MUMBAI/NEW DELHI: India could allow global online retailers such as Amazon.com Inc and eBay to sell their own products as early as next month, removing restrictions that have held back competition in one of the world’s biggest, and most price-sensitive, retail markets.
The decision, which is likely to be announced in or alongside the budget, is one of the first tangible signs of economic reform by the business-friendly government of Prime Minister Narendra Modi, who was sworn in 10 days ago. The move could allow the government to circumvent political opposition to opening up India’s $500bn retail sector to global retail giants such as Walmart Stores Inc.
Four people privy to discussions within the government said that officials believed a more robust online retail sector would spur manufacturing and consumption, helping revive an economy that has grown at below 5 percent for two years, the longest period of sub-par expansion since the late 1980s.
“Most stakeholders support FDI (foreign direct investment),” said a senior government official, referring to e-commerce. “We have pitched for opening it up completely.”
Industry surveys say e-commerce could contribute up to 4 percent to India’s economy by 2020 from under 1 percent now. When asked about the decision, a spokesman for India’s commerce and industry ministry declined to comment.
“The way the government is initiating discussion, it is very clear that they are extremely serious about it,” said an executive with a global online retailer who was invited to a meeting two weeks ago between the government and foreign and domestic companies.
“They understand this will help small traders to grow their business, expand and reach out to a larger market,” he said. While Modi’s Bharatiya Janata Party (BJP) has been a vocal critic of the country’s multi-brand retail policy, it has remained quiet on the proposal to open up the e-commerce sector.
On the campaign trail, Modi had asked small traders not to feel intimated by big online retail chains. “We should not worry about these things. Our children have taken IT to the world. We’ll have to embrace it,” he told a gathering of small traders in February.
Modi will eventually decide investment guidelines as well as the foreign ownership cap, but the sources said the rules will be clearer and better than those
for foreign investment in the supermarket sector. Reuters
