer electronics, along with apparel and accessories, account for the bulk of India’s retail e-commerce sales. These will contribute 40 per cent of the total retail e-commerce sales in 2016 from the current level of 35 percent, said the study.

India’s travel and tourism are second fastest growing travel and tourism industry in the world. Nearly 75 per cent of total travel related business has migrated to e-commerce. With nearly one-third of Internet users already making purchases online, the e-commerce growth will rely more on increased spending from existing buyers than first-time online buyers.

Other factors contributing to the growth of e-commerce include aggressive merchandising and discounting from flash sales and daily deals, more online loyalty programmes and increasing popularity of smartphones and tablet computers among consumers. Event tickets, music, consumer electronics, games and consoles, sports equipment, flowers, insurance, home appliances and furniture saw strong growth in the last year.

Even with efficiency improvements in individual performance and productivity (IPPs) in the delivery networks, it is estimated that there will be an additional employment of close to 1,00,000 people in these two functions alone by 2017-2020, representing an increase in employment.

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